TOP TIP: Employers Should Ensure They Are a Party to the Arbitration Agreement They Want to Enforce (Of Course)
Several recent cases highlight the need for employers to take some basic steps to make sure they are actually a party to any arbitration agreement with an employee, and that the agreement is actually finalized.
In Wekesser v. Knight Enterprises S.E., LLC, the U.S. Court of Appeals for the Fourth Circuit held that an employer could not force arbitration of an employee’s Fair Labor Standards Act claims based on an agreement that was executed between the employee and the parent company. The court found that the employer was not a party to the agreement, nor could it be considered a third-party beneficiary of the agreement because the agreement did not clearly evidence an intent to benefit a third party.
Similarly, in Goplin v. WeConnect, Inc., the U.S. Court of Appeals for the Seventh Circuit refused to enforce an arbitration agreement where the employer was not identified by name in the agreement. The agreement named another company, and the employer argued that the two were not separate entities but were different names for the same entity. However, language on the employer’s website indicated that the two were distinct companies that had merged to form a single new company. Thus, the court found that the employer was not a party to the agreement.
Finally, in Huckaba v. Ref-Chem, L.P., the U.S. Court of Appeals for the Fifth Circuit found that the employer’s failure to sign an arbitration agreement rendered it invalid. Although Texas courts have found that the presence of a signature block alone does not establish the parties’ intent to require signatures, the agreement contained additional language that expressly required it to be signed by both parties. Specifically, it stated that, by signing the agreement, the parties were giving up any right they had to sue each other and that any changes would need to be made in writing and signed.
These cases hammer home the point that employers should ensure that they are specifically named in the arbitration agreement. If there is a change to the corporate entity, it may be necessary to execute new agreements utilizing the name of the new entity. And, of course, employers should actually sign the agreement – a step that is sometimes overlooked, even if it seems obvious.