- A human resource official's expectations or assumptions about what happened during hiring processes conducted by individual managers for a nationwide restaurant chain had little persuasive value in a recent court case dealing with missing arbitration agreements, the 4th U.S. Circuit Court of Appeals has ruled (Hill v. Employee Resource Group, LLC, et al., No. 18-2009 (4th Cir. June 12, 2020)).
- In a class action lawsuit, April Hill alleged that Employee Resource Group LLC (ERG), which owns and operates Applebee's restaurants in several states, violated the Fair Labor Standards Act (FLSA) by failing to pay the minimum wage and that ERG violated West Virginia state law by failing to pay wages within the legally required timeframe when employees resigned. ERG filed a motion to enforce arbitration agreements but, instead of attaching signed arbitration agreements, it attached exhibits including an affidavit from its HR director stating that managers were trained in the onboarding process that all prospective ERG employees were expected to sign arbitration agreements and that the lack of agreements was probably a recordkeeping error.
- The district court granted the employer's request with respect to the class members for which signed agreements eventually were produced, leaving 71 class members with no proof of a signed agreement and 177 class members with disputed proof of signed agreements. The district court noted that without testimony from those directly involved in the "asserted" formation of the agreements, there was little evidence to support a finding that the agreements existed. The appeals court agreed, observing that the HR director's "expectations or assumptions" about what happened during the onboarding process at individual's Applebee's stores wasn't enough.
Many employers favor arbitration as a means of keeping matters from developing into potentially pricey lawsuits and out of the public eye. As this case illustrates, however, the employer's objective can be defeated if there is doubt that the agreements exist, especially in states that, as the Hill court mentioned, have high standards of proof for those seeking to prove the existence of a lost contract.
In another lawsuit, an employer had to prove that employees were adequately informed of the contents of the arbitration agreements. The employer, which was in the 8th Circuit, lost because it only had the provision in the employee handbook, which the company could not prove had been read in its entirety by the plaintiff. Simply providing a handbook was not an enforceable arbitration agreement, the court said.
Additionally, the confidential nature of the arbitration process has caused mandatory arbitration to come under fire in recent years, particularly when the claims involve harassment, discrimination or assault. Employees say the lack of public scrutiny allows such claims to be swept under the rug. Google, Facebook and Microsoft ended mandatory arbitration for sex harassment and other employment claims following public pressure. Sources say that, while arbitration has its advantages in employment disputes, it isn't always the best option.