First, Tenet owned some hospitals that it later sold to Integrated. Tenet had in place a “Fair Treatment Process,” which included arbitration. Applicants and employees signed off on this process at a number of different points in their employment relationship. Integrated maintained the arbitration program after the purchase, but made some changes and called it the Alternative Dispute Resolution Process.
Avery brought a class action for unfair competition, failure to pay appropriate overtime wages, failure to provide meal and rest periods, failure to pay wages when due, and failure to provide accurate wage statements.
While the lawsuit was pending, Integrated unilaterally changed the arbitration clause by adding a class arbitration waiver. Integrated posted the change on its intranet page. But it did not provide employees with a copy of the new employee handbook containing the arbitration provision change, instruct employees to review the new handbook on the intranet, or even notify employees of the existence of the new handbook.
Integrated tried to compel arbitration of each individual plaintiff's claim. The trial court denied its motion to compel. The Court of Appeal affirmed.
The court made two important decisions. First, the court held that Integrated's class action waiver was unenforceable, but not because of the ongoing war about class action waivers. Rather, the court held that it was invalid because it was issued after the claims arose, and Integrated failed to notify employees about the new employee handbook. As a result, Integrated was required to rely on the arbitration clause in the Tenet Employee Handbook, the Fair Treatment Process.
Of note, although there are cases disfavoring "policy" based arbitration provisions, the court emphasized that it is ok to have an arbitration agreement in a policy, and even to make changes. But those changes have to be prospective in application only, and the employer must ensure the employees receive reasonable and actual notice of the changes.
The lesson here? Ensure that there is a way of identifying handbooks and other documents (such as a control number, version, etc.). In this case, the application and other documents "incorporated by reference" the full text of the Fair Treatment Process, but there was no way of knowing which version the employee agreed to. It is critical to have a way of matching the receipt to the policy document.
This case is Avery v. Integrated Healthcare Holdings, Inc. and the opinion is here.