Although, this is not a new case it is significant and of interest.

The California Court of Appeal, Second District held that an arbitration provision in an employee handbook was severable from all of the other rights and policies included in the handbook and therefore there was no agreement to arbitrate.

An employee was employed for approximately eighteen years when she was fired. She then filed suit against the employer for various rights dealing with wrongful termination and violations of public policy, etc. The employer filed a motion to dismiss the complaint and compel arbitration. This was all based on the employee handbook.

 
The handbook was divided into nine sections headed by roman numerals. Section number VIII was titled "Mutual Agreement to Arbitrate Claims." It had an agreement to arbitrate controversies arising out of, or relating to, or associated with the employee's employment with the company or the termination. The final page of section VIII contains lines for dates and signatures of the employee and the employer. This was neither signed nor dated. After section IX, which is entitled "Arbitration Procedure," there was another page with an unnumbered heading titled "Employee Acknowledgement." It has an acknowledgement of receipt of a copy of the handbook and the agreement to abide by the policies, rules, benefits, and procedures. This was signed.

The employer relied on the employee acknowledgement to show that there was a binding arbitration agreement. The court held otherwise.

The right to arbitrate comes from a contract. The court reiterated that there has to be a written agreement to arbitrate a controversy in order for the court to compel arbitration. The court found that there were two separate agreements in the employee handbook. One was the agreement to arbitrate, which was the subject of Section VIII. The other is the agreement to be bound by the "benefits, policies, rules, and procedures" contained within the remaining sections of the handbook. It appeared that the reasoning that there were two agreements was based on the fact that the mutual agreement to arbitrate indicated that it was intended to be a complete stand alone agreement. It was entitled "Sole and Entire Agreement." It also stated that "This is the complete agreement of the parties on the subject of Arbitration of Disputes." Further, it appears that it was important that the final page of section VIII, which dealt with arbitration, was not signed.

Generally, in order to force arbitration, the parties must somehow agree to arbitration in writing. Typically, it is part of the written contract. In this case the arbitration agreement was severable (could be separated) from the balance of the contract. Otherwise, the agreement can be done by way of an agreement to arbitrate after a controversy has arisen. This is typically called a "Submission to Arbitrate," which is signed by all of the parties. In this case there was no signed agreement to arbitrate.