Order Up: Restaurant's Arbitration Agreement Held Valid Without Its Signature
As the restaurant industry continues to grapple with challenges against employee-arbitration clauses, the U.S. Court of Appeals for the Fifth Circuit has found that an arbitration agreement signed only by an employee is valid and enforceable.1
As part of its onboarding process, the defendant's employees are required to sign an online arbitration agreement in which they waive the right to bring any class or collective action claims and agree to arbitrate any work-related disputes. Based on this agreement, the defendant sought to dismiss a former employee's class action suit and compel arbitration. The plaintiff's primary defense against compelling arbitration was that the defendant did not sign the agreement. A Texas district court agreed, finding the arbitration agreement unenforceable because it lacked the defendant's signature.
Reversing the district court's decision, the Fifth Circuit found the agreement unambiguous, valid and enforceable. Applying Texas law, the Fifth Circuit concluded that to make a signature a condition precedent to enforcement, "the agreement must clearly and explicitly require a signature." The plaintiff argued – and the lower court had previously agreed – that the contract did explicitly require a signature by expressly referencing the defendant "signing" the agreement in three separate places. Rejecting that argument, the Fifth Circuit held that reviewing the agreement as a whole, which it must, the "scattered" references of "signing" were insufficient to "clearly and explicitly require a signature." The Fifth Circuit found the fact that the agreement lacked a signature block for the defendant to sign the agreement more compelling.
One interesting sidenote is the Fifth Circuit's dicta on the analysis of the parties' intent, which it would have been required to do had it found the agreement to be ambiguous. Again, applying Texas law, the Fifth Circuit concluded that the fact that the agreement was on the defendant's letterhead, the plaintiff was required to sign it as necessary before employment, and the defendant kept the agreement in the plaintiff's file "decisively favored" the defendant by evincing its intent to be bound by the agreement, even though it was not signed.
1 Flores v. BJ's Restaurant Operations Co., 2023 WL 6533452 (5th Cir.) (Oct. 6, 2023)