Ohio's Actual Knowledge Requirement for Agreements with an Arbitration Provision

arbitration_noticeIn Ohio, a party must have actual knowledge of an agreement that requires arbitration of disputes before that party can be compelled to arbitrate a dispute under the agreement.  Thus, merely posting a copy of an agreement in a place of employment is insufficient, in itself, to require an employee to arbitrate disputes with the employer under that agreement.  This is the holding in Jones v. Carrols, LLC d/b/a Burger King, 9th Dist. Summit C.A. No. 2738, 2015-Ohio-2250, ¶ 12, a recent ruling out of Summit County, Ohio.

The plaintiff in Jones began working at an Akron-area Burger King restaurant in 2004.  Id. at ¶ 2.  Two years later, Carrols—the owner of the Burger King location—implemented a Mandatory Arbitration Policy (MAP) that required employees to arbitrate nearly all employment claims.  Id.  Although Carrols required all new employees to sign a copy of the MAP, it did not require its then-existing employees (like Jones) to sign a copy.  Id.  Instead, Carrols: (1) distributed a memorandum to managers (to be disseminated to then-existing employees) stating that, by reporting to work on or after August 1, 2006, an employee agreed to the MAP; and (2) required managers to hang a poster containing the MAP in the place of employment.  Id.

In 2012, Jones was fired, and he subsequently filed a complaint alleging discrimination, invasion of privacy, and other claims.  Id. at ¶ 3.  Carrols moved to compel arbitration of Jones' claims pursuant to the MAP; Jones opposed, arguing that he had never agreed to the MAP and had been unaware of its existence.  Id.  After a hearing, the trial court found that Carrols had taken "reasonable steps to inform [Mr. Jones] of the company's mandatory arbitration requirement," and dismissed Jones' complaint.  Id. (quoting trial court).

Ohio's Ninth District Court of Appeals reversed and remanded.  The issue on appeal:  "whether Mr. Jones knew about the [arbitration] policy and whether his actual knowledge of the MAP was required."  Id. at ¶ 7.  The Court found that, "[i]f Mr. Jones did not have actual knowledge of the MAP, there is simply no way he could have assented to it, and, therefore, it would be impossible to conclude that he had agreed to its terms."  Id. at ¶8.  In making this finding, the Court relied on contract principles because "[w]hether an issue is referable under an arbitration agreement is a question of contract."  Id. at ¶ 6.[1]  Noting that "[i]t is well established that, in order for parties to enter a contract, there must be mutual assent to its terms—i.e., a meeting of the minds," the Court found that "[a]xiomatically, a party cannot assent to a term of which the party is unaware."  Id. at ¶ 8.

The appellate court found that the trial court incorrectly focused on whether Carrols had taken "reasonable steps to inform [Mr. Jones] of the company's mandatory arbitration requirement."  Id. at ¶ 10.  The appellate court rejected Carrols' argument—which relied on Michigan law—that reasonable notice is sufficient.  Id.[2]  The Court emphasized that "[a]lthough there are a number of cases dealing with the question of whether a party had reasonable notice of the arbitration agreement, this Court has not found a case from Ohio applying the reasonable notice standard in the absence of a signed contract."  Id. (emphasis added).  "The trial court was in the best position [at the hearing] to resolve the contradictory testimony and evidence [regarding whether Mr. Jones had actual knowledge of the MAP] but did not do so."  Therefore, the appellate court remanded the case to determine whether Mr. Jones knew about the MAP.  Id. at ¶ 12.

Thus, the principle in Jones is different from the principles that (1) failing to read a contract is not a defense to its enforcement, and (2) a party is not required to explain the arbitration agreement to the other party.  Hedeen v. Autos Direct Online, Inc., 2014-Ohio-4200, ¶33-34, 19 N.E.3d 957 (8th Dist.) ("If a person can read and is not prevented from reading what he signs, he alone is responsible for reading what he signs.  [Plaintiff] further argues that [defendant] did not explain the arbitration agreement to her.  However, the law does not require him to do so.") (internal quotations and citations omitted).  Jones imposes an affirmative obligation on employers in Ohio to notify and verify that their employees have "actual knowledge" of an agreement that requires arbitration of disputes; they cannot, for example, simply post the agreement on a bulletin board or on the company's website.  (This obligation is not surprising given the due process concerns with binding arbitration.)  The court in Jones distinguished the new employees who actually signed a copy of the MAP from the current employees who were not required to sign a copy.  Thus, if employers determine to implement a new policy or agreement containing an arbitration provision, then they must effectively communicate that fact and obtain evidence that all employees—both current and new—have actual knowledge of that agreement (e.g. , by signing a copy or an acknowledgement).


[1] The Court added:  "In fact,''an arbitration clause is, in effect, a contract within a contract, subject to revocation on its own merits[, and therefore] *** an alleged failure of the contract in which it is contained does not affect the provision itself.'"  Id. at ¶ 6, quoting Taylor Bldg. Corp. of Am. V. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, ¶ 41.

[2] Carrols cited Michigan law that demonstrated actual notice is not required for changes to workplace policy.  Id. at ¶ 10.  The appellate court responded:  "Without engaging in a lengthy discussion of Michigan employment jurisprudence, we simply note that the 'reasonable notice' standard is a result of Michigan holding that employees may have 'contractual rights' despite there being no meeting of the minds, a statement of law that, to this Court's knowledge, has not been accepted in Ohio."  Id.

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