Fifth Circuit Rules Employer Can’t Enforce an Arbitration Agreement It Failed to Sign
The U.S. Court of Appeals for the Fifth Circuit affirmed that an employer could not compel arbitration against its workers because the employer’s representative failed to sign the agreement. This ruling serves as a reminder to employers: without the proper signatures, even well-drafted agreements may not be enforceable and preclude any benefits sought through arbitration.
In Mertens v. Benelux Corp., the dispute arose after several servers at a club in Austin, Texas, filed federal wage claims under the Fair Labor Standards Act. Although their employer distributed an arbitration agreement that required signatures from both the club and the employee, some employees filled out both signature boxes themselves, leaving the employer’s signature absent.
When the employer tried to enforce arbitration, the district court denied the motion. It cited the agreement’s “clear and express language stating that both parties needed to sign it to give it effect.” The Fifth Circuit agreed, noting that the contract’s wording — such as “each” and “they” — and the presence of a designated employer signature box made it unambiguous that both signatures were required.
The employer argued that the agreement did not explicitly state that signatures were a condition precedent to contract formation. It pointed to its actions in distributing and attempting to enforce the agreement as evidence of intent. The appeals court rejected these arguments, emphasizing that under Texas law, specific conditional phrases are not necessary if the contract’s language and structure make the requirement clear.
Ultimately, the Fifth Circuit concluded that “both parties’ signatures were required to execute a valid arbitration agreement, and that is where we end our inquiry.” In light of this ruling, employers may want to review their arbitration agreements and take any needed steps to confirm the contracts can be enforced.
Please contact Reed Russell, Mark Fijman or any member of the Phelps labor and employment team if you have questions or need advice.
