Hunton Employment & Labor Perspectives

On April 10, 2019, the California Court of Appeals, Second District, in Diaz v. Sohnen Enterprises, 2019 S.O.S. 1722, ruled that an employee impliedly consents to an arbitration agreement by simply continuing to work, despite never signing the arbitration agreement and even outright rejecting it.

Prior to distributing arbitration agreements to its employees, Sohnen notified them that it was adopting a new dispute resolution policy requiring arbitration of all claims and specified that continued employment would constitute an implied consent of the agreement’s terms.  One of Sohnen’s employees, Erika Diaz, verbally rejected the arbitration agreement but nevertheless continued working at Sohnen.

A week later, Diaz sent a letter rejecting the arbitration agreement and thereafter filed a complaint in state court alleging discrimination.  Sohnen then moved to compel arbitration of Diaz’s complaint, but the trial court denied the motion on the grounds that the arbitration agreement was an adhesion contract and was, therefore, invalid.

Sohnen appealed and, in a split opinion, the Court of Appeal reversed.  In its opinion, the Court held that there was sufficient evidence that Diaz consented to the arbitration agreement due to her continued employment.

Specifically, the Court held that “California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement.”

The Court also found “no evidence of surprise nor of sharp practices demonstrating substantive unconscionability.” Further, because Sohnen's employment agreement with Diaz was at-will, Sohnen could unilaterally change the terms of that agreement, so long as it provided her with notice of the change.

This opinion supports the standard that when an employee continues his or her employment after sufficient notification that an arbitration agreement is a condition of continued employment, that employee impliedly consents to the arbitration agreement. It further stands for the proposition that continued at-will employment can override even an employee’s express rejection to arbitrate.  Nevertheless, employers should consult with counsel prior to distributing arbitration agreements to ensure that proper language is included therein and that adequate notice is given to employees.