This is an unpublished decision, and therefore not controlling on any lower court. And there is no new or novel case law discussed by the court. The case is however valuable as an illustration of how difficult it might be to create and implement a binding arbitration agreement with employees, and in this case how missteps in the implementation can badly effect the outcome of litigation.

In this case John Schwenk began working for Bristol Farms in 2009. In September 2020, he filed a class action complaint based on wage and hour claims.

Seven months after he filed his case in the trial court, Bristol Farms distributed to its employees an arbitration agreement to include a broad range of claims, including those involved in this litigation. The agreement contained an opt-out procedure for employees to follow if they did not want to be bound by the agreement.

It was undisputed that one day after Schwenk signed and submitted the acknowledgment page of the arbitration agreement, he asked for it back, and shredded it. He crossed out his signature on the receipt tracking list in the presence of a Bristol Farms administrator who then initialed and confirmed the change on the form.

Seventy days after Schwenk shredded the arbitration agreement and crossed out his signature on Bristol Farms’s receipt tracking list, counsel for both Bristol Farms and Schwenk met and discussed the agreement. Meanwhile, between the shredding of the agreement, and the discussion between counsel, Schwenk’s lawsuit had moved forward with Schwenk’s counsel propounding two sets of initial discovery requests to Bristol Farms, and the parties filing a second joint case management statement with the trial court without mentioning the arbitration agreement or that either party would seek arbitration.

Thirty days after the respective parties’ counsel discussed the arbitration agreement, Bristol Farms filed a motion to compel arbitration. Bristol Farms contended that Schwenk impliedly assented to the proposed agreement to arbitrate. The trial court rejected the contention because it found Schwenk did not assent to the agreement, and denied the motion. The court of appeal agreed and affirmed the trial court in the unpublished case of Schwenk v Bristol Farms – G060731 (October 2022).

Bristol Farms argues it is entitled to a reversal as a matter of law based on a two-part argument: (1) Schwenk agreed to Bristol Farms’s arbitration agreement by continuing employment; and so (2) Schwenk’s failure to comply with the “opt out” procedure in the arbitration agreement constituted his consent to be bound by the arbitration agreement’s terms.

In response, Schwenk notes the Legislature’s enactment of Labor Code section 432.6. in 2019. The statute provides in relevant part that no person may require an “employee to waive any right, forum, or procedure for a violation of [the Labor Code], including the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court.”

Labor Code section 432.6, subdivision (c), includes in its definition of prohibited dealings any “agreement that requires an employee to opt out of a waiver or take any affirmative action in order to preserve their rights.”

Thus the court of appeal wrote “Applied facially, Labor Code section 432.6, subdivisions (a) and (c), are fatal to Bristol Farms’s argument that its opt out procedure shows Schwenk consented to the arbitration agreement.”

And the court of appeal concluded that the “trial court correctly decided Bristol Farms had not shown mutual consent in this case based on undisputed facts. Substantial evidence supports the court’s finding that Schwenk ‘never agreed to arbitrate his claims against Bristol Farms’ because Schwenk’s undisputed outward manifestations of conduct would lead a reasonable person to believe his consent did not exist.”