I Didn't Agree to That! Court Holds No Arbitration without Offer and Acceptance.
The Missouri Court of Appeals recently affirmed a trial court’s holding that a mere “Acknowledgement of Receipt,” attached to an Alternative Dispute Resolution Policy given to the employee upon hire, does not constitute an “offer” that can bind the employee to arbitrate future employment claims.
In Trunnel v. Missouri Higher Education Loan Authority, the Court of Appeals reasoned that MOHELA’s ADR Policy did not create an agreement to arbitrate because MOHELA never extended an offer to be bound by the arbitration process that could be accepted by the employee. When MOHELA hired Trunnel, Trunnel was given two documents, one titled “MOHELA Policy Regarding Mandatory Alternative Dispute Resolution/ADR Process” (“ADR Policy”) and the other a one-page document titled “Important Acknowledgement of Receipt of MOHELA Mandatory Policy on Dispute Resolution/ADR Process”). Trunnel purportedly signed the Acknowledgment of Receipt, but not the ADR Process document itself.
In pertinent part, the “Acknowledgment of Receipt” stated that employees “are bound by this Policy even if they do not sign this Acknowledgement form.” At the bottom of the form, the signature line states “I ACKNOWLEDGE RECEIPT OF THE MANDATORY ALTERNATIVE DISPUTE RESOLUTION/ADR PROCESS POLICY.” Trunnel subsequently sued for constructive discharge based on race, sex, and disability and retaliation. MOHELA moved to compel arbitration.
The trial court relied on Jackson v. Higher Education Loan Authority of Missouri, 497 S.W.3d 283 (Mo. App. E.D. 2016) to deny MOHELA’s motion to compel arbitration. In Jackson, the district court examined the exact same policy at issue, and determined that the arbitration policy signed by employees of MOHELA did not constitute a valid offer that an employee could accept. Rather than presenting an offer that could be accepted or rejected, MOHELA merely published the policy to its employees and required a signature acknowledging receipt of the policy.
Following the reasoning of Jackson, the trial court further found that Trunnel merely acknowledged receipt of the published ADR Policy, which was not an offer, and therefore she did not agree to be bound by the terms of the ADR Policy. MOHELA’s one argument on appeal was that Jackson was wrongly decided. It argued that the Acknowledgment of Receipt document Trunnel signed contained clear language that a binding agreement was being offered. The Court of Appeals noted that it was persuaded by the Jackson decision and concluded the ADR Policy and Acknowledgement of Receipt documents were merely a publication to employee, as there was no consequence for the failure to sign and nothing was presented to the employee for her acceptance. Further, while not dispositive, prominent use of the word “policy” was but one factor relied on by the Jackson Court to reach their conclusion, and in Trunnel MOHELA’s use of the word “policy” in lieu of “agreement” or “contract” again undermined its arguments that it constituted a contract.
Additionally, the Acknowledgement of Receipt form contained no explicit language manifesting an employee’s understanding that they were entering into, and bound by, the ADR Policy. The acknowledgment form simply required the employee to confirm they received a copy of the process itself, not that they assented to the terms therein. The Court discussed the Eighth Circuit case Shockley v. PrimeLending (analyzed in our 2019 Blog post: Arbitration Agreements 101: they require - you guessed it - agreement.), and found that “an acknowledgement of a review of offered terms alone does not evince an intent to accept those terms.”
Finally, MOHELA attempted to assert that an offer and acceptance existed with an affidavit from MOHELA’s Assistant Director of Human Resources, stating that Trunnel’s employment was contingent on signing the Acknowledgement. But the Court afforded little weight to the Affidavit, which contradicted the plain language of the Acknowledgement of Receipt, reasoning that if a signature on the Acknowledgement of Receipt was a condition of employment, there was no need to advise employees that their failure to sign would have no bearing on the applicability of the ADR process.
The decision in Trunnel provides important guidance to employers drafting Arbitration Agreements. First, the employee’s signature page must clearly state the employee’s intention to be bound by the terms of the actual agreement they are signing, rather than just acknowledging receipt of a company policy.
Second, employee handbooks generally do not create contractual rights. Arbitration agreements should be executed separately from employee handbooks, lest an employer unwarily create contractual rights it did not intend. Acknowledgement of receipt on an employee handbook will almost never be sufficient to bind an employee to an arbitration provision contained therein.
Third, while the Courts have regularly discussed adequate consideration in arbitration agreements (See Promises, Promises in Arbitration of Employment Disputes and Missouri Court of Appeals holds an employer may not reserve the right to litigate claims against an employee in court while simultaneously restricting the employee to arbitrate her employment claims.), employers must remember that an arbitration agreement has to contain each element of a contract including an offer, acceptance, a meeting of the minds, and consideration.
Fourth, the Agreement must make it clear to the employee that the employment relationship (or continuation of employment) is contingent upon signing the Agreement. In addition to not constituting an offer or acceptance, a promise is also illusory where signing or not signing the document is of no legal effect.
To avoid the pitfalls MOHELA encountered in Jackson and Trunnel, ensure that the signature page and all related documents clearly indicate that the employee agrees to be bound by the provisions of the arbitration agreement. As always, employers who may be considering modifying their arbitration agreements should pay close attention to recent cases discussing the limits of an employer’s right to do so. (See The Eastern District of Missouri continues the trend of invalidating employee-employer arbitration agreements).