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Mark I. Schickman, Editor and Cathleen Yonahara, Assistant Editor
Freeland Cooper & Foreman LLP
Vol. 18, No. 1
April 11, 2008
ALTERNATIVE DISPUTE RESOLUTION
Ralphs Grocery can't bag employee's lawsuit through arbitration
Cathleen S. Yonahara
The California Court of Appeal, Fourth Appellate District, recently held that Ralphs Grocery Company couldn't compel an employee to arbitrate his discrimination and harassment lawsuit because there was no valid agreement to arbitrate. Let's take a
look at the case.
Cleanup on aisle arbitration
Sam Metters sued Ralphs Grocery Company and his store manager, Bill Frigo, for race discrimination and harassment in violation of the California Fair Employment and Housing Act (FEHA). Ralphs asked the court to order him to arbitration, arguing that
he entered into a binding arbitration agreement when he filled out a dispute resolution form.
On Metters' annual evaluation form, he answered "yes" to the following question: "Do you . . . have any complaints or incidents of unlawful harassment, discrimination or retaliation that you want to report?" In response, in March 2005, Bonnie Franco,
the manager of employee relations, sent him a letter that contained a "Notice of Dispute & Request for Resolution" form. The letter stated: "The information you provide on the Dispute Form or otherwise will be used to conduct a reasonable review of
your dispute and to respond to your desired resolution." Metters didn't respond to the letter.
In August 2005, Metters called the "Ask Dave" hot line (named after Dave Hirsch, the company's president) about his dispute. Franco sent him another letter nearly identical to the first. He later signed and submitted the two-page dispute form,
claiming harassment and discrimination based on race, color, and national origin/ancestry from "June 2004 to present."
On the lower half of the second page of the dispute form, the following appears under the heading "IV. Mediation & Binding Arbitration":
The Company's Dispute Resolution Program includes a Mediation & Binding Arbitration Policy (the "Policy"). The Policy provides for one day of voluntary mediation (only if both you and the Company agree) of "Covered Disputes" (as defined
in the Policy) with a neutral third-party mediator at the Company's expense, and requires the resolution of such Covered Disputes only through mandatory final & binding arbitration by a neutral third-party arbitrator (instead of a judge or jury) if
they are not or cannot be resolved through mediation pursuant to the Policy or other informal dispute resolution efforts. . . . I hereby submit this dispute for informal resolution directly by the Company's management. Metters claimed
that he started complaining about harassment, discrimination, and retaliation in August 2004. During that time, he contacted Franco, the "Ask Dave" hot line, and Ralphs' district manager to complain. The district manager recommended that he take
vacation time. Metters argued that in September 2005, he made several attempts to have Franco and Hirsch resolve his complaints, but nothing happened.
Metters claimed that he received the dispute form after he contacted the HR department but never received a copy of the policy. After receiving the dispute form, he contacted Franco, who "instructed [him] to fill out the form and submit it to Ralphs'
legal office without any further explanation." He believed that he needed to complete, sign, and submit the dispute form before his claims would be investigated. No one told him about arbitration, and he was unaware he had signed an arbitration
agreement.
Franco argued that she was "not aware of any attempts by Samuel Metters to contact me during September 2005" and that a "copy of Ralphs' Mediation & Binding Arbitration Policy was available to Mr. Metters prior to him signing the [dispute] form." She
also denied instructing him to submit the form: "If an employee calls with questions regarding the [dispute] form, my standard response is 'it is helpful if you fill out the form, however, you are not required to do so.'"
The trial court found there was no meeting of the minds and therefore no valid arbitration agreement.
No valid arbitration agreement existed
On appeal, Ralphs argued that the agreement to arbitrate was valid, and Metters didn't dispute that he signed the agreement, which stated he received and read the arbitration policy. Generally, a party can't avoid the terms of a contract on the
grounds that he failed to read it before signing. However, if the signing party was unaware of the contractual provisions, he isn't presumed to have agreed to them. Thus, if the writing doesn't appear to be a contract and the terms aren't called to
the recipient's attention, no contract is formed with respect to an undisclosed term.
In this case, the trial court found that the dispute form didn't appear to be a contract, nor did it alert Metters that he was agreeing to binding arbitration. The form wasn't titled "Arbitration Agreement"; rather, it was ambiguously titled "Notice
of Dispute & Request for Resolution." The agreement to arbitrate wasn't contained in an employment contract. Instead, it was buried in a grievance form the employee believed he had to submit in order to have his grievance heard.
Metters declared that he was told he had to fill out the form in order to submit his dispute for resolution. Based on the letters he received from Franco and his conversation with her, he believed the form was the only means by which he could have
his claims reviewed. Furthermore, no one informed him that if he filled out a dispute form, he would automatically agree to arbitration.
Ralphs claimed that Metters should have known he could have submitted his dispute without filling out the dispute form because Franco's letters said Ralphs would investigate his dispute based on "[t]he information you provide on the Dispute Form or
otherwise." However, Metters previously had provided information by other means, but Ralphs took no action. According to the appellate court, "Had Ralphs wanted to clarify, rather than obfuscate, the grievance procedure, it would have told Metters to
either fill out the Dispute Form, under which he would agree to binding arbitration, or write a letter detailing his dispute." The court also found the arbitration provisions in the dispute form confusing and replete with legalistic references to the
policy, which wasn't attached.
The policy required employees to sign and submit a dispute form to pursue an informal resolution of "covered disputes." "In other words," said the appellate court, "an employee has no real choice to avoid arbitration if he wants some action taken on
his complaint." However, when the complaint involves discrimination or harassment, the employer's duty to investigate promptly is "affirmative and mandatory" and can't depend on whether the employee agrees to arbitration.
The appellate court concluded that the record contained substantial evidence to support the trial court's finding that there was no valid agreement to arbitrate Metters' discrimination claim and denied Ralphs' request to compel arbitration. Metters
v. Ralphs Grocery Company (California Court of Appeal, Fourth Appellate District, 2/29/08, published 4/1/08).
Bottom line
This case is highly instructive for employers that wish to enforce an arbitration agreement. To a have valid arbitration agreement, you must make it clear to the employee that the agreement is a contract and that he is agreeing to arbitrate his
claims and waive his right to a jury trial. Furthermore, you can't condition your investigation of a harassment or discrimination complaint on an employee's consent to arbitrate his claims. You are liable for any failure to promptly and thoroughly
investigate harassment or discrimination claims.
You can require employees to sign mandatory arbitration agreements in which they agree to arbitrate all work-related disputes as a condition of employment, but only if the agreement meets certain tests of fairness and due process. You should consult
legal counsel to develop arbitration agreements that are valid and binding in California.
The author can be reached at Freeland Cooper & Foreman LLP in San Francisco, yonahara@freelandlaw.com.
Copyright 2008 M. Lee Smith Publishers LLC
The contents of CALIFORNIA EMPLOYMENT LAW LETTER are intended for general information and should not be construed as legal advice or opinion. Readers in need of legal advice should retain the services of competent counsel. The State Bar of California
does not designate attorneys as board certified in labor law.
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