Page 1
Court of Appeal:
Proviso Rendered Express Binding-Arbitration Clause a Nullity
By a MetNews Staff Writer
Effect cannot be given a clause in an employee handbook unequivocally requiring arbitration of any dispute at the option of either party, Div. Five of this district’s Court of Appeal has held. because the introductory portion declares that the document—agreed to by the worker—“is intended to be a general source of information and is not a contract.”
That, coupled with the declaration in a closing section that “[t]his Employee Handbook is not intended to establish terms of employment,” justified an order by Los Angeles Superior Court Judge Stuart M. Rice denying a motion by an employer in a wage-and-hour case to compel arbitration, Justice Dorothy C. Kim said in an unpublished opinion filed Tuesday.
Rice determined that the matter before him presented circumstances “highly similar” to those dealt with by this district’s Court of Appeal in its 2016 opinion in Esparza v. Sand & Sea, Inc. which found no mutual assent to arbitration. There, Justice Audrey B. Collins of Div. Four said that the opening portion of the handbook, which she termed the “welcome letter,” was “extremely broad,” specifying that “the handbook ‘is not intended to...create any legally enforceable obligations.’ ”
Collins proclaimed:
“Defendants now ask us to find that the arbitration provision did create a legally enforceable obligation, despite the express language to the contrary. We decline to do so. Mutual assent is determined by the reasonable meaning of the parties’ words and acts.”
At issue in the appeal resolved by Div. Five on Tuesday was whether the holding in Esparza is applicable.
Appellant’s Argument
Defendant/appellant Sunset Services Holdings, LLC, arguing on appeal that plaintiff/respondent Rafael Carrion, a former employee, is bound by an arbitration agreement, set forth:
“Carrion and Sunset unambiguously agreed to arbitration and Esparza is readily distinguishable. Esparza’s employee handbook had a disclaimer stating it did not ‘create any legally enforceable obligations on the part of the Company or its employees,’ and the acknowledgment there said nothing about arbitration, recognized that the plaintiff had not read the handbook at the time she signed the acknowledgment, and provided she must return it after her employment ended.”
Sunset’s opening brief continues:
“Although Sunset’s Employee Handbook does have some disclaimers, they are narrower than Esparza’s, and the Handbook and Acknowledgement have none of Esparza’s language contradicting mutual assent. On the contrary, Carrion expressly acknowledged, ‘Whether or not I have signed a separate agreement to arbitrate, I understand that my employment with the Company is subject to binding arbitration, which is set forth in the ‘Arbitration’ section of the Employee Handbook.’ ”
The brief, drafted by Andrea F. Oxman and Payam Malakouti of the downtown Los Angeles firm of Jackson Lewis, cites various portions of the handbook that refer to compulsory arbitration, upon demand of one of the parties, declaring:
“These provisions unambiguously mean the parties agreed to arbitration..”
Kim’s Opinion
Kim disagreed. She said that “the handbook’s references to an arbitration policy or requirement are not ‘unambiguous’ ” in light of what is set forth in the “welcome letter” (borrowing Collins’s description of the seminal part of a handbook welcoming the new employee aboard) and the closing portion.
The jurist declared that these “broad disclaimers” of the provisions in the handbook being contractual in nature “are substantively indistinguishable from the one” in the opening portion of agreement under consideration in Esparza. The wording there was:
“[T]his handbook is not intended to be a contract (express or implied), nor is it intended to otherwise create any legally enforceable obligations on the part of the Company or its employees.”
That language, Collins concluded in Esparza, “undermines defendants’ argument that the handbook and its arbitration provision actually was intended to create a legally enforceable obligation to arbitrate.” Kim wrote that the same applies in the appeal brought by Sunset, meaning that Rice properly denied the motion to compel arbitration.
Reference to Arbitration
Kim rejected the distinction pointed to by Sunset that the acknowledgement of receipt executed by Carrion made specific reference to the arbitration clause while the acknowledgement in issue in Esparza did not.
In Esparza, Collins quoted, with approval, the 2012 majority opinion by Div. Seven of this district’s Court of Appeal in Sparks v. Vista Del Mar Child and Family Services which says:
“To support a conclusion that an employee has relinquished his or her right to assert an employment-related claim in court, there must be more than a boilerplate arbitration clause buried in a lengthy employee handbook given to new employees. At a minimum, there should be a specific reference to the duty to arbitrate employment-related disputes in the acknowledgment of receipt form signed by the employee at commencement of employment.”
Kim responded that in embracing that language, the court in Esparza “did not suggest that the existence of such a reference” to arbitration, in the acknowledgement, “by itself, would constitute sufficient evidence of mutual assent to be bound.” She said:
“In light of the directly contradictory language in the welcome letter and at the end of the handbook disavowing the existence of any agreement between the parties, the reference, at best, rendered any assent to arbitration uncertain.”
Alternative Position
Sunset also argued in its opening brief that “it is at least ambiguous whether the parties mutually assented to arbitration,” saying that if ambiguity is discerned, it should be resolved by reference to the 1998 Court of Appeal opinion in 24 Hour Fitness, Inc. v. Superior Court. That decision was rendered by Div. Three of the First District Court of Appeal.
The opinion was authored by Justice Carol Corrigan, now a member of the California Supreme Court. She said that “because of the strong public policy in favor of arbitration,” ambiguities are to be resolved in favor of arbitration and following this approach “cures the apparent ambiguity” in the case at hand.
Kim said:
“The issue in this case, however, does not concern the interpretation of an ambiguous provision within an agreement, but rather the threshold formation issue of whether the language of the handbook can be construed as a sufficient manifestation of assent to the same thing, namely, an agreement, or contract, to arbitrate. And on this issue, defendant, as the party seeking to compel arbitration, had the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence….We agree with the trial court that defendant did not meet its burden here.”
The case is Carrion v. Sunset Services Holdings, B337432.
Sunset was represented by H. Scott Leviant, Kane Moon, Lilit TerAstvatsatryan, and Holly Williams of Moon Law Group.
Copyright 2025, Metropolitan News Company