Despite the modern trend and convenience of using online onboarding of employees with click-through or e-signed acknowledgments and agreements with employees, I still think it is a better practice to have important agreements that an employer may try to enforce in court (e.g., arbitration and noncompetion agreements) physically signed by employees and the originals documents retained. But even where an employer obtains “wet signatures” from employees and maintains those originals, what happens when the employer fails to countersign the arbitration agreements; is the arbitration agreement still enforceable?
In a case from the Fourteenth Court of Appeals in Houston, the Court held that where the employer can show that is accepted the arbitration agreement by its conduct and the agreement does not foreclose acceptance of its terms by conduct, the arbitration agreement can still be binding even where the employer never countersigned the arbitration agreement. In GSC Wholesale, LLC v. Young, the employer had an Occupational Injury Benefit Plan and a Mutual Agreement to Arbitrate Occupational Injury and Disease claims. The employee, Young, signed the Mutual Agreement to Arbitrate Occupational Injury and Disease claims, but the employer never countersigned the agreement when it was returned to it.
Young later suffered a work-related injury arising from a forklift accident. The Occupational Injury Benefit Plan paid substantial medical and disability benefits related to the injury. Young later sued in court over his injuries and the employer moved to compel the case to arbitration pursuant to the arbitration agreement. The trial court denied the motion to compel arbitration finding that the employer’s countersignature on the agreement was a condition precedent to its enforceability and therefore the arbitration agreement was unenforceable.
On appeal, a majority of the court held that while the employer never showed its assent to the arbitration agreement by signing it, there were other ways in which the employer showed it intended to be bound by the terms of the arbitration agreement through its conduct including: hiring and continuing to employ the employee after the employee agreed to the terms of agreement (which stated that agreeing to arbitration was a condition of employment). Because the employer agreed to the terms of the arbitration agreement through its conduct, the majority held that a valid arbitration agreement existed and reversed the trial court with instructions to compel the case the arbitration. Thus, while it is better to have the employer countersign the mutual arbitration agreement signed by employees, the failure to do so will not be fatal to the agreement’s enforcement in all case.
You can access the majority and dissenting opinions here. A petition for review was filed with the Texas Supreme Court on December 20, 2022.