Labor & Employment Law Daily Wrap Up, ARBITRATION—N.D. Cal.: Arbitration agreement within ‘informational’ only employee handbooks not enforceable, (May 7, 2025)

By Marjorie Johnson, J.D.

The employer could not “have it both ways” by claiming its handbooks did not create “a contract or enforceable promise or guarantee of any kind” while simultaneously asserting that they created a binding arbitration agreement.

An employer that included an arbitration agreement within two employee handbooks which contained language stating each handbook “is not a contract or enforceable promise or guarantee of any kind,” can’t force a former employee to arbitrate her employment discrimination claims. Denying the employer’s motion to compel arbitration, a federal court noted that there was no language in the policy acknowledgement which “indicated the employee was agreeing to be bound by the arbitration agreement, or that the agreement was excluded from the language stating that nothing in the handbook was legally binding on the parties.” Because the ambiguity must be construed against the employer, no arbitration agreement was formed (Clayborne v. SSA Group, LLC, No. 25-cv-01617-DMR (N.D. Cal. May 1, 2025)).

The employee filed the instant action alleging her former employer violated California’s Fair Employment and Housing Act (FEHA) and public policy by wrongfully terminating her because of her sex and her complaints about discrimination and health safety risks. At issue was the employer’s motion to compel arbitration and stay the court action.

Employee handbooks, arbitration agreements. As part of the onboarding process after she was hired, the employee created an online account on the employer’s internal learning management system which gave her access to documents that included two documents titled “California Employee Handbook” and “National Employee Handbook.” Each handbook contained a mandatory arbitration agreement. She was given three days to review the documents, ask questions, and acknowledge the onboarding documents electronically.

Both the e-signature policy acknowledgement page and both the handbooks contained the following phrase: “I understand that this Handbook is solely for the purposes of summarizing [SSA’s] current policies, benefits and rules, [and] that it is not a contract or enforceable promise or guarantee of any kind, whether of employment or of any specific terms or conditions of employment or procedural rights.” The documents also both stated that the employee “understand[s] and acknowledge[s] the Arbitration Agreement, defined in the Employee Handbook.”

Ambiguity. The employee argued that the employer failed to establish the existence of a valid arbitration agreement because although she electronically checked a box confirming that she “accept[s] and acknowledge[s] the company policy above.” the language was ambiguous as to whether acknowledging the handbooks manifested her assent to be bound by the arbitration agreement itself. In particular, the employee argued that to “understand and acknowledge” is different from consenting to be bound by the terms of a contract. She also pointed out that the documents did not explicitly exclude the arbitration agreement from the above statement that the handbook is “not a contract.” Accordingly, she contended that because it was ambiguous whether the arbitration agreement was intended to be a binding contract, there was no mutual assent, and no enforceable contract was formed.

Contradictions. The court agreed. The arbitration agreement contradicted the explicit language that the handbooks were “not a contract or enforceable promise or guarantee of any kind, whether of employment or of any specific terms or conditions of employment or procedural rights.” It was reasonable to interpret the handbooks’ language as communicating that they were not intended to create any “enforceable promise or guarantee” of “terms or conditions of employment or procedural rights,” including the mandatory arbitration procedures.

No arbitration agreement. Indeed, the policy acknowledgement page stated: “I understand that this Handbook is solely for the purposes of summarizing the [employer’s] current policies, benefits and rules.” This was reinforced by the stated purpose of the handbooks, which explicitly stated that they were “intended solely for informational purposes.” The court found that it was ambiguous whether the handbooks were intended to create any contract, including a contract to arbitrate, and because such an ambiguity must be construed against the employer as the drafter of the language, no arbitration agreement was formed.

The employer emphasized that the acknowledgement page stated, “I further understand and acknowledge the Arbitration Agreement, defined in the Employee Handbook.” However, the court explained that “[m]erely referencing the Arbitration Agreement in the policy acknowledgment page is insufficient.” Significantly, there was no language in the policy acknowledgement which “indicated the employee was agreeing to be bound by the arbitration agreement, or that the agreement was excluded from the language stating that nothing in the handbook was legally binding on the parties.” Rather, the policy acknowledgement only required the employee to “understand and acknowledge” the arbitration agreement as being defined in the handbooks—it did not indicate an intent to bind the employee to the terms of the arbitration agreement. Moreover, the arbitration agreement was not specifically excluded from the language that the handbooks were “not a contract or enforceable promise or guarantee of any kind.”

The case is No. 25-cv-01617-DMR.

Judge: Ryu, D.

Attorneys: Ashley Silva-Guzman (Jaurigue Law Group) for Tykia Clayborne. Ashley N. Lopeztello (Barnes & Thornburg) for SSA Group, LLC.

Companies: SSA Group, LLC

Cases: Arbitration ContractClaims CaliforniaNews