A Signature Can Be Worth Thousands of Dollars

There is a lot of discussion about the utility and enforceability of arbitration agreements to resolve employee disputes with their employers. As we noted in a recent blog post, last month, the U.S. Supreme Court held that employment contracts that contain arbitration clauses and class action waivers are enforceable. Employers find these agreements attractive because arbitration tends to be faster and less expensive than court litigation. However, a recent case out of the 5^th Circuit reminds us that an employer seeking to enforce a written arbitration should not overlook a small but important detail: the signatures of the parties to the agreement.

In Huckaba v. Ref-Chem, LP, No. 17-50341, (5th Cir. June 11, 2018), the 5^th Circuit Court of Appeals reversed the district court's judgment compelling arbitration. Why? Because the express language of the agreement at issue required for it to be signed by both parties and because it was undisputed that Ref-Chem did not sign the agreement. That's right, the company did not sign the agreement it was seeking to enforce.

Whether or not all parties must sign a written agreement for it to be binding is a matter of state contract law. The 5^th Circuit interpreted the agreement at issue under Texas contract law. In support of its decision, the Court noted that the arbitration agreement contained: (1) a statement that "[b]y signing this agreement the parties are giving up any right they may have to sue each other;" (2) a clause prohibiting modifications unless they are "in writing and signed by all parties;" and (3) a signature block for the employer, Ref-Chem. Thus, the Court concluded, this express language clearly indicated an intent for the parties to be bound to the arbitration agreement by signing. The agreement also identified the parties in the first line as "[t]he organization referred to above ('Employer') and the Employee, whose signature is affixed hereto." The Court found that this clause made clear the parties' intention that the employer would sign the agreement. (The Court also acknowledged that Texas courts have held that a signature block by itself is insufficient to establish the parties' intent to require signatures).

What did the absence of this one signature cost the company? The company probably spent thousands of dollars in attorneys' fees briefing this issue at the District Court and then at the Circuit Court. Now the former employee has the opportunity to pursue her claims in court, which is going to cost the company even more money. Expensive lesson.

The takeaway: Know and understand your agreement. If you are not sure who should sign it, ask your attorney.