Employer’s Failure To Sign Arbitration Agreement Renders It Unenforceable

A recent decision by a Texas Court of Appeals provides a cautionary tale to employers seeking to implement a program of arbitrating employee disputes. In CC Restaurant, L.P. v. Olague, a divided appeallate panel affirmed the trial court’s denial of an employer’s motion to compel arbitration based upon the employer’s failure to sign the arbitration agreement it prepared and provided to its employee. The court referenced this language in the agreement:

The Parties expressly acknowledge and understand that by signing this Agreement, each is affirming that he/she/it has read and understands this arbitration provision; each is agreeing to be bound by it; each is waiving its respective rights to have a Dispute between or among them adjudicated by a court or by a jury; and each is waiving its respective rights to have a Dispute between or among them proceed as a class, collective, or consolidated action or arbitration.

As the court held, “the Agreement’s language specified the Employer’s signature was required for the Employer to be bound to arbitrate its claims against the Employee. The Employer did not sign the Agreement, however the Employee did, therefore, only the Employee agreed to arbitration.”

The court acknowledged that that, in addition to the agreement, the employer provided the employee with a notice referencing the agreement which called only for the employee’s signature (which was provided), “indicating both the Employee and the Employer are bound by the Agreement to arbitrate, as provided in the Agreement, by virtue of the Employee’s continued employment.” However, according to the court, while the employee’s signature,

may evidence the Employee’s agreement to arbitrate her claims against the Employer, the Motice itself provides no consideration on the part of the Employer for an agreement to arbitrate other than continuing employment, which is alone insufficient. There is no mutuality in its terms; instead, the Notice is predicated on the Agreement: it indicates the parties are bound by the Agreement as provided for in the Agreement.

The takeaway for employers endeavoring to implement arbitration programs: make sure the requisite documents are signed by all appropriate parties.

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