When we first consult with a client about a pending employment dispute, we ask the company to forward relevant documents, including employment agreements, noncompetes, etc. It’s very common for us to receive agreements signed by the employee during onboarding that were never countersigned by the employer. A recent decision from the Fifth Circuit of Appeals (which includes Texas) reminds employers of the importance of fully executing agreements with employees.

In Mertens v. Benelux Corp., four employees filed a FLSA collective action lawsuit against the employer. The company moved to compel arbitration, citing a mandatory arbitration agreement signed upon hiring by the employees. However, the employer’s general manager failed to sign the agreements, placing them in the employees’ personnel files.

Citing Texas contract law, the Fifth Circuit affirmed denial of the motion to compel arbitration. The arbitration agreement required signature by both parties, and the employees never intended to be bound by its terms if the employer had not also bound itself to the agreement.

The same legal reasoning applies in most states and could also govern the terms of employment agreements and restrictive covenants with employees. Obtaining signatures on these documents by an authorized corporate officer may take some additional effort, but failure to follow these basic contract law requirements can result in the employee being relieved of those obligations.

For more information, please contact me or your regular Parker Poe contact. Click here to subscribe to our latest alerts and insights.