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A California Appellate court held that an arbitration provision contained in an employee handbook did not create an enforceable arbitration agreement when the language of the handbook and acknowledgment of receipt specifically disclaimed that a legal contract was formed between the parties by those documents.
In McNett v. Network Management Group, Inc., No. B184807, 2006 WL 2892659, (Cal. App. Oct 12, 2006), McNett, a longtime employee of Network Management Group, Inc. (Network), brought suit against the company. Network moved to compel arbitration and McNett argued that no agreement to arbitrate had been formed.
McNett had received an employee handbook containing an arbitration provision and an attached exhibit entitled Mediation of Disputes and Arbitration of Disputes, which he signed. He also signed an acknowledgment of receipt of the employee handbook. Both the handbook and the acknowledgment form included language which specifically stated that no legal contract was being formed.
Network contended that the arbitration provision was a “separate and severable” agreement, citing Romo v. Y-3 Holdings, Inc., supra, 87 Cal. App. 4d 1153 (Cal. App. 2001). The Court distinguished Romo, pointing out that the Romo agreement contained language that indicated it was a separate agreement, contained specific language agreeing to arbitrate disputes, and contained places for both parties to sign the agreement; unlike the arbitration provision in this case.
In denying Network’s motion to compel arbitration, the Court held that “a reasonable interpretation of such language is that Network and [McNett] may expect an employment dispute to be arbitrated but such expectation was not a contractual obligation or a ‘legal document’ obligating either party to arbitrate.” (emphasis added).
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