December 2021 | Arbitration “Agreement” Unenforceable when Employer Fails to Establish Employee Executed Agreement

The Second District California Court of Appeal analyzed whether a valid arbitration agreement existed between an employee and employer. The Court denied the employer’s petition to compel arbitration, finding that the employer failed to provide evidence of an agreement.  (Gamboa v. Northeast Community Clinic, No. B304833 (Ct. App. Nov. 30, 2021)). The Gamboa opinion illustrates the shifting burdens of proof for parties to a motion to compel arbitration.

Facts of the Gamboa Case

This case involves the claim that a terminated employee signed an arbitration agreement affecting her ability to sue her former employer in state court. Hope Gamboa started working at the Northeast Community Clinic (the “Clinic”) in May 2018. She signed some onboarding documents when she began work as a condition of employment. Two months later, she injured her hand. Gamboa requested medical accommodations due to her injury, but the Clinic terminated her employment. In 2019, Gamboa sued the Clinic for discrimination, retaliation, and failure to provide reasonable accommodations, among other claims.

The Clinic quickly filed a motion   to compel arbitration in the case. The Clinic argued that Gamboa had agreed to binding arbitration when she completed the onboarding documents and that her signature on the onboarding documents made Gamboa’s claims subject to arbitration. The Clinic filed a declaration by  its director of human resources Marina Lopez. Lopez’s declaration states that Gamboa had signed an arbitration agreement as part of her employment agreement with the Clinic. The arbitration agreement is attached to the declaration and appeared to be signed by a representative of the Clinic and an employee.

Gamboa opposed the motion to compel arbitration because (1) the Clinic did not establish that it had a valid arbitration agreement with her and (2) the agreement provisions were unconscionable and thus unenforceable. She filed a declaration in support of the motion stating that she reviewed the arbitration agreement attached to Lopez’s declaration but does not remember seeing the document when she joined the Clinic. She also stated that if she had known about the arbitration agreement, she would not have signed it. Finally, she objected to Lopez’s declaration and the attached agreement. In reply, the Clinic stated that her failure to remember the agreement did not invalidate it and that it is still enforceable.

The trial court agreed with Gamboa that the Clinic had not shown a valid contract was formed.   The trial court denied the motion and sustained Gamboa’s objections to the declaration and agreement. The trial court denied the Clinic’s motion to compel arbitration. In addition to finding that the Clinic hadn’t met its burden to show that a contract was formed, the trial court also found that the proposed agreement was unconscionable.

The Clinic appealed, arguing that the trial court erred in its findings.

Did a Valid Arbitration Agreement between Gamboa and the Clinic Exist?

The Court of Appeal found the Clinic hadn’t established that Gamboa had agreed to arbitration so it didn’t consider the “unconscionability” issue. The Court of Appeal’s opinion explains that in California, a trial court can grant a motion to compel arbitration only if it finds that there is an agreement to arbitrate a claim or claims in the lawsuit. (Code Civ. Proc. § 1281.2). The trial court sits as a trier of fact by weighing all the evidence, such as declarations and documents. To succeed in a motion to compel arbitration, the moving party must show by a preponderance of the evidence that an agreement exists. The moving party initially has the burden of proof, which it can meet by producing evidence of a written agreement (either by attaching the agreement or by listing verbatim the provisions in the motion). It is not necessary to authenticate the agreement in this initial step.

If the opposing party disputes the existence of an agreement, then the opposing party has the burden of producing evidence challenging the agreement’s authenticity. The opinion details case law establishing that the opposing party can submit a declaration under penalty of perjury that she does not remember the agreement, that she does not remember signing the agreement or that she did not sign the agreement.  If the opposing party meets its burden of producing evidence refuting the existence of an “agreement,” the moving party must then provide admissible evidence (e.g., an authenticated document or adequate declaration) showing that there is a valid arbitration agreement. The burden of proving the agreement remains with the moving party.

The policy favoring contractual arbitration does not extend to those individuals who are not parties to an arbitration agreement.  No one can be compelled to arbitrate a dispute without a prior agreement to do so.

To decide whether the Clinic showed a valid agreement, the Court of Appeal looked to the trial court’s factual findings. It implicitly found that  Gamboa had challenged the arbitration agreement’s authenticity by filing her declaration stating that she did not remember seeing the agreement. See Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 846. As a result, the Clinic had the burden of producing admissible evidence of a valid agreement.

However, the Clinic did not meet its burden of showing that it formed a contract with Gamboa. Because the trial court sustained Gamboa’s evidentiary objections, the Clinic did not present any evidence that Gamboa saw or signed the agreement.  The Clinic never “authenticated” Gamboa’s signature on the arbitration agreement as required by Evidence Code section 1401(a).  The Court of Appeal’s opinion explains that the trial court did not err in sustaining Gamboa’s objections. Lopez’s declaration lacks foundational facts to establish that the declarant Lopez had personal knowledge about her statements. For example, the declaration does not state that she worked at the Clinic at the same time as Gamboa or saw her sign the agreement. There are no specific details about how the agreement was executed by Gamboa, nor was the agreement properly authenticated.

The Takeaway

Enforcing Arbitration Agreements through motion practice require attention to details. If the moving party cannot show that there was an agreement to arbitrate, the motion to compel arbitration will be denied.  The Gamboa case shows the importance of stating foundational facts in a supporting declaration in order to establish the existence of an arbitration agreement. Moreover, it articulates the shifting burdens that parties to a California motion to compel arbitration must meet.