Wednesday, April 10, 2019

Diaz v. Sohnen Enterprises (Cal. Ct. App. - April 10, 2019)

You work for Employer.  You've got a written contract that says that you'll be paid $50,000 a year and that you will receive two weeks of vacation per year.  The contract is at will, so the employer can fire you whenever it wishes.

One day, Employer calls a staff meeting and explains that Employer is going through a rough patch. Employer orally tells all the employees the following:

(1) Effective immediately, every employee's pay will be reduced by $10,000 a year, and no vacations will be allowed.

(2) Effective immediately, every employee will be required to mow the CEO's lawn once a week for three hours, without additional compensation.

(3) Effective immediately, any dispute involving Employer and any employee will be decided not in court, but in binding arbitration.

You immediately stand up and tell Employer:  "No way.  I have a written contract.  I don't agree to these changes."  Employer responds:  "Tough for you.  We're unilaterally changing the contract.  If you continue to work here, we are going to deem that as consent to these changes."  You say:  "Look, you can fire me if you want to.  But to be clear:  I'm not agreeing to those changes.  If you continue to employ me, I'm going to deem that consent to our existing contract, not your proposed changed one."

You continue to report to work for Employer.  Employer does not fire you.  Four weeks later (you're paid monthly), you get your paycheck, and it's $800 short.  They've reduced your salary like they said they would.

You promptly quit, and immediately file a lawsuit against Employer, seeking $800 in damages for breach of contract.  Employer counterclaims for breach of contract, alleging that you failed to mow the lawn of Employer for four weeks, and it cost Employer $160 to hire a replacement.  Employer also moves to compel arbitration.  You say in response to both the motion and the counterclaim that you never agreed to Employer's proposed contract, so you're owed the $800 and aren't required to pay $160 or arbitrate your dispute.

Who wins?  Was there a contract?  Was there a meeting of the minds?  Does the answer vary as between the salary, the mowing, and the arbitration clause?

The Court of Appeal doesn't answer all of these questions.  But in a split opinion, on facts analogous to the above hypothetical, it does hold that -- as a matter of law -- the employee has in fact agreed to arbitrate under these conditions.  Expressly saying you don't agree isn't good enough.  You've still agreed.

I'm not quite sure why the Employer's unilateral "take it or leave it" (e.g., if you report to work you've agreed) is given priority over the Employee's unilateral "take it or leave it" (e.g., if you continue to employ me, you've agreed").  Particularly since the Employee's statement is consistent with an existing contract to which all parties did agree, so presumably, you've got to get a new meeting of the minds to change it.

Nor do I understand why arbitration would be any different than salary, or mowing the lawn, or anything else.  So if there's a distinction here, it'd be interesting to see where it comes from.

Regardless, that's the law (at least now) in California.  Even if you say you disagree, it's still a contract, and you're bound.