New York Federal Court Finds Employment Arbitration Agreement To Be Invalid

On July 14, 2017, the U.S. District Court of the Southern District of New York held that an arbitration agreement was not a binding contract between the employer and employee because there was neither an offer nor an acceptance. The employer, Macy’s, proffered that an “Election Form” was sent to employees for the employees to opt out of their “right to arbitration” by signing and returning the form. Macy’s interpreted the failure to sign and return the form to be a binding agreement to resolve employment disputes solely through arbitration. 

The Court rejected this argument relying on New York common law which states in relevant part that “it is well settled that [a] party to an agreement may not be compelled to arbitrate its dispute with another unless the evidence establishes the parties’ clear, explicit and unequivocal agreement to arbitrate.” Fiveco, Inc. v. Haber, 11 N.Y.3d 140, 144, (N.Y. 2008) (internal quotation marks and citations omitted). The Court found that the “Election Form” provided to the employee was “remarkably counterintuitive, ambiguous, and misleading.” Weiss v. Macy's Retail Holdings Inc., 2017 U.S. Dist. LEXIS 109757 (S.D.N.Y. July 14, 2017). Additionally, the Court found that there was no acceptance, relying on New York case law which states that “an offeror has no power to transform an offeree's silence into acceptance when the offeree does not intend to accept the offer[.]” Karlin v. Avis, 457 F.2d 57, 62 (2d Cir. 1972).

Although this decision only directly impacts employees in New York, it should be a signal to employers and employees about the requirements for a valid arbitration agreement in the employment context. It also provides employees with arguments that might be used to invalidate arbitration agreements, if presented with similar factual circumstances.