Employer’s Failure to Sign Agreement Torpedoes Its Motion to Compel Arbitration
A fundamental principle of contract law is that a written contract is an agreement in writing that serves as proof of the parties’ obligations. What happens, however, when the parties forget some of the niceties of formalizing a written contract?
For one answer, consider the recent decision in the case of Shank v. Fiserv, Inc., in which the Eastern District of Pennsylvania addressed Fiserv’s motion to dismiss and compel arbitration at the outset of the case.
Ms. Shank worked as a quality analyst for Fiserv Inc. from 2007 through 2014. In 2014, Ms. Shank took medical leave for about two months after she was seriously injured in a car accident.
Upon her return to her regular duties, Ms. Shank was notified that her position had been eliminated in a reorganization which occurred during her absence. Although there had been layoffs, Ms. Shank believed that the reasons given by Fiserv were merely pretextual and that, in fact, she had been fired in violation of various federal laws, including the Americans with Disabilities Act, the Family Medical Leave Act, and Title VII.
So she sued Fiserv in the United States District Court for the Eastern District of Pennsylvania.
Fiserv sought to dismiss the case and force arbitration, citing a "Mutual Agreement to Arbitrate Claims" that Ms. Shank had signed when she was hired and that would have contractually obligated her to arbitrate her claims. However, Fiserv’s argument had a flaw, said Ms. Shank, because it did not sign the agreement.
Therefore, Ms. Shank argued, the agreement was not valid and binding.
The court agreed with Ms. Shank.
First, it acknowledged the general rule that signatures are not required to form a binding contract. However, said the court, the intent of the parties, as expressed in the writing, was that both parties were required to sign before it would be effective. It relied on language in the agreement stating that by “utilizing this process and signing this agreement, the employee and the Company relinquish[ed] all rights to pursuing through the court the claims covered by this Agreement.”
The court concluded that this language was a clear and unambiguous statement of mutual intent that the parties would only relinquish their litigation rights if they signed the agreement. Because Fiserv had not signed the “Mutual Agreement” and was not formally bound by it, neither was Ms. Shank. Accordingly, the court overruled the motion to dismiss.
It’s easy to see how an oversight of this nature could occur.
Employers aren’t always perfect about making sure that every document filled out at the beginning of an employment relationship is signed by the right people. However, the Shank decision illustrates a danger that can arise if a written contract isn’t signed by each side.
Fiserv could have avoided this risk by signing the document before presenting it to Ms. Shank or by omitting the language that the court used to decide that the agreement required signature by both parties.
But because it did not, it now must litigate publicly with Ms. Shank in court.