Trial News

The Eighth Circuit has ruled that an employee who clicked a link to electronically acknowledge her review of an employee handbook did not consent to a clause in the handbook providing for arbitration of employment-related disputes. (Shockley v. PrimeLending, a PlainsCapital Co., 2019 WL 3070502 (8th Cir. July 15, 2019).)

Jennifer Shockley was a mortgage loan processor for PrimeLending from June 2016 to July 2017. Early in her employment and again in February 2017, Shockley was asked to access an electronic copy of the employee handbook on PrimeLending’s computer network. Clicking on the link to the handbook generated an automatic notice of acknowledgment of review of the handbook. Although clicking the link also opened a pop-up window with a hyperlink to the full text of the handbook, Shockley claims she did not review this full text. The full text contained a clause requiring arbitration of employment-related disputes and delegating to an arbitrator the authority to resolve claims regarding the “interpretation, applicability, enforceability or formation” of the arbitration clause.

In September 2017, Shockley sued PrimeLending in federal district court, alleging that its overtime pay practices violated the federal Fair Labor Standards Act and Missouri state law. PrimeLending moved to compel arbitration of the claims, arguing that a valid arbitration agreement existed and that “the delegation provision grants authority to the arbitrator to decide all questions of arbitrability.” Shockley disagreed, arguing that when she clicked the employee handbook link no valid contract was formed, so she had not agreed to either the arbitration or delegation provisions in the handbook.

The district court agreed with Shockley, finding that although parties to an arbitration agreement can delegate questions of the agreement’s scope and validity to arbitrators, the court still must determine whether an agreement was formed. The court applied Missouri contract law principles to evaluate whether there was an “offer, acceptance, and bargained for consideration” between PrimeLending and Shockley. Here, the court said, both offer and acceptance were lacking. Simply providing employees with electronic access to the handbook was not an offer, the court said, but merely informational. While other courts have found an employment arbitration agreement in a handbook to be valid, in those cases the agreement was accompanied by a statement that the employee, “by accepting or continuing employment . . . agreed to accept [the arbitration agreement].” (Berkley v. Dillard’s Inc., 450 F.3d 775 (8th Cir. 2006).)

The court also found that even if providing the handbook constituted an offer, Shockley’s review of company policies did not constitute acceptance. Therefore, Shockley could not be “compelled to proceed to arbitration in order to prove that she never agreed to arbitrate claims in the first place,” the court said, relying on Nebraska Machinery Co. v. Cargotec Solutions, LLC (762 F.3d 737 (8th Cir. 2014).) There, the Eighth Circuit held that in a dispute between a construction equipment dealer and a manufacturer, an arbitration agreement in one purchase order was insufficient to compel arbitration because the clause was not part of the overarching purchase contract. Applying this principle to Shockley’s case, the court found that because no arbitration contract was formed, there was no need to look further to the specific terms of the arbitration and delegation provisions.  

On appeal, the Eighth Circuit reviewed the district court’s decision de novo and agreed that Missouri contract law governed the case. While no specific terms of art are required for an offer, the court said a valid offer must “include the ability to accept through some affirmative words or action.” In addition, the delegation provision should be evaluated as a severable provision of the contract or “an additional, antecedent agreement.” If “the delegation provision is invalid, PrimeLending’s claim to compel arbitration of the arbitrability issues fails.”

While PrimeLending demonstrated that Shockley may have reviewed the delegation clause, it’s possible that she never saw it. In addition, the computer-generated acknowledgment of review was not an unequivocal acceptance of the delegation provision, the court said. Shockley’s possible review of the delegation provision’s terms is not enough to constitute acceptance, and therefore, no valid contract as to the delegation provision existed. The Eighth Circuit found that it need not look in-depth at the specific terms of the arbitration provision since that provision “suffers from the same fatal flaw as the delegation provision” and affirmed.

Independence, Mo., attorneys Matthew Crimmins and Virginia Stevens Crimmins, who represent Shockley, said they were “pleased that the Eighth Circuit affirmed the district court’s ruling denying PrimeLending’s motion to compel arbitration and are looking forward to focusing on the merits of this matter.” They added that this “important ruling strongly reaffirms the essential premise of the Federal Arbitration Act, which is that parties must have an agreement to arbitrate before they can be compelled to arbitrate.”