Avery v. Integrated Healthcare Holdings: Court Affirms Order Denying Motion to Compel Arbitration

In Avery v. Integrated Healthcare Holdings, Inc. (6/27/13, pub. 7/23/13) --- Cal.App.4th ---, the Court of Appeal affirmed an order denying the defendant's motion to compel individual arbitration of wage and hour claims asserted in a putative class action. The Court held as follows:

Integrated could not enforce an arbitration policy, including a class action waiver, which it implemented after the action was filed and notice of which it did not give to the plaintiffs. Although an employer may reserve to itself the unilateral right to modify an arbitration agreement, the covenant of good faith and fair dealing requires the employer to exercise that right fairly and in good faith. Slip op. at 10. An employer may not make unilateral changes to an arbitration agreement that apply retroactively to accrued claims because doing so would interfere unreasonably with the employee’s expectations regarding how the agreement applied to those claims. Slip op. at 11. Similarly, the employer must give the employee reasonable notice regarding changes the employer makes so the employee is aware of his or her rights under the agreement. Ibid. The Court declined to enforce the arbitration policy at issue for both of these reasons. Slip op. at 11-13.

Integrated could not compel one plaintiff, Cade, to arbitrate because she did not sign an arbitration agreement, and substantial evidence supported the trial court's finding that she did not have an implied-in-fact agreement to arbitrate. Slip op. at 13-17. An employee must receive notice of any condition that the employer places on the employee’s employment before the employee can impliedly accept that condition by beginning or continuing to work for the employer. Slip op. at 16. Absent such notice, any such condition is not enforceable. Ibid.

Integrated could not compel the remaining plaintiffs to arbitrate because it failed to establish the terms of an enforceable agreement to arbitrate with them. Slip op. at 17-25. Specifically, Integrated "failed to present sufficient evidence establishing [that] the specific [arbitration policy] it presented to the trial court was the [arbitration policy] to which Plaintiffs agreed." Slip op. at 17.

The opinion is available here.