O'Bryan, Randy v. Pember Companies, Inc.
Filing
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ORDER denying 16 Motion to Compel; and denying request for sanctions (dkt. 21 ). Signed by District Judge James D. Peterson on 5/10/2021. (jls)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
RANDY O’BRYAN, on behalf of
himself and all others similarly situated,
Plaintiff,
OPINION and ORDER
v.
20-cv-664-jdp
PEMBER COMPANIES, INC.,
Defendant.
This is a proposed class and collective action for unpaid wages under the Fair Labor
Standards Act and Wisconsin wage laws. Plaintiff Randy O’Bryan contends that his former
employer, defendant Pember Companies, Inc., violated his and other employees’ rights by
failing to pay for travel time and failing to include nondiscretionary payments in the regular
rate of pay for the purpose of calculating the overtime rate. Dkt. 1.
Pember moves to compel O’Bryan to arbitrate his claims under the dispute-resolution
policy contained in Pember’s employee handbook. Dkt. 16. But the written acknowledgment
signed by O’Bryan disclaimed any intent that the handbook would create a binding contract.
The court will deny Pember’s motion. But Pember’s motion was not frivolous, so the court will
deny O’Bryan’s request for sanctions.
BACKGROUND
A motion to compel arbitration is reviewed in the same way as a motion for summary
judgment. Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002). The court considers all
evidence in the record and draws all reasonable inferences in the light most favorable to
O’Bryan because he is the non-moving party. Id.
Pember is a construction company based in Menomonie, Wisconsin. It hired O’Bryan
to work as a laborer in March 2018. Pember submits a declaration from Bridget Marshall,
Pember’s payroll and human resources specialist, who says that when O’Bryan was hired, she
“walked him through” Pember’s 48-page employee handbook. Dkt. 19, ¶ 2.
The handbook includes a dispute-resolution policy that states,
I agree that all problems, claims and disputes experienced by me
or Pember Companies, Inc. related to my employment shall be
resolved as outlined below. I agree to submit all such disputes to
final and binding arbitration. Arbitration shall be the sole and
exclusive forum and remedy for all covered disputes of either
Pember Companies, Inc. or me.
Dkt. 12-2, at 18. The policy further provides that employees may bring only individual claims
and cannot participate in any class or collective proceedings. Id. at 19. The policy states that
its arbitration provision is “binding,” and it concludes by stating, “I have read this entire
provision and fully understand the limitations which it imposes upon me and I understand that
this provision cannot be modified except by the President of Pember Companies, Inc.” Id.
The last page of the handbook is a form by which the employee acknowledges receiving
the employee handbook. Id. at 50. O’Bryan signed the acknowledgment form. Dkt. 12-2. The
acknowledgement form includes bolded text that states:
Unless I have an individual written employment contract, my
employment relationship with Pember Companies, Inc. is at will.
I may terminate my employment at any time I believe such action
to be appropriate and Pember Companies, Inc. retains the same
right to terminate my employment when it believes such action
to be appropriate.
I acknowledge that this handbook is neither a contract of
employment nor a legal document.
Dkt. 12-2, at 2.
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ANALYSIS
Pember contends that the handbook’s dispute-resolution section requires O’Bryan to
arbitrate his claims on an individual basis. To prevail on its motion, Pember must show three
things: (1) the parties had a written arbitration agreement; (2) O’Bryan’s claims fall within the
agreement’s scope; and (3) O’Bryan has refused to arbitrate his claims. Zurich Am. Ins. Co. v.
Watts Indus., Inc., 417 F.3d 682, 690 (7th Cir. 2005).
O’Bryan agrees that the second and third requirements are met here. But he contends
that the parties didn’t have a valid agreement to arbitrate because of the acknowledgement
form’s disclaimer. Whether O’Bryan and Pember had a valid arbitration agreement is governed
by principles of state contract law. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
The parties assume that Wisconsin law applies to this question, so the court will do the same.
See FutureSource LLC v. Reuters Ltd., 312 F.3d 281, 283 (7th Cir. 2002) (“[T]here’s no
discussion of choice of law issues, and so we apply the law of the forum state.”).
The central question is which statement should control: the handbook’s statement that
the arbitration provision is “binding,” or the acknowledgement form’s disclaimer that the
handbook is “neither a contract of employment nor a legal document.” Pember’s basic
argument is that the dispute-resolution policy is an enforceable contract: Pember made an offer
by providing O’Bryan with a copy of the policy when he began work; O’Bryan accepted the
offer by accepting the job; and mutual consideration is present because both sides agreed to
arbitrate their claims. See Dkt. 17, at 11–12.
But the problem with Pember’s position is that after Marshall walked O’Bryan through
the handbook, O’Bryan signed the acknowledgment form containing the disclaimer. Pember
contends that the disclaimer merely “preserv[ed] the at-will employment relationship” between
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the parties and “should not be co-opted to abrogate the Dispute Resolution policy.” Dkt. 17,
at 15–16. If the disclaimer had merely stated that the handbook was not an employment contract,
this argument would have more force. But the disclaimer did more: it disclaimed that the
handbook was a “legal document” at all. This phrase is not limited to the question of at-will
employment; it speaks generally about the handbook. The plain reading of this phrase is that
the handbook created no enforceable rights for either Pember or its employees. And that
reading is consistent with the general approach of the handbook, which reserved to Pember the
right to change its policies whenever it saw fit. Pember could easily have had its employees
enter binding arbitration agreements, if that were its intent, but the broad concluding
disclaimer renders the handbook a mere advisal of Pember’s current policies.
The Wisconsin Court of Appeals held that a similar disclaimer stating that an employee
handbook “is not intended to create, nor does it create, contract rights” prevented an employee
from bringing a suit for breach of the handbook’s provisions because the disclaimer expressly
“refute[d] any assertion that a contractual relationship existed.” Helland v. Kurtis A. Froedtert
Mem’l Lutheran Hosp., 229 Wis. 2d 751, 601 N.W.2d 318, 323 (Ct. App. 1999). Likewise, the
Court of Appeals for the Seventh Circuit held that a disclaimer stating that an employee
handbook “is not a contract of employment and does not affect your rights as an employee”
barred an employee’s contract claim based on the handbook because “[s]uch a disclaimer . . .
is a complete defense to a suit for breach of contract based on an employee handbook.”1
Workman v. United Parcel Serv., Inc., 234 F.3d 998, 1000 (7th Cir. 2000).
1
Although the court of appeals applied Indiana law in Workman, its discussion on this point
was not specific to the law of that state. Rather, the court applied general contract principles
drawn from cases applying Illinois, Iowa, North Dakota, and Texas law. See Workman, 234 F.3d
at 1000.
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Pember argues that Helland and Workman aren’t on point because they address whether
such disclaimers prevent an employee from bringing a suit for breach of an employee handbook,
not whether the employer may enforce the handbook’s arbitration provision. But Pember
doesn’t explain why this distinction matters. The question here is whether Pember’s handbook
created enforceable contractual obligations, and these cases speak precisely to that question.
They show that when a disclaimer clearly states that an employee handbook is not a contract,
an employee can’t bring a contract suit to enforce the handbook’s provisions. And if O’Bryan
can’t sue to enforce the handbook’s provisions, neither can Pember. “[I]n the law, what is sauce
for the goose is normally sauce for the gander.” Heffernan v. City of Paterson, N.J., 136 S. Ct.
1412, 1418 (2016).
Bradley v. Wolf Retail Solutions I, Inc. is instructive. That case also involved an arbitration
provision contained in an employee handbook with a disclaimer that the handbook was “not a
contract” and was not “intended to create contractual obligations of any kind.” 443 F. Supp.
3d 959, 960–61 (N.D. Ill. 2019). Citing Workman and similar cases, the court said that it was
“axiomatic that a document stating that it is not a contract and that it creates no contractual
obligations of any kind is not a contract that creates a contractual obligation to engage in
arbitration.” Id. at 962. The court held that the plaintiff wasn’t bound by the handbook’s
arbitration provision. Pember attempts to distinguish Bradley by noting that the arbitration
provision in that case bound only the employee, whereas Pember’s policy requires both sides
to arbitrate their claims. But the Bradley court wasn’t concerned with the question of mutual
consideration; it focused entirely on the disclaimer language in reaching its holding.
Pember cites a handful of cases in which district courts have enforced employee
handbook arbitration provisions despite disclaimers like the one here. All but one are readily
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distinguishable because they involved employees who signed forms expressly agreeing to
arbitration. See Moreno v. Progistics Distrib., Inc., No. 18 C 1833, 2018 WL 3659348, at *1
(N.D. Ill. Aug. 2, 2018); Diggs v. Linebarger, Goggan Blair & Sampson, LLP, No. 13 C 624, 2013
WL 5737306, at *1 (N.D. Ill. Oct. 22, 2013); Isaacs v. OCE Bus. Servs., Inc., 968 F. Supp. 2d
564, 567 (S.D.N.Y. 2013). But the acknowledgement form that O’Bryan signed said nothing
about arbitration.
Pember’s strongest case is Patterson v. Raymours Furniture Co., Inc., 96 F. Supp. 3d 71
(S.D.N.Y. 2015). In that case, the court compelled arbitration based on an employee
handbook’s arbitration provision despite a disclaimer that the handbook’s contents were “not
promissory or contractual in nature.” Id. at 74. The court held that the handbook’s arbitration
provision was enforceable because it met two requirements: (1) its language was “distinct and
mandatory”; and (2) the employee was expressly advised that the arbitration policy “is an
essential element of your continued employment relationship with [the employer] and is a
condition of your employment.” Id. at 77–78 (citing Isaacs, 968 F. Supp. 2d at 571) (internal
quotation marks omitted). The court agrees that the language of Pember’s arbitration provision
is distinct and mandatory. But Pember identifies no language in the acknowledgement form or
the handbook expressly stating that compliance with the arbitration provision was a condition
of O’Bryan’s continued employment, and the court finds no such language, either. And even if
Patterson were on point, the court would decline to follow it against the weight of contrary
authority from Wisconsin and this circuit.
Two matters remain. First, O’Bryan asks the court in his response brief to sanction
Pember under Federal Rule of Civil Procedure 11 for bringing a frivolous motion. Dkt. 21, at
2. O’Bryan failed to comply with Rule 11(c) before asking for sanctions: he gave Pember only
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one day’s notice before moving for sanctions, not the required 21 days; he did not make a
separate motion for sanctions; and he did not describe the specific conduct that he believed
warranted sanctions, merely stating that Pember’s arguments were “without merit” and
referring Pember to his response brief. See Dkt. 22-1. And even if O’Bryan had complied with
Rule 11(c), Pember’s motion had arguable merit and does not warrant sanctions.
Second, the court struck the scheduling order in January in response to the parties’
stipulated request to do so. Dkt. 28. Magistrate Judge Stephen Crocker will hold a scheduling
conference to reset the schedule.
ORDER
IT IS ORDERED that:
1. Defendant Pember Companies, Inc.’s motion to compel arbitration, Dkt. 16, is
DENIED.
2. Plaintiff Randy O’Bryan’s request for sanctions, Dkt. 21, is DENIED.
3. The clerk of court is directed to set a scheduling conference with Magistrate Judge
Stephen Crocker to reset the remainder of the schedule.
Entered May 10, 2021.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge
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