In a seemingly unjust result for the employer, a California court of appeal recently refused to enforce an unsigned arbitration agreement against a human resources director who repeatedly misled her employer into thinking she had signed it. In Gorlach v. The Sports Club Company, the employer required all employees to sign a new arbitration agreement as a condition of further employment. Gorlach, the company's HR head, was responsible for collecting employee signatures. In June, she told the COO that everyone except four employees had signed the arbitration agreement, but did not disclose that she was one of the four holdouts. Throughout June and July, Gorlach led company executives to believe she had signed the agreement. On August 6, she resigned without having signed the agreement and brought a lawsuit for, among other claims, sexual harassment and retaliation.
The employer sought to compel arbitration based on Gorlach's verbal statements that she had signed the agreement. Rejecting the employer's argument, the court ruled that, in order to prevail, the employer had to show that it relied on Gorlach's misrepresentations to its detriment, i.e., that it would have terminated Gorlach once it learned that she had not signed. The employer offered no evidence that it would have terminated Gorlach for failing to sign.
This unfortunate result could have been avoided by double-checking to confirm that all employees, including Gorlach, had signed the new arbitration agreement.