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An Employer’s Notice to Employees of a Mandatory Arbitration Program May be Insufficient Basis to Compel Arbitration

Arbitration is of course a creature of contract, and so a party may not be compelled to arbitrate unless it has agreed, or is deemed to have agreed, to arbitrate a dispute. An offeree may be deemed to have manifested its agreement to an arbitration regime by various sorts of conduct, including in some instances inaction in the face of notice. However, there is a line in the sand in that regard in the Sixth Circuit when it comes to employer-employee relations. That is, an employer’s notice of its institution of a mandatory arbitration policy or program is, without more, insufficient to compel an employee to arbitrate a subsequent dispute. Something more is required in order to be able to infer the employee’s knowing assent to the new term of employment.

In Cerjanec v. FCA, US, LLC, 2017 WL 6407337 (E.D. Mich., Dec. 15, 2017), there was no written bilateral arbitration agreement between employer and employees. Rather, in 1995, the employer -- Fiat Chrysler Automobiles (FCA) -- gave notice of its new “Employment Dispute Resolution Process” (“EDRP”), which would thereafter require non-union employees to arbitrate their employment-related disputes with FCA. When some of those employees later commenced an age discrimination class action suit against FCA, the employer moved to compel arbitration, arguing that the plaintiffs had agreed to arbitrate when they continued their employments after receiving notice of the arbitration policy. Id. at *1. But the Court held that “in the absence of any signed agreement or any FCA-distributed materials expressly telling Plaintiffs that they would accept the terms of the EDRP by continuing their employment,” it could not find that there was an agreement to arbitrate. Id. at *14.

The name plaintiffs -- current and former employees of FCA -- had, when applying for positions with the company, signed an application stating that they agreed to follow all “orders, rules, and regulations” of the company. Id. at *9. But the EDRP was promulgated after each of them had commenced employment, and FCA did not argue that the employment application term constituted agreement to the company’s subsequent dispute resolution program. Id. Rather, FCA argued that the employees had manifested their assent to the ADR program “by continuing to work for the company after receiving notice of the EDRP’s implementation in 1995.” Id. at *9-*10.

The Court disagreed. Relying on the Sixth Circuit’s decision in Seawright v. Am. Gen. Fin. Inc., 507 F.3d 967 (6th Cir. 2007), it determined that the employer’s failure to notify the employees expressly that “they would accept the terms of the EDRP by continuing their employment” was a critical omission, and thereupon held that the employees had not manifested knowing assent merely by continuing to work at FCA.

The Court noted that under applicable contract law (Michigan’s), acceptance of an agreement may be inferred from a party’s conduct when the offer does not require a specific form of acceptance, and that an arbitration agreement may indeed be accepted by continued employment. Id. at *10. However, the Court opined, continued employment can manifest assent only “when the employee knows that continued employment manifests assent.” Id. at *11 (emphasis in original).

In Seawright, the employer had provided its employees with an informational brochure concerning its new arbitration policy that expressly stated that “seeking, accepting, or continuing employment with [the defendant] means that you agree to resolve employment-related claims against the company . . . through this process instead of through the court system.” Id. at *11, citing Seawright, 507 F.3d at 971. Indeed, that employer also sent its employees a similar notification two years after the arbitration program went into effect, reiterating that continuing employment with the defendant meant that an employee agreed to resolve employment-related claims through the employer’s arbitration program. Id.

The Cerjanec court also distinguished an earlier Michigan state court decision in which the arbitration policy in question was set out in an employment guidelines manual, and the employee in question “had availed herself of the provisions in the guidelines manual that also contained the arbitration policy.” In that circumstance, continued employment was deemed a sufficient basis for inferred assent. In the Cerjanec case, by contrast, the employer’s notice of its EDRP had been a standalone communication. See id. at *13.

Thus, the rule in the Sixth Circuit is that knowing continuation of employment after receipt of the requisite express notice constituted acceptance of an arbitration agreement. See id. at *11. FCA had failed to provide a key element of the requisite notice, and thus its employees had not knowingly assented to the employer’s new arbitration regime.

While the teaching of the Cerjanec decision, following the Seawright guidance, applies only in the Sixth Circuit (at least for now), the lesson here is one worth every employer’s attention.


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