Harris v. TAP Worldwide, LLC
248 Cal. App. 4th 373
| Cal. Ct. App. | 2016Background
- Harris (African‑American) worked for TAP Worldwide; received Employee Handbook with Appendix A arbitration agreement and signed an acknowledgment of receipt on September 16, 2012, before becoming a permanent employee.
- Harris alleged multiple wage-and-hour and FEHA claims, wrongful termination, and related tort claims arising from events culminating in his December 18, 2013 termination.
- Defendants moved to compel arbitration relying on the Handbook and Appendix A (the Current Employment Alternative Dispute Resolution Agreement); Appendix A covered the asserted claims and stated continued employment constituted assent.
- Harris argued no valid arbitration agreement existed because he did not sign a separate “Agreement to Arbitrate,” the handbook modification clause rendered any arbitration clause illusory, and the agreement was unconscionable.
- The trial court denied the motion to compel arbitration; defendants appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of an arbitration agreement | Acknowledging receipt of the handbook (not signing a separate agreement) is insufficient to form assent | Written acknowledgment of receipt plus continued employment and explicit handbook language deeming continued employment acceptance establishes assent | There was a valid, written arbitration agreement; assent was established by receipt and continued employment |
| Whether the arbitration agreement is illusory due to unilateral modification rights | Handbook language allowing unilateral change makes the arbitration clause illusory | Appendix A contains a specific, limited modification clause (written mutual modification; employer may only prospectively change to comply with law with 30 days’ notice); specific clause controls general handbook language | Arbitration agreement not illusory; Appendix A’s specific limitations and implied covenant of good faith foreclose illusoriness |
| Effect of employer’s general right to modify handbook policies | General modification power voids arbitration clauses (relying on Sparks) | Asmus and later authority permit unilateral modification subject to good faith/notice; such power does not render contract illusory | Court rejects Sparks’ broad rule; employer’s modification rights are limited by implied covenant of good faith and fair dealing and thus do not render arbitration unenforceable |
| Unconscionability | Agreement is adhesive and one‑sided (procedural and substantive unconscionability) | Agreement is adhesive but not substantively unconscionable because modification limits are narrow and prospective; no other oppressive terms shown | Agreement not unconscionable; motion to compel arbitration should have been granted |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000) (framework for procedural and substantive unconscionability in employment arbitration)
- Pinnacle Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC, 55 Cal.4th 223 (2012) (party seeking arbitration bears initial burden; contract principles govern arbitration enforceability)
- Sparks v. Vista Del Mar Child & Family Servs., 207 Cal.App.4th 1511 (2012) (handbook distribution and unilateral modification can, in that case, defeat arbitration — discussed and distinguished)
- Asmus v. Pacific Bell, 23 Cal.4th 1 (2000) (unilateral modification power does not render contract illusory if subject to limitations like fairness and notice)
- Mitri v. Arnel Mgmt. Co., 157 Cal.App.4th 1164 (2007) (handbook acknowledgment alone may be insufficient to bind employee to separate arbitration agreement)
- 24 Hour Fitness, Inc. v. Superior Court, 66 Cal.App.4th 1199 (1998) (employee acknowledgment referencing handbook can bind employee to arbitration clause contained therein)