SPARKS v. VISTA DEL MAR CHILD & FAMILY SERVICES No. B234988.
207 Cal.App.4th 1511 (2012)
145 Cal. Rptr. 3d 318
PERRY SPARKS, Plaintiff and Respondent, v. VISTA DEL MAR CHILD AND FAMILY SERVICES, Defendant and Appellant.
Court of Appeals of California, Second District, Division Five.
July 30, 2012.
Hill, Farrer & Burrill, James A. Bowles and E. Sean McLoughlin for Defendant and Appellant.
Karl Gerber for Plaintiff and Respondent.
CERTIFIED FOR PARTIAL PUBLICATION
Defendant Vista Del Mar Child and Family Services (defendant) appeals from an order denying its petition to compel arbitration of the wrongful termination claims of its former employee, plaintiff Perry Sparks (plaintiff). Defendant relies upon an arbitration clause in its 2006 employee handbook (Handbook), which plaintiff acknowledged he received. We hold that plaintiff is not bound by the arbitration clause because that clause was included within a lengthy employee handbook; the arbitration clause was not called to the attention of plaintiff, and he did not specifically acknowledge or agree to arbitration; the Handbook stated that it was not intended to create a contract; the Handbook provided that it could be amended unilaterally by defendant and thus rendered any agreement illusory; the specific rules referred to in the arbitration clause were not provided to plaintiff; and the arbitration clause is unconscionable.
A. The Complaint
Plaintiff filed a wrongful termination complaint against defendant, his former employer. Plaintiff alleged he was initially hired as a temporary employee in January 2007, he was permanently hired in April 2007 as a controller, and he was terminated for pretextual reasons in 2010. According to plaintiff, he was terminated after he complained of various employee practices that he asserted violated federal and state reporting and compensation laws. Plaintiff sought damages for termination in violation of fundamental public policy; unfair business practices — Business and Professions Code section 17200; violation of Labor Code section 1102.5, subdivision (a); and intentional infliction of emotional distress.
Defendant filed a petition to compel arbitration and stay the action, and moved for a hearing. In the unverified petition to compel arbitration, defendant alleged that plaintiff and all of defendant's employees were subject to a mutual dispute resolution policy that required binding arbitration of employment disputes. Defendant further alleged that it demanded arbitration of the claims asserted in the complaint and that plaintiff refused to respond or submit to arbitration. According to defendant, the arbitration policy was "prominently" located in the Handbook that was distributed to all employees. Defendant stated, "Plaintiff acknowledged receipt and review of the Handbook, and expressly agreed to abide by its terms by signing the `Acknowledgment of Receipt of Employee Handbook' ... on April 24, 2007."
Paragraphs KK and LL on pages 35 and 36 of the Handbook contain the following clauses, which are in the same type and size as all other provisions in the Handbook:
"All disputes regarding your employment with [defendant], or the termination of your employment, will be subject to final and binding arbitration pursuant to the provisions of the Federal Arbitration Act. The arbitration will be held under the applicable rules of the American Arbitration Association. [¶] This policy requires that arbitration shall be the exclusive forum for resolving all disputes between you and [defendant] or any of its employees or managers arising out of claims for wrongful termination, discrimination, retaliation or harassment in violation of state or federal law, alleged violation of state or federal family and medical leave laws and any other laws pertaining to employment, and for unpaid wages under state or federal law. All such claims, as well as any other claims that arise out of your employment relationship with [defendant], shall be resolved by an arbitrator and not
"This Employee Handbook may be amended, revised and/or modified by [defendant] at any time without notice. If you have any questions about this, please contact the Human Resources Department."
Page i of the Handbook provided as follows: "This handbook is provided for the use of the Employees as a general summary of the agency's personnel policies, work rules and benefits. The handbook is designed to acquaint you with the information as quickly as possible by highlighting agency policies, practices and benefits for your personal education. The handbook cannot anticipate every situation or answer every question. Therefore, you will find variations in working conditions and benefits, depending upon the division, category and Employee unit to which you belong. Your more detailed questions should be referred to your supervisor and/or the Human Resources Department. This Handbook is not intended to create a contract of employment and does not in any way alter the at-will employment relationship between [defendant] and its Employees."
The document signed by plaintiff is entitled, "Acknowledgment of Receipt of Employee Handbook." The acknowledgement states that the Handbook "contains important information about [defendant's] general personnel policies and on [his] privileges and obligations as an Employee." It provides, "I understand that I am governed by the contents of the Handbook and that [defendant] may change, rescind or add to any policies, benefits or practices described in the Handbook from time to time in its sole and absolute discretion, with or without prior notice."
Plaintiff in his declaration opposing the petition to compel arbitration stated that he was not made aware of the arbitration clause by defendant and was not aware of it. He also stated that during his employment he received a new handbook, of which he never acknowledged receipt in writing, and an accompanying letter from defendant's human resources director. That letter stated, "Here is your Master Copy of the 2009 Employee Handbook. This copy is to be placed in a location where all key Employee reference information is maintained. New employees will receive personal copies as
In this new handbook, there is an arbitration provision virtually identical to the one in the 2006 Handbook, except it adds the following significant language: "Employees will be required to sign for receipt of the handbook acknowledging inclusion of the arbitration policy stated in the handbook. Also, Employees will be required to sign a full arbitration agreement that is signed by both the Employee and the Human Resources Director or designee."
B. Ruling on Petition
At the hearing on the petition to compel arbitration, the trial court heard argument and concluded there was no agreement to arbitrate, explaining that the mere acknowledgement of receipt of the Handbook was insufficient to create an enforceable arbitration agreement. The trial court therefore denied the petition.
A. Arbitration Principles and Standard of Review
"Where the existence of a contract is at issue and the evidence is conflicting or admits of more than one inference, it is for the trier of fact to determine whether the contract actually existed. But if the material facts are certain or undisputed, the existence of a contract is a question for the court to decide. [Citation.]" (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208 [45 Cal.Rptr.3d 692].) Here, the facts concerning the enforceability of the Handbook are not in dispute. Any dispute about whether plaintiff was or should have been aware of the clause is not, in this case, dispositive on the issue of the enforceability of the arbitration clause. Thus, as the issue here is a legal one, we decide the matter de novo. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799 [35 Cal.Rptr.2d 418, 883 P.2d 960].)
B. Failure to File a Response
C. Handbook's Arbitration Clause Not Enforceable
The Handbook, which was "distributed" to all employees, included an arbitration provision in one of many clauses not prominently distinguished from the other clauses. The provision is not specifically highlighted and there is no place for the employee to acknowledge it in writing. Interestingly, defendant corrected this deficiency in the later handbook, which plaintiff did not acknowledge in writing receiving, by providing that an employee had to sign an arbitration provision.
A relevant case in California is Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164 [69 Cal.Rptr.3d 223] (Mitri), which, as here, involved an employee handbook stating that "`[a]ny dispute arising out of employment with the Company, as allowed by law, will be settled by binding arbitration.'" (Id. at p. 1167.) The court held that the employer did not establish the
The language in the Handbook here, like the language at issue in Mitri, supra, 157 Cal.App.4th 1164, suggests that the Handbook, which was "distributed" to all employees, was informational rather than contractual. Thus, because defendant failed to point out or call attention to the arbitration requirement in the acknowledgment, plaintiff should not be bound to arbitrate.
Cases in other jurisdictions support this conclusion. For example, in Nelson v. Cyprus Bagdad Copper Corp. (9th Cir. 1997) 119 F.3d 756 (Nelson), the Ninth Circuit held that the arbitration provisions in an employee handbook did not constitute a waiver of the plaintiff's right to have his claims under the Americans with Disabilities Act of 1990 (ADA), 42 United States Code sections 12101 to 12213, and the Arizona Civil Rights Act, Arizona Revised Statutes section 41-1463 determined in court. The court said, "The undisputed facts in the record before us demonstrate that [the employee] did not enter into a `knowing agreement' to arbitrate his claims under the ADA. First, we conclude that the acknowledgment form signed by [the employee] does not suffice as a valid waiver under [Prudential Ins. Co. of America v.] Lai [(9th Cir. 1994) 42 F.3d 1299]. When [the employee] was given a copy of the revised employee Handbook, he signed an acknowledgment of receipt.
Following Nelson, supra, 119 F.3d 756, the Ninth Circuit in Kummetz v. Tech Mold, Inc. (9th Cir. 1998) 152 F.3d 1153 also held that an arbitration clause in an employee handbook did not compel a former employee to arbitrate rather than litigate his claims in court. The court stressed that, as here, the acknowledgment form signed by the employee did not refer to the arbitration provision in the handbook. (Id. at p. 1155.)
Similarly, the Supreme Court of Hawaii held that the requirement for a binding arbitration agreement — an employee's unambiguous intent to submit to arbitration — "ha[d] not been satisfied" by an acknowledgment of receipt of an employer's handbook containing an arbitration clause. (Douglass v. Pflueger Hawaii, Inc. (2006) 110 Haw. 520 [135 P.3d 129, 143].) In that case, the court stressed that the acknowledgment contained no reference to the arbitration clause. Moreover, also as here, the court emphasized as follows: "[T]he arbitration provision at issue here is not `boxed off' or otherwise set apart from the other provisions in the Handbook or on the acknowledgment form. In fact, the arbitration provision, like all the other provisions in the Employee Handbook, is (1) introduced by its own bold faced heading and (2) in the same font size as the rest of the Handbook. Moreover, the agreement, unlike the agreement in Brown [v. KFC National Management Co. (1996) 82 Haw. 226 [921 P.2d 146]] that was set off and on the same page as the signature line, is located on page 20 of the sixty-page Handbook, and [the employee's] signature is not found until forty pages later on the acknowledgment page, which, as previously pointed out, makes no mention of the arbitration provision. [¶] `Only if [the employer] had specifically called [the
The arbitration clause is also substantively unconscionable in that it requires the employee to relinquish his or her administrative and judicial rights under federal and state statutes (cf. Ajamian v. CantorCO2e, L.P., supra, 203 Cal.App.4th at pp. 798-799) and it makes no express provision for discovery rights (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 104). As the American Arbitration Association rules specified by the clause were not provided to plaintiff, and according to defendant those rules gave the arbitrator the discretion to deny any discovery, the provision for discovery is insufficient. Accordingly, the clause is unenforceable as unconscionable.
For all of the foregoing reasons, the trial court correctly denied the petition to compel arbitration.
The trial court's order is affirmed. Plaintiff is entitled to costs on appeal.
Armstrong, J., concurred.
I respectfully dissent from the determination to affirm the order denying the petition to compel arbitration.
First, California contract law provides when an employee signs an acknowledgment of receipt of an employee handbook, she or he is bound by its contents including an agreement to arbitrate. (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1215 [78 Cal.Rptr.2d 533] [acknowledgement referred to arbitration provision in employee handbook]; Boys Club of San Fernando Valley, Inc. v. Fidelity & Deposit Co. (1992) 6 Cal.App.4th 1266, 1271-1272 [8 Cal.Rptr.2d 587] [party bound by incorporation of a contract into a performance bond]; Ware v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1972) 24 Cal.App.3d 35, 41 [100 Cal.Rptr. 791] [broker's signature on application that referred not to arbitration but to exchange rules which contained an agreement to arbitrate disputes]; Gear v. Webster (1968) 258 Cal.App.2d 57, 61 [65 Cal.Rptr. 255] [Realtor who agreed to abide by association bylaws bound by arbitration agreement contained therein]; see Adajar v. RWR Homes, Inc. (2008) 160 Cal.App.4th 563, 569 [73 Cal.Rptr.3d 17]; Knight et al., Cal. Practice Guide: Alternative Dispute Resolution (The Rutter Group 2011) ¶ 5:18, p. 5-12 (rev. # 1, 2010).) Here, the undisputed evidence demonstrates plaintiff's written acknowledgement signed by him states he agreed to be bound by the employee handbook. The employee handbook has a clearly stated arbitration provision. It is expressly listed in the 2006 employee handbook table of contents. Entitled "DISPUTE RESOLUTION POLICY," it plainly sets forth both parties' obligation to arbitrate all employment disputes. No doubt, other jurisdictions may have other views of the effect of an express agreement to be bound by the terms of an employment handbook. But those views are inconsistent with this state's law until now.
The fact plaintiff chose not to read the 2006 handbook is not controlling. Plaintiff acknowledged in writing he received the employee handbook, which set forth his obligations as an employee. Plaintiff agreed in writing he was governed by the handbook's contents. He further agreed to read the employee handbook and understand and adhere to its policies. This was sufficient to comply with the written agreement to arbitrate requirement imposed by the Federal and California Arbitration Acts. (9 U.S.C. § 2; Code Civ. Proc., § 1281; Valero Refining, Inc. v. M/T Lauberhorn (5th Cir. 1987) 813 F.2d 60, 63-64; Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348,
Second, I am unpersuaded by plaintiff's argument that the arbitration provisions are somehow hard to find or understand. They look clear to me. And plaintiff was hired to act as defendant's controller. The complaint alleges he gave sophisticated tax and labor law advice to defendant's senior officials and his warnings were rebuffed. The arbitration provisions are apparent, obvious and lucid. The acknowledgement expressly refers to the handbook, which contains the arbitration provisions.
Third, I am unpersuaded by plaintiff's reliance on cases where the arbitration agreement requires it be executed. Three cases involve that scenario. In each of these cases, the employee handbook contained an arbitration provision. Each of the three arbitration provisions required the employees to sign the agreement to arbitrate. And in none of these cases had the employee signed the separate agreements to arbitrate. (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 776, 805-806 [137 Cal.Rptr.3d 773]; Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164, 1169-1173 [69 Cal.Rptr.3d 223]; Romo v. Y-3 Holdings, Inc. (2001) 87 Cal.App.4th 1153, 1159-1160 [105 Cal.Rptr.2d 208].) Here, there was no specified duty in the employee handbook to execute a distinct arbitration agreement. And the trial court expressly relied on Mitri and Romo; neither of which are controlling.
Fourth, there is no merit to plaintiff's argument the 2006 employee handbook's statement that it does not create a contract of employment permitted the arbitration petition to be denied. The language relied upon by plaintiff, which appears under the heading "TERMINATION OF EMPLOYMENT," states: "Employment is at will and may be terminated by the Employer or the Employee with or without notice or reason. An Employee terminated without notice for a reason other than dishonesty, insubordination or malfeasance, as determined at the sole discretion of the Employer, will receive two weeks transition pay. Nothing contained in this handbook is intended to create a contract of employment or alter the at-will nature of the employment relationship in any way." This paragraph addresses the issue of an implied contract not to terminate but for good cause. (Dore v. Arnold
Fifth, plaintiff's argument that all preemployment arbitration agreements are unconscionable and therefore may not be enforced is not a ground for affirming the judgment. Such a rule is preempted by the Federal Arbitration Act. (9 U.S.C. § 2; Marmet Health Care Center v. Brown (2012) 565 U.S. ___, ___ [182 L.Ed.2d 42, 132 S.Ct. 1201, 1203]; AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___, ___ [179 L.Ed.2d 742, 131 S.Ct. 1740, 1750].)
Sixth, the agreement is not unconscionable because of any problem relating to discovery. Plaintiff argues the American Arbitration Association rules do not permit for the sufficient use of discovery devices. Implied in an employer-employee arbitration agreement is the opportunity to utilize discovery devices in a case which potentially may involve emotional distress damages. (Code Civ. Proc., § 1283.1; Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076-1081 [130 Cal.Rptr.2d 892, 63 P.3d 979]; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 105-106 [99 Cal.Rptr.2d 745, 6 P.3d 669].) Here, there is a cause of action for intentional severe emotional distress infliction. Implied within the arbitration agreement is the right to adequate discovery.
Seventh, I agree though with plaintiff as to any of his claims covered by the 2009 handbook. There is no evidence plaintiff was ever advised of the contents of the 2009 handbook, which supplanted the earlier arbitration agreement. There is no signed acknowledgement of the 2009 handbook as was the case earlier. Thus, his claims incurred subsequent to the promulgation of the 2009 handbook are not subject to its arbitration provisions. (Metters v. Ralphs Grocery Co. (2008) 161 Cal.App.4th 696, 703-704 [74 Cal.Rptr.3d 210].) As a result, I would reverse the trial court's findings as to all the
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