On April 1, 2008, in Metters v. Ralphs Grocery Co., the California Appellate Court provided guidance on what constitutes an enforceable arbitration agreement.  Samuel Metters was an employee alleging racial discrimination and harassment against his employer, Ralphs Grocery.  He claimed that a resolution dispute form with a binding arbitration clause was not an enforceable contract, despite his having signed it.  The Court agreed.

In response to Metters’s internal complaint of harassment and discrimination, Ralphs sent Metters a letter purportedly accompanied by the Company’s dispute resolution form and arbitration policy.  The letter advised Metters to complete, sign, and return the form to aid in an investigation.  It also stated that should Metters fail to do so within 15 days from the letter’s date, the Company would review his dispute using any information already provided.  While Metters neglected to sign and return the form, he later did so when it was sent to him again after he made further complaints.

Ralphs’ arbitration policy called for mandatory and binding arbitration of all disputes should informal procedures fail.  This policy was also incorporated by reference into the dispute form.  The form, titled "Notice of Dispute & Request for Resolution," was in part an arbitration agreement, including conditions above the signature block where the employee was to sign.  These conditions stated that by submitting the dispute form, the employee agreed to comply with Ralphs’ arbitration policy.  The conditions also included separate, express language consenting to binding arbitration, as well as that the employee was not required to complete, sign, or return the form in order for Ralphs to investigate a complaint.

In finding the form unenforceable, the Court determined that Metters had not been aware that he was agreeing to mandatory arbitration, and thus could not be bound by the dispute form. Some of the factors the Court considered were that the dispute form did not resemble a contract, noting that the form’s title did not alert Metters to the nature of the document.  The form did not clearly warn Metters to pay special attention to its arbitration provisions.  Metters was also not informed by Human Resources that if he used the form, he was agreeing to arbitration.  The Court found it telling that Metters had provided information regarding his complaint outside of the dispute form, without any apparent action by the Company.

The Court suggested that because the arbitration policy required an employee to submit the dispute form for the Company to respond, "an employee ha[d] no real choice to avoid arbitration if he want[ed] some action taken on his complaint."  Thus, the Court did not find it persuasive that Metters had signed the arbitration agreement, despite its language clearly stating that he was not required to do so in order for his complaint to be investigated.  The Appellate Court made it clear that the totality of the circumstances determined whether an arbitration agreement was binding.  Employers will want to review this case to evaluate whether their own arbitration agreements are enforceable.