The Fifth Circuit Clarifies the Principle that Employers Must Give “Unequivocal Notice” of a New Policy for the Policy to Be Enforceable
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A Texas employer may modify the terms of an at-will employment relationship if the employer (1) provides “unequivocal notice” of a new term or policy; and (2) the employee continues to work after notice.  Less clear is what constitutes “unequivocal notice” of a policy change.  What does an employer have to do to ensure “notice”?  What if an employee protests the policy?  In a recent unpublished decision called Moran v. Ceiling Fans Direct, Inc., the Fifth Circuit addresses these issues in the context of an arbitration policy that the employer tried (unsuccessfully) to enforce against several employees.     
 
The Facts

The plaintiffs in Moran are several former employees who sued Ceiling Fans Direct for alleged violations of the Fair Labor Standards Act.  Three months before the suit was filed, the employer attempted to institute a mandatory arbitration program.  The policy was first addressed at a meeting where the company President made available a “notice” stating that the employees and employer were required to arbitrate employment disputes.  The notice also stated that working after a certain date would constitute acceptance of the policy.  So far, so good.  
 
The problem arose when the employer did a sloppy job in communicating the notice to the employees.   The facts showed that:
 
* The arbitration notice was neither read nor explained to employees
* Employees were not required to take the notice with them from the meeting
* When some employees said that they would not sign anything, the company President said that it did not matter and that they did not have to sign anything; the President later told another employee “not to worry about it”
* When the following month the company issued an arbitration policy with a signature line at the bottom, it did not require any signatures and no employee actually signed the policy, even though the company had required signatures on other policies
* The company President later circulated a memo appearing to contradict a key term of the arbitration policy
 
Based on these collective facts, the Fifth Circuit held that there had not been “unequivocal notice” of the arbitration obligation and therefore the plaintiffs were not bound to arbitration their FLSA claims against the company.
 
The Bottom Line for Employers

Although the Moran case dealt with an arbitration policy, its logic is applicable to any employment policy purporting to alter the terms of employment, such as leave policies, compensation schemes, or confidentiality policies, to name a few.  As Moran demonstrates, when rolling out a new policy employers must take reasonable steps to assure that employees are provided the policy, and they must give clear and consistent information about its terms and its binding effect.  And perhaps most important, employers must be prepared to address employee protests to the policy and to respond by making clear that acceptance of the new policy is a condition of continued employment.  The case is Moran v. Ceiling Fans Direct, Inc., 2007 WL 2597613 (5th Cir. Sept. 6, 2007).
 

*  Muskat, Martinez & Mahony, LLP represents employers in labor and employment law matters.  For more information, visit our website at www.m3law.com, or contact any of our partners:
 
Mike Muskat, (713) 987-7851, mmuskat@m3law.com
Samantha Martinez, (713) 987-7852, smartinez@m3law.com
Michelle Mahony, (713) 987-7849, mmahony@m3law.com