Mar v. Perkins ( 2024 )

Filed 5/22/24
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
WINSTON MAR, B327665
Plaintiff and Respondent, (Los Angeles County
Super. Ct.
v. No. 22STCV26170)
LAWRENCE PERKINS et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Maurice A. Leiter, Judge. Affirmed.
Practus, Sana Swe and Andrew W. Heger for Defendants
and Appellants.
Cohen Williams, Marc S. Williams and Martin J.
Chrisopher Santos for Plaintiff and Respondent.
__________________________
SierraConstellation Partners, LLC (Sierra) and Lawrence
Perkins (collectively, Sierra defendants) appeal from an order
denying their motion to compel arbitration of Winston Mar’s
1
action for buyout of his partnership interest. The trial court
found the Sierra defendants failed to meet their burden to
establish the existence of an arbitration agreement because Mar
clearly stated that he refused to sign the arbitration agreement
and Sierra could terminate his employment if it objected. On
appeal, the Sierra defendants contend the trial court erred
because Sierra notified Mar that his continued employment
constituted assent to the arbitration agreement, and Mar
continued his employment for 19 months before he left Sierra and
filed this lawsuit.
The Sierra defendants are correct that where an employer
modifies its employment policy to require employees to arbitrate
their disputes and clearly communicates to employees that
continued employment will constitute assent to an arbitration
agreement, the employees will generally be bound by the
agreement if they continue to work for the company. However,
where, as here, the employee promptly rejects the arbitration
agreement and makes clear he or she refuses to be bound by the
agreement, there is no mutual assent to arbitrate. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Mar’s Complaint
On August 12, 2022 Mar commenced this action, asserting
a cause of action for buyout of his partnership interest in Sierra
pursuant to Corporations Code section 16405.1 Mar alleged that
1 Under Corporations Code section 16405,
subdivision (b)(2)(B), a partner who dissociates from a
partnership “may maintain an action against the partnership or
2
in June 2015 he and the Sierra defendants entered into a general
partnership “to conduct business as a national interim
management and advisory firm serving middle-market
companies” facing “difficult business challenges.”2 On April 1,
2022 Mar provided the Sierra defendants with written notice of
his dissociation from the partnership effective that date. In his
notice, Mar stated the Sierra defendants were required to
purchase Mar’s partnership interest within 120 days pursuant to
Corporations Code section 16701, subdivisions (a) and (e). The
Sierra defendants did not respond to Mar’s demand for payment
or tender any payment for his partnership interest. Mar sought a
determination of the buyout price of his partnership interest; an
order directing the Sierra defendants to pay the buyout price plus
interest; costs of suit; and reasonable attorneys’ fees and the fees
and expenses of any appraisers and other experts.
B. The Sierra Defendants’ Motion To Compel Arbitration
On November 29, 2022 the Sierra defendants filed a motion
to compel arbitration.3 They argued Mar was an at-will employee
another partner” to “have the partner’s interest in the
partnership purchased.”
2 Mar alleged he was a partner, which the Sierra defendants
dispute. We treat Mar as an employee for purposes of this
opinion and express no opinion on the merits of his cause of
action.
3 The Sierra defendants styled their motion as a petition to
compel arbitration. (See Code Civ. Proc., § 1281.2 [referring to a
request to enforce an arbitration agreement as a “petition of a
party to an arbitration agreement”].) However, because the
pleading was filed in an existing lawsuit, we treat it as a motion
3
and was bound by the arbitration agreement in Sierra’s employee
handbook because the handbook stated that Mar’s obligation to
arbitrate was an express term of his employment. Further, Mar’s
refusal to sign the handbook acknowledgment and standalone
arbitration agreement was immaterial because Mar’s continued
employment with Sierra for 19 months after Sierra added the
mandatory arbitration agreement to its handbook created an
implied-in-fact agreement to arbitrate between the parties.4 The
Sierra defendants argued Mar’s claim fell within the scope of the
arbitration agreement, and he was therefore required to arbitrate
in accordance with federal and state law, which strongly favored
arbitration.
In support of their motion, the Sierra defendants submitted
a declaration from Rebecca Waits, Sierra’s chief people officer,
who started working at Sierra in October 2019. Waits stated that
Perkins, Sierra’s chief executive officer, founded Sierra in
January 2013. Mar began working at Sierra as a business
to compel arbitration. (See Villareal v. LAD-T, LLC (2022)
84 Cal.App.5th 446, 452, fn. 2 [treating petition to compel
arbitration filed in existing action as motion to compel
arbitration]; Phillips v. Sprint PCS (2012) 209 Cal.App.4th 758,
772 [“There is an ‘analytic distinction’ between
a motion (or petition) to compel arbitration filed within an
existing action, as here, and a petition to compel arbitration that
commences an independent action.”].)
Further undesignated statutory references are to the Code
of Civil Procedure.
4 The Sierra defendants argued Mar worked for an
additional 18 months at Sierra, but we count 19 months from the
date Sierra proposed the arbitration agreement until he left
Sierra.
4
advisor in July 2013. According to Waits, Mar is an at-will
employee with the title of “Managing Director.” Mar was paid a
salary, and he received an annual W-2 form from Sierra until his
employment ended in 2022.
In 2020 Sierra added a mandatory arbitration agreement to
its employee handbook. On August 11, 2020 Waits emailed a
copy of the handbook to all Sierra employees, including Mar,
along with a separate arbitration agreement.5 Waits stated in
her email, “Please print out and sign the acknowledgments for
the handbook, non-harassment policy and binding arbitration
policy.” (Boldface omitted.) Waits averred in her declaration
that Mar called her “to say that he would not sign either
document.” On August 17 and 21 Waits sent emails requesting
that employees send their signed acknowledgments to her by
August 21.
On August 31 Waits emailed Mar, stating in part, “We
know that you have received this Employee Handbook, and that
you are aware of its terms, regardless of the fact that you have
refused to sign for it. We are therefore advising you, by way of
this memo, that whether or not you agree to sign the
Acknowledgment of Employee Handbook, these are the rules of
this Company and they do still apply to you, including the
mandatory arbitration provisions. . . . [¶] We are just sending
this memo to you to say that you do not have to sign the
Employee Handbook. Regardless, because you have received the
handbook and are aware of its terms, if indeed you elect to
continue your employment with . . . us beyond today, August 31,
5 Waits’s August 2020 emails, including her August 31 email
exchange with Mar, were attached as exhibits to Waits’s
declaration.
5
2020[,] you will be deemed to have accepted the terms of these
policies of the Employee Handbook, including the arbitration
provisions, and will be bound by and held accountable to them,
regardless of the fact that you have failed to sign it, and
regardless of any express objections you may have noted.” Mar
responded eight minutes later by email, “Again, I am not signing
this handbook. And will not be bound by it. [¶] If you would
like, please feel free to terminate me due to that.” Mar worked at
Sierra for another 19 months after receiving Waits’s August 31
email.
On March 29, 2021 Waits emailed Sierra’s 2021 team
member handbook to employees along with a separate arbitration
agreement. Mar again called Waits “shortly thereafter to
reiterate his refusal to sign the Handbook acknowledgement
form.”
The 2021 handbook, which was attached as an exhibit to
Waits’s declaration, contained an arbitration agreement that
provided in part, “To the maximum extent permissible under
federal and state law, any controversy, dispute or claim
(‘Dispute(s)’) between you and the Company, or its officers,
directors, owners, agents or other Team Members, subsidiaries,
affiliates, parent, or related entities, related in any manner to
your employment or association with the Company, or
termination thereof, that could have been resolved in a court of
law before a judge or jury, shall be resolved by binding
arbitration at the request of any party. Arbitration is the process
by which a neutral third party, rather than a judge or jury,
makes a binding decision relating to a Dispute. The arbitrability
of any Dispute under this agreement shall be determined by
application of the substantive provisions of the Federal
6
Arbitration Act (9 U.S.C. Sections 1 and 2) (‘FAA’). To the extent
that the FAA is inapplicable, the arbitration law of the state in
which you work or last worked for the Company shall apply.
Arbitration shall be the exclusive method for resolving any
Dispute; provided however, that any party may request
provisional relief from a court of competent jurisdiction, as
provided under federal or state law. Even if the Company does
not sign or acknowledge receipt of this agreement, the Company,
like you, agrees to be bound by this agreement and agrees to
arbitrate all Disputes.”
The 2021 handbook contained an acknowledgment page,
which stated in part, “Whether or not I have signed a separate
agreement to arbitrate, I understand that I have agreed that my
employment with the company is subject to binding arbitration
which is set forth in the ‘arbitration’ section of the handbook. I
understand and acknowledge that the agreement to arbitrate
contains a waiver of my ability to act as a class representative in
any class action proceeding or to participate in any class
proceeding as a member of a class. Arbitration provided for
under this agreement is the exclusive method to resolve any
disputes or controversies that the company or I may have,
whether or not arising out of my employment or termination of
that employment with the company.” (Capitalization omitted.)
Mar did not sign the handbook acknowledgment form.
The separate arbitration agreement contained the same
provisions as the arbitration agreement in the 2021 handbook,
except it contained a different acknowledgment paragraph and
7
signature line for the employee.6 The acknowledgment
paragraph provided, “I hereby acknowledge that I have received,
reviewed, and agree to the binding arbitration agreement and the
class action waiver and that I have waived my right to a trial
before a judge or jury in all disputes with the company.”
(Capitalization omitted.) Mar did not sign the separate
arbitration agreement.
C. Mar’s Opposition to the Motion To Compel Arbitration
In Mar’s opposition to the Sierra defendants’ motion to
compel arbitration, he argued that he never agreed to arbitrate
his claim as evidenced by Waits’s declaration. Mar asserted that
when Sierra proposed a change to its existing relationship with
Mar by requiring arbitration of all disputes, he was free to reject
it and make a counteroffer. After Mar told Waits that Sierra
could terminate him due to his refusal to sign the handbook
acknowledgment form, Sierra never attempted to fire him.
In his supporting declaration, Mar stated that when he
joined Sierra in 2013, Mar, Perkins, and Tim Hassenger agreed
that they would be equal equity owners as partners in Sierra.
Mar contributed $400,000 to Sierra over the years, which Sierra
had not repaid. During his time with Sierra, Mar generated tens
of millions in revenue for the company through his contacts and
clients, and he led numerous projects for Sierra’s clients. When
Hassenger left Sierra, Perkins and Mar “agreed to split the
equity 60/40 in favor of Mr. Perkins, recognizing that Mr. Perkins
6 The separate arbitration agreement was attached as an
exhibit to Waits’s declaration.
8
handled more management of the company. This agreement was
reached orally and was never documented.”
When Mar received Waits’s August 11, 2020 email
requesting a signed copy of the arbitration acknowledgment form,
Mar “did not believe the arbitration agreement applied to [him]
as a partner of [Sierra].” Mar’s account of the emails he and
Waits exchanged does not differ from that of Waits. Mar stated
he called “Waits and informed her that [he] would not sign the
handbook or arbitration agreement.” Waits then stated in an
August 31 email to Mar that Mar’s continued employment would
be deemed acceptance of the arbitration agreement. Mar replied,
“Again, I am not signing this handbook. And will not be bound by
it. If you would like, please feel free to terminate me due to that.”
According to Mar, on March 29, 2021 Waits emailed the
entire company a link to the handbook and arbitration
agreement. Shortly thereafter, Mar called Waits “to make clear,
again, that [he] would not be signing the arbitration agreement
and that she could terminate him if she insisted on instituting
such a clause. Again, nobody from [Sierra] ever attempted to
terminate [his] relationship with the company.” On April 1, 2022
Mar provided written notice of his intent to withdraw as a
partner, and Sierra responded that it wanted Mar to continue
leading several projects for the company. Mar agreed, and he
signed an independent consulting agreement with Sierra on April
1, 2022, which did not contain an arbitration provision.7
However, Mar left Sierra on April 1 because “Perkins wanted to
7 Mar attached the independent consulting agreement as an
exhibit to his declaration.
9
change the terms [of their oral partnership agreement] to further
favor his position.”
D. The Sierra Defendants’ Reply in Support of Their Motion To
Compel Arbitration
In their reply, the Sierra defendants disputed that Sierra
ever had an oral partnership agreement with Mar. They argued
that in response to Waits’s August 2020 email, Mar did not claim
the employee handbook did not apply to him as a Sierra partner,
only raising the possibility that Sierra could terminate his
employment. Further, Mar’s independent consulting agreement
with Sierra stated he was previously employed by Sierra without
any mention of his partnership interest in Sierra.
E. The Trial Court’s Ruling
On March 10, 2023, after hearing argument from counsel,
the trial court denied the Sierra defendants’ motion to compel
arbitration. The court explained in its minute order, “Defendants
have the burden of establishing the existence of an arbitration
agreement. Defendants have not met that burden. [Mar] clearly
stated he did not agree to arbitration. He said Defendants could
fire him for his refusal to be bound by the employee handbook’s
arbitration provision. Defendants did not fire him. Defendants
cite no authority holding that an employee handbook creates an
implied-in-fact contract despite the employee’s express statement
he will not be bound by it. Nor have Defendants shown that in
the standoff presented here—the employer doesn’t fire an
employee who refuses to agree to arbitration, and the employee
doesn’t quit—the law deems the employee to have consented.”
The Sierra defendants timely appealed.
10
DISCUSSION
A. Motions To Compel Arbitration and Standard of Review
Section 1281.2 requires the trial court to order arbitration
of a controversy “[o]n petition of a party to an arbitration
agreement alleging the existence of a written agreement to
arbitrate a controversy and that a party to the agreement refuses
to arbitrate such controversy . . . if it determines that an
agreement to arbitrate the controversy exists.” Accordingly, the
threshold question is whether there is an agreement to arbitrate.
(American Express Co. v. Italian Colors Restaurant (2013)
570 U.S. 228, 233 [“arbitration is a matter of contract”]; Pinnacle
Museum Tower Assn. v. Pinnacle Market Development (U.S.),
LLC (2012) 55 Cal.4th 223, 236 (Pinnacle) [“‘“A party cannot be
required to submit to arbitration any dispute which he has not
agreed so to submit.”’”]; Trinity v. Life Ins. Co. of North
America (2022) 78 Cal.App.5th 1111, 1120 (Trinity) [“As the
language of this section makes plain, the threshold question
presented by every petition to compel arbitration is whether an
agreement to arbitrate exists.”].)
The party seeking to compel arbitration bears the burden of
proving by a preponderance of the evidence an agreement to
arbitrate a dispute exists, and the party opposing arbitration
bears the burden of proving unconscionability or other defenses.
(Pinnacle, supra, 55 Cal.4th at p. 236; Rosenthal v. Great Western
Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) “To carry this
burden of persuasion the moving party must first produce ‘prima
facie evidence of a written agreement to arbitrate the
controversy.’ [Citations.] ‘If the moving party meets its initial
prima facie burden and the opposing party disputes the
11
agreement, then . . . the opposing party bears the burden of
producing evidence to challenge the authenticity of the
agreement.’ [Citations.] If the opposing party produces such
evidence, then ‘the moving party must establish with admissible
evidence a valid arbitration agreement between the parties.’
[Citation.] Despite the shifting burden of production, ‘[t]he
burden of proving the agreement by a preponderance of the
evidence remains with the moving party.’” (Trinity, supra,
78 Cal.App.5th at p. 1120; accord, Gamboa v. Northeast
Community Clinic (2021) 72 Cal.App.5th 158, 165.)
Where “the evidence is not in conflict, we review the trial
court’s denial of arbitration de novo.” (Pinnacle, supra,
55 Cal.4th at p. 236; accord, Diaz v. Sohnen Enterprises (2019)
34 Cal.App.5th 126, 129 (Diaz); Harris v. TAP Worldwide, LLC
(2016) 248 Cal.App.4th 373, 380 (Harris).) Because the facts
regarding the arbitration agreement and communications
between Waits and Mar are undisputed, we review de novo the
legal question whether on the undisputed facts there was an
agreement to arbitrate.
B. The Sierra Defendants Failed To Establish Mar’s Assent to
the Arbitration Agreement
The Sierra defendants contend, relying on this court’s
decision in Diaz, supra, 34 Cal.App.5th at page 130, that Mar’s
conduct in continuing to work for Sierra constituted acceptance of
Sierra’s arbitration agreement regardless of whether he signed
the agreement. Mar responds that no implied-in-fact agreement
was formed by his continued employment because he
unequivocally rejected the arbitration agreement, and he never
signed the agreement We agree with Mar that the Sierra
12
defendants did not meet their burden to show an express or
implied-in-fact agreement to arbitrate was formed.
“[I]t is a cardinal principle that arbitration under the FAA
‘is a matter of consent, not coercion.’ [Citation.]” Thus, ‘“a party
cannot be required to submit to arbitration any dispute which he
has not agreed so to submit.”’ [Citations.] In determining the
rights of parties to enforce an arbitration agreement within the
FAA’s scope, courts apply state contract law while giving due
regard to the federal policy favoring arbitration.” (Pinnacle,
supra, 55 Cal.4th at p. 236; accord, B.D. v. Blizzard
Entertainment, Inc. (2022) 76 Cal.App.5th 931, 943 [“‘[W]hile
California public policy favors arbitration, “‘“there is no policy
compelling persons to accept arbitration of controversies which
they have not agreed to arbitrate.”’”’”].)
“‘[T]he existence of an enforceable arbitration agreement is
established under state law principles involving formation,
revocation and enforcement of contracts generally.’” (Juen v.
Alain Pinel Realtors, Inc. (2019) 32 Cal.App.5th 972, 978; accord,
Flores v. Nature’s Best Distribution, LLC (2016) 7 Cal.App.5th 1,
9 [“‘California contract law applies to determine whether the
parties formed a valid agreement to arbitrate.’”].) “An essential
element of any contract is the consent of the parties, or mutual
assent. [Citation.] Mutual assent usually is manifested by an
offer communicated to the offeree and an acceptance
communicated to the offeror.” (Donovan v. RRL Corp. (2001)
26 Cal.4th 261, 270-271; accord, Mendoza v. Trans Valley
Transport (2022) 75 Cal.App.5th 748, 777; see Civ. Code, § 1550
[“It is essential to the existence of a contract that there should
be: . . . [the parties’] consent[.]”].) “‘While both the Federal
Arbitration Act . . . and California law favor arbitration, a party
13
is not required to arbitrate his or her claims absent consent.’”
(Fleming v. Oliphant Financial, LLC (2023) 88 Cal.App.5th 13,
22; accord, Costa v. Road Runner Sports, Inc. (2022)
84 Cal.App.5th 224, 233.)
“A party’s acceptance of an agreement to arbitrate may be
express, as where a party signs the agreement. A signed
agreement is not necessary, however, and a party’s acceptance
may be implied in fact [citation] or be effectuated by delegated
consent.” (Pinnacle, supra, 55 Cal.4th at p. 236; accord, Mendoza
v. Trans Valley Transport, supra, 75 Cal.App.5th at p. 777;
Chambers v. Crown Asset Management, LLC (2021)
71 Cal.App.5th 583, 591.) “An implied contract is one, the
existence and terms of which are manifested by conduct.” (Civ.
Code, § 1621; accord, Diaz, supra, 34 Cal.App.5th at p. 130; Craig
v. Brown & Root (2000) 84 Cal.App.4th 416, 420 (Craig).)
1. Sierra initially proposed an express bilateral
arbitration agreement, which Mar rejected
Where an arbitration agreement includes a signature line
for the employee to acknowledge assent to the agreement, the
employee’s signature creates an express bilateral contract. (See
Bleecher v. Conte (1981) 29 Cal.3d 345, 350 [“A bilateral contract
is one in which there are mutual promises given in consideration
of each other. [Citations.] The promises of each party must be
legally binding in order for them to be deemed consideration for
each other.”]; Juen v. Alain Pinel Realtors, Inc., supra,32 Cal.App.5th at pp. 979-981 [employers did not meet their
burden to show employee assented to arbitration agreement by
initialing the arbitration provision].)
14
Here, both the arbitration agreement in the handbook and
the separate arbitration agreement, by including a signature line
for the employee, contemplated an express bilateral contract with
mutual assent. Although Sierra did not sign the arbitration
agreement, the agreement provided that even if Sierra did not
sign or acknowledge receipt of the agreement, it “agrees to be
bound by this agreement and agrees to arbitrate all Disputes.”
And the handbook acknowledgment form, which contained only a
signature line for the employee to sign, stated above the
employee’s signature line that the employee agrees to binding
arbitration. Similarly, the separate arbitration agreement
contained only a signature line for the employee to sign to
acknowledge that the employee had “received, reviewed and
agree[d] to the binding arbitration agreement.” (Capitalization
omitted.)
Waits’s initial emails in August 2020 show Sierra’s intent
for the parties to enter into an express bilateral contract to
arbitrate. On August 11 Waits emailed the handbook and
separate arbitration agreement to Mar and requested that he
sign the acknowledgments for the handbook and arbitration
agreement. On August 17 and 21 Waits again requested that
Mar return the signed acknowledgments to her by August 21. It
is clear from these emails and the language of the arbitration
agreement that Sierra did not initially intend to unilaterally
impose an arbitration requirement as a condition of employment.
(See Gorlach v. Sports Club Co. (2012) 209 Cal.App.4th 1497,
1509 [employer did not unilaterally impose arbitration
requirement absent employee’s signature where “the handbook
told employees that they must sign the arbitration agreement,
implying that it was not effective until (and unless) they did so”];
15
Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164,
1171 [“the employee handbook’s arbitration provision only placed
plaintiffs on notice that they would be called upon to sign a
separate binding arbitration agreement, thereby contradicting
defendants’ argument the provision in the handbook and
subsequent performance constituted a unilateral contract of
binding arbitration”].)
In response to Waits’s August 11 email, Mar told Waits
that he would not sign the arbitration agreement. Mar continued
to refuse to sign the handbook and arbitration agreement
acknowledgments notwithstanding Waits’s August 17 and 21
emails requesting that all employees return their signed
acknowledgments to her by August 21. Because no bilateral
agreement to arbitrate was formed, the Sierra defendants did not
meet their burden to show the existence of an arbitration
agreement as of August 21.
2. Mar did not by his conduct assent to an implied-in-
fact agreement to arbitrate
“California law permits employers to implement policies
that may become unilateral implied-in-fact contracts when
employees accept them by continuing their employment.” (Asmus
v. Pacific Bell (2000) 23 Cal.4th 1, 11 (Asmus); accord, Diaz,
supra, 34 Cal.App.5th at p. 130.) It is the performance by the
employee in continuing to work for the employer that constitutes
the employee’s acceptance of the unilateral implied-in-fact
contract. (Harris, supra, 248 Cal.App.4th at p. 384 [implied-in-
fact agreement was formed “where, as here, the employee’s
continued employment constitutes her acceptance of an
agreement proposed by her employer”]; Civ. Code, § 1584.)
16
“In a unilateral contract, there is only one promisor, who is
under an enforceable legal duty. [Citation.] The promise is given
in consideration of the promisee’s act or forbearance. As to the
promisee, in general, any act or forbearance, including continuing
to work in response to the unilateral promise, may constitute
consideration for the promise.” (Asmus, supra, 23 Cal.4th at
p. 10; accord, People v. Mohammed (2008) 162 Cal.App.4th 920,
933 [“‘A unilateral contract is one in which a promise is given in
exchange for some act, forbearance or thing; there is only one
promisor.’”].)
In Asmus, the parties agreed that under California law the
company’s employment security policy—which required the
employer to reassign or retrain management employees if their
jobs were eliminated—became a unilateral implied-in-fact
contract when the employees accepted the policy by continuing
their employment. (Asmus, supra, 23 Cal.4th at p. 14.) However,
the parties disagreed as to how an employer could modify the
unilateral contract after the employee accepted the contract by
working for the employer. The Supreme Court held, in response
to a certified question from the Ninth Circuit under California
Rules of Court, rule 29.5, that applying contract principles, “an
employer may terminate a unilateral contract of indefinite
duration, as long as its action occurs after a reasonable time, and
is subject to prescribed or implied limitations, including
reasonable notice and preservation of vested benefits.” (Id. at
p. 18.) Further, “[t]he facts clearly show that employees enjoyed
the benefits of the [employment security policy] for a reasonable
time period, and that [the company] gave its employees
reasonable and ample notice of its intent to terminate the
[policy]. . . . In addition, the employees accepted the company’s
17
modified policy by continuing to work in light of the
modification.” (Ibid., italics added.)
In DiGiacinto v. Ameriko-Omserv Corp. (1997)
59 Cal.App.4th 629, 635 (DiGiacinto), this court concluded in an
employee’s action for breach of contract against his employer that
the employer had unilaterally modified a compensation term in a
written employment contract by imposing a new written contract
reducing the employee’s pay for a lower-level position. This court
explained, “[A]n at-will employee who continues in the employ of
the employer after the employer has given notice of changed
terms or conditions of employment has accepted the changed
terms and conditions.” (Id. at p. 637.) The employee’s continued
employment after notice of the reduced compensation term (the
new offer) was therefore acceptance of a new unilateral contract.
(Ibid.)
Although Asmus and DiGiacinto did not address
arbitration agreements, as we explained in Diaz, supra,
34 Cal.App.5th at page 130, “California law in this area is settled:
when an employee continues his or her employment after
notification that an agreement to arbitration is a condition of
continued employment, that employee has impliedly consented to
the arbitration agreement.”8 In Diaz, on December 2, 2016 the
8 The Supreme Court in Asmus, supra, 23 Cal.4th at
pages 10 to 11 cited Lang v. Burlington Northern R. Co. (D.Minn.
1993) 835 F.Supp. 1104 as an example of a unilateral contract.
In Lang, the federal district court, applying Minnesota law, found
the employee’s continued employment after he received an
arbitration agreement “constituted acceptance of the offer and
provided the necessary consideration to bind the parties.” (Lang,
at p. 1106.)
18
employer informed the employee of a new dispute resolution
policy during an in-person meeting. (Id. at p. 128.) The employer
added that continued employment by any employee who refused
to sign the agreement would constitute acceptance of the
agreement. (Ibid.) On December 14 the employee indicated she
did not wish to sign the agreement, but at a December 19
meeting, the employer again advised the employee that
“continuing to work constituted acceptance of the agreement.”
(Ibid.) After the employee filed a complaint for workplace
discrimination, on December 23 the employee’s attorney provided
the employer a letter on behalf of the employee rejecting the
arbitration agreement but indicating her intent to continue her
employment. (Ibid.) This court found the employee impliedly
assented to arbitration by her continued employment, explaining,
“[The employee] maintained her employment status between
December 2 and December 23, and remained an employee at the
time of the hearing on this case. As a result, she was already
bound by the arbitration agreement before the presentation of
the letter indicating both her rejection of the agreement and her
intent to remain employed.” (Id. at p. 131.) 9
9 In his thoughtful concurrence (post, at p. 2, fn. 1), Justice
Segal concludes that Diaz is not distinguishable (and is incorrect)
because the employee (Erika Diaz), like Mar, promptly rejected
the arbitration agreement. Citing his dissent in Diaz, supra,
34 Cal.App.5th at page 135 (dis. opn. of Segal, J.), Justice Segal
reasons that Diaz was first told on December 19 by a company
representative that her continuing to work for the company
would constitute acceptance of the proposed arbitration
agreement, and she quickly consulted a lawyer and rejected the
agreement only one day later.
19
Likewise, in Harris, supra, 248 Cal.App.4th at page 381,
the employee acknowledged his receipt of an arbitration
agreement and employee handbook before he commenced his
employment. The arbitration agreement provided that if an
employee continued employment after the effective date of the
policy, the employee “‘will be deemed to have knowingly and
voluntarily consented to and accepted all of the terms and
conditions set forth herein without exception.’” In addition, the
handbook provided “that receipt and agreement to the mandatory
arbitration policy is ‘an absolute prerequisite’ to hiring and
continued employment,” and if “‘an applicant fails to execute the
We agree that an employee’s rejection of an arbitration
agreement only a day after being told that continued employment
meant acceptance of the agreement constitutes a prompt and
sufficient rejection of the agreement such that no implied-in-fact
agreement to arbitrate is formed. And certainly, it was
reasonable for Diaz to consult with an attorney before being
deemed to have accepted the agreement. However, the majority
decision in Diaz was based on a different reading of the facts—
that the company representative on December 2 told Diaz that
her continued employment constituted acceptance of the
agreement, and Diaz did not reject the agreement until 21 days
later—on December 23, when she and her attorney presented the
company a letter (albeit dated December 20) rejecting the
agreement, a day after Diaz filed suit against the employer.
(Diaz, supra, 34 Cal.App.5th at p. 128.)
Whether in a particular case an implied-in-fact agreement
is created by the employee continuing to work for the company
will need to be decided on the facts of the case. But the eight
minutes here is too short a period, and in Diaz, the court found
21 days was too long. (Diaz, supra, 34 Cal.App.5th at p. 131.)
20
Agreement to Arbitrate yet begins employment, that employee
will be deemed to have consented to the Agreement to Arbitrate
by virtue of receipt of this Handbook.’” (Id. at p. 383.) The Court
of Appeal concluded the employee’s work for the employer
constituted an implied-in-fact acceptance of the arbitration
agreement, explaining, “Plaintiff was offered employment on an
at-will basis under the terms of the Employee Handbook.
Plaintiff unequivocally accepted the offer of employment by
commencing to work for [the employer] for which he was paid.
Plaintiff’s commencement of performance under the Employee
Handbook constituted assent to its terms.” (Id. at pp. 383-384;
see Craig, supra, 84 Cal.App.4th at pp. 420, 422 [employee’s
continued employment after receiving arbitration policy created
implied-in-fact agreement to arbitrate where employee received
the policy and continued to work for the employer until she was
terminated four years later].)
Like Diaz, Harris, and Craig, Mar continued to work for
Sierra after Waits made clear in her August 31, 2020 email that
Mar would be bound by the arbitration agreement if he continued
his employment. As discussed, Waits advised Mar that if he
continued to work for Sierra beyond August 31, he “will be
deemed to have accepted the terms of these policies of the
Employee Handbook, including the arbitration provisions, and
will be bound by and held accountable to them, regardless of the
fact that [he] failed to sign it, and regardless of any express
objections [he] may have noted.” But unlike those cases, Mar
responded immediately that he did not agree to be bound by the
arbitration agreement. And unlike Diaz, supra, 34 Cal.App.5th
at page 131, in which this court held the employee’s conduct in
continuing to work for her employer for 21 days after receiving
21
the arbitration agreement without repudiating the agreement
(which she did the day after she filed suit against the employer),
Mar promptly informed Waits within minutes after she sent her
August 31 email that he refused to accept the terms of the
agreement. Further, Mar made clear that Sierra could terminate
him if his failure to sign the agreement was unacceptable.
We recognize that in both Asmus, supra, 23 Cal.4th at
pages 7 to 8 and DiGiacinto, supra, 59 Cal.App.4th at
page 632 the employees objected to the new terms of employment
(loss of the employment security policy in Asmus and lower pay in
DiGiacinto), yet the Supreme Court and this court concluded the
employees were bound by the modified employment agreements
as a result of their continued employment. (Asmus, at pp. 2-3;
DiGiacinto, at p. 639.)10 However, a key factor in those cases was
that the consideration for the new implied-in-fact agreement was
the ability of the employee to continue to work for the
company. In DiGiacinto, for example, the employee’s former job
position was eliminated, but the employer reduced the employee’s
job responsibilities to “save his job,” at the same time reducing
10 In DiGiacinto, supra, 59 Cal.App.4th at page 637 this court
observed, in discussing the majority line of cases finding
acceptance of a unilateral modified term of employment by the
employee’s continued employment, that “[p]resumably” (with
respect to a breach of contract action), “it would not be legally
relevant if the employee also had complained, objected, or
expressed disagreement with the new offer; as long as the
employee continued in employment with notice of the new terms.”
As discussed, we conclude in the arbitration context that an
employee’s prompt rejection of an arbitration agreement prevents
the formation of an agreement to arbitrate, but the employer may
terminate the employee.
22
his pay. (DiGiacinto, at p. 632.) And in Asmus, the employer
notified its managers that as a result of market conditions it
planned to discontinue its employment security policy to reduce
costs, but it provided in place of the policy a generous pension
program for its managers. (Asmus, at pp. 7-8.) Thus, the
employees’ continued employment was acceptance of the new
consideration offered with the proposed modified employment
terms. (See Civ. Code, § 1584 [“Performance of the conditions of
a proposal, or the acceptance of the consideration offered with a
proposal, is an acceptance of the proposal.”].) Moreover, as other
courts have observed, neither Asmus nor DiGiacinto (nor this
court’s decision in Diaz) addressed whether in the arbitration
context the employee’s prompt, express rejection of an arbitration
agreement meant an implied-in-fact contract was not formed.
(See Mendoza v. Trans Valley Transport, supra, 75 Cal.App.5th
at p. 788 [noting that “‘neither Asmus nor DiGiacinto
. . . addressed whether an arbitration agreement existed between
an employer and employee’”]; Gorlach v. Sports Club Co., supra,
209 Cal.App.4th at p. 1510 [same]; Mitri v. Arnel Management
Co., supra, 157 Cal.App.4th at p. 1171 [same].)
Here, the Sierra defendants rely on Mar’s conduct in
remaining employed at Sierra as evidence of his assent to the
arbitration agreement. But we cannot imply Mar’s intent to
arbitrate given his explicit and immediate rejection of the
arbitration agreement. Where an employee promptly and
unequivocally rejects an arbitration agreement as a modified
term of employment, mutual assent to arbitrate is lacking. If
Sierra did not want Mar to continue his employment without an
arbitration agreement, it had a simple remedy—to terminate
him. It did not.
23
Because Mar did not expressly or impliedly assent to
arbitrate his claims, there was no arbitration agreement.
DISPOSITION
The order is affirmed. Mar is to recover his costs on appeal.
FEUER, J.
I concur:
MARTINEZ, P.J.
24
SEGAL, J., Concurring.
I join the majority’s well-reasoned and persuasive opinion,
with the exception of the majority’s attempt on pages 18 to 22 to
distinguish our decision in Diaz v. Sohnen Enterprises (2019)
34 Cal.App.5th 126 (Diaz). Though the majority makes
considerable effort to use words like “prompt” or “promptly” to
distinguish today’s decision from Diaz, I do not believe Diaz is
distinguishable. What today’s decision really shows is that Diaz
is incorrect.
The majority makes two attempts to distinguish Diaz.
First, the majority says that, unlike the plaintiff in Diaz, “Mar
responded promptly that he did not agree to be bound by the
arbitration agreement.” (Maj. opn. ante, at p. 21.) The resort to
an adverb like “promptly” obscures that there is no legal
significance to the difference in the timing of the objections by the
plaintiffs in the two cases. (See Norfolk Southern Ry. Co. v.
M/V Saginaw (N.D. Ohio 2023) 667 F.Supp.3d 611, 615 [“What is
promptly?”].) In Diaz the company told its employees at a
meeting on December 2, 2016 they would have to sign an
arbitration agreement and gave the employees “a copy of the
agreement to review at home.” (Diaz, supra, 34 Cal.App.5th at
p. 128.) There was a dispute in the evidence whether the
company also told the employees at the meeting that continuing
to work for the company would constitute acceptance of the
agreement. But the evidence, considered in the light most
favorable to the plaintiff (who prevailed in the trial court), was
1
that the company did not.1 On December 14, 2016 (12 days after
the company said she could take the agreement home) the
plaintiff told the company she would not sign the arbitration
agreement. (Diaz, at p. 128.) Therefore, the employer in Diaz
(like Sierra) initially proposed a bilateral arbitration agreement,
which the employee in Diaz (like Mar) rejected.
On December 19, 2016 company representatives met with
the plaintiff in Diaz, who again said she would not sign the
arbitration agreement. (Diaz, supra, 34 Cal.App.5th at p. 128.)
According to the statement of one company representative (which
was supported by a contemporaneous memorandum and which
the trial court essentially credited (id. at p. 129; id. at p. 135
(dis. opn. of Segal, J.))), December 19, 2016 was the first time
someone from the company told the plaintiff that by continuing to
come to work she would be (in the company’s words) “deemed for
all purposes to have accepted” the agreement. (Id., at p. 129; id.
at p. 135 (dis. opn. of Segal, J.).) One day later, on December 20,
2016, the plaintiff in Diaz, through her attorney, sent a letter
stating that she rejected the proposed arbitration agreement and
that she would continue to come to work. (Diaz, supra, at p. 128;
id. at p. 135 (dis. opn. of Segal, J.).) That’s pretty prompt.
1 One company representative in Diaz stated in a declaration
she told employees at the December 2, 2016 meeting that
refusing to sign the agreement while continuing to work at the
company would constitute acceptance of the agreement. (Diaz,
supra, 34 Cal.App.5th at p. 128.) But as discussed in the next
paragraph, that representative’s statement was inconsistent with
other evidence, including the statement of different company
representative. (Diaz, at p. 129; id. at p. 135 (dis. opn. of
Segal, J.).)
2
Perhaps not “within minutes” (maj. opn. ante, at p. 21), but still
pretty darn quick.
And in some ways quicker: The plaintiff in Diaz, an
unsophisticated employee, wisely decided to consult with an
attorney before responding to the company’s request to sign the
arbitration agreement and the company’s deemed-to-have-
accepted position, and the attorney still got the letter out in a
day. I think taking a day to consult with an attorney is not an
unreasonable delay and should not disqualify an employee’s
response as not prompt (enough). Put another way, an employer
who “deems” an employee to have accepted a new arbitration
policy one day after informing the employee of the policy has not
provided “reasonable notice” of the policy, as required to modify
the employment agreement. (See Asmus v. Pacific Bell (2000)
23 Cal.4th 1, 16 [“an unqualified right to modify or terminate [an
employment contract] is not enforceable”; the “exercise of the
power is subject to limitations, such as fairness and reasonable
notice”].)2
Second, the majority says “Mar made clear that Sierra
could terminate him if his failure to sign the agreement was
unacceptable” (maj. opn. ante, at p. 21), something the plaintiff in
Diaz may not have done. In my view, this distinction is also one
2 Even if in Diaz the company did notify the plaintiff at the
December 2, 2016 meeting that continuing to work for the
company would be deemed accepting the arbitration agreement,
and the plaintiff therefore took 18 days to respond through her
attorney that she rejected the agreement and would continue to
work, eighteen days is still pretty prompt. Especially where the
company asks its employees to take the arbitration agreement
home to review.
3
without a difference. Mar’s statement Sierra could fire him if he
did not sign the arbitration agreement simply (admittedly, an
adverb) made explicit what his other statements (and the
statements by the plaintiff in Diaz) implied: I do not agree to
arbitration, I’m still coming to work, and you’ll have to fire me to
get me to stop. As the majority repeatedly points out (maj. opn.
ante, pp. 18, 20, 21), an employer always has the right to
terminate the employment of at-will employees like Mar and the
plaintiff in Diaz if they don’t follow the rules (or sometimes even
if they do); an employer certainly doesn’t need to be reminded of
that fact by an at-will employee.
From my perspective (dissenting in Diaz and joining this
opinion), Diaz is not meaningfully distinguishable from this case.
Yet the majority reaches a different result here than we did in
Diaz. Which to me means today’s decision leaves Diaz with very
little, if any, legal or practical import for employers, employees,
litigants, and their attorneys. Recognizing that reality, I concur
in the majority’s opinion.
SEGAL, J.
4