Unsigned agreement binds former employee

An employer’s arbitration award of $11,000 for damages and $50,000 in attorneys’ fees and costs in a case against a former employee has been upheld by a state appellate court.

The former employee, James Gail, was the clinical director for TBI Solutions, a medical provider, for about 10 years. When he resigned from the role, TBI filed a demand for arbitration. It relied on an employment contract that mandated arbitration for any employment-related dispute.

Gall brought an action to permanently stay the arbitration proceedings. He claimed he could not be bound by the provision because he never signed the employment agreement.

A Michigan trial court found that Gall had agreed to the terms of the employment agreement by continuing to work with TBI even though he hadn’t signed it. The trial judge dismissed Gall’s suit, finding that he and TBI had entered into a binding arbitration agreement.

In the arbitration proceedings, Gall put forth the same argument: He did not sign the employment contract so he could not be bound by the substantive terms TBI claimed he violated.

Gall then sought to narrow the scope of the trial court’s ruling, saying the court had simply found that there was a binding arbitration agreement, not that the employment agreement as a whole was binding.

But the arbitrator didn’t see it that way, holding that Gall couldn’t re-litigate the existence of an employment agreement. An enforceable arbitration agreement could only arise out of the larger employment agreement presented to the trial court and the enforceability of the entire agreement was the basis for the holding regarding arbitration.

In her final award, the arbitrator rejected many of TBI’s claims, but held that Gall “had not performed his contractual duties regarding oversight of medical records and accreditation compliance.”

On appeal, Gall argued that under the Uniform Arbitration Act the lower court could not have determined if the entire contract was enforceable. In pertinent part, the act says courts shall decide if an agreement to arbitrate exists and arbitrators shall decide if a contract containing a valid agreement to arbitrate is enforceable.

But the appeals court said that here, “defendant did not make a specific challenge to the arbitration provision in his argument to the trial court that the case was not subject to arbitration. …

“Rather, defendant argued that the contract, as a whole, was not enforceable because he did not sign the employment agreement and did not otherwise agree to the terms therein. Thus, defendant’s argument that there was not an agreement to arbitrate necessarily required the trial court to determine whether the contract, as a whole, was binding.”

Given that argument, the lower court inevitably had to resolve as a threshold matter the question of whether Gall had agreed to the employment agreement’s terms.