Last week, the Hamilton County Court of Appeals reversed an
employer’s motion to dismiss and compel arbitration because the arbitration “clause”
was contained in an employee handbook, which specifically said that it was not
a binding contract and was illusory since the employer could change the terms
at any time without the employee’s assent.
Bauer
v. River City Mtge., L.L.C., 2023-Ohio-3443.
“Because the acknowledgement form disavowed any binding force and provided [the
employer] with the authority to amend the employee manual at any time without
notice to [the employee], we hold there was no meeting of the minds here. And
absent mutual assent, the employee handbook was merely a unilateral statement
of rules and policies which did not create any contractual obligation and
rights.”
According to the Court’s opinion, the plaintiff employee
signed the Handbook Acknowledgement, which explicitly stated that Handbook
could be changed at any time at the employer’s discretion without notice and that
it was not intended to form an implied or express contract. One of the policies required employees to
arbitrate any dispute with the employer.
The plaintiff filed suit after being fired, claiming that she had been
subjected for years to discrimination and sexual harassment. The employer moved to dismiss and compel
arbitration based on the employee handbook.
The trial court dismissed the complaint due to the arbitration policy.
The appellate court reminded the parties that:
As in all contracts, express or implied, both parties must intend to be bound. Absent mutual assent, a handbook becomes merely a unilateral statement of rules and policies which create no obligation and rights.
The Court distinguished prior court decisions where the
handbook acknowledgement specifically referenced the arbitration requirement
and the employee’s consent to it. Unlike
those cases, the handbook acknowledgement in this case said nothing about
mandatory arbitration; on the contrary, it referred only to how the handbook
was not an enforceable contract.
Further, the employer’s reservation of rights to unilaterally
modify the handbook policies without notice or consent rendered any such
contract illusory. “Many courts have ‘found that permitting an employer to
unilaterally amend or terminate an arbitration agreement without notice renders
the agreement illusory.”’
Defendants rely heavily on Ohio’s strong policy favoring arbitration to argue the employee manual was a binding contract. But this policy is not triggered when a broad disclaimer of contractual obligations indicates the parties never agreed to arbitrate. Further, the presumption in favor of arbitration is useful in resolving ambiguities in the language of an arbitration provision. . . . .But here, no such ambiguities exist, as the acknowledgement form clearly and unequivocally disclaims any contractual obligations. Defendants’ reliance on Ohio’s strong policy favoring arbitration is therefore misplaced.
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
