Davis v. Nordstrom Case Analysis

Employers in California May Unilaterally Change Terms of Employment and Need Not Inform Employees that Continued Employment Constitutes Assent to the New Terms

A recent decision has important implications for employees in California whose employer issues an employee handbook or other terms of employment. In the case of Davis v. Nordstrom, Inc., 755 F.3d 1089 (9th Cir. 2014), the Ninth Circuit held that an employer may unilaterally change the terms of employment, and California law does not require the employer to inform an employee that her continued employment constitutes acceptance of new terms of employment. This case was decided under the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1, et seq. At bottom, the court found that Nordstrom provided sufficient notice when it changed the terms of employment relating to arbitration, and had no duty to specifically inform employees that continued employment constituted assent.

Factual Basis of The Case

This case arose from an employment dispute between the Appellant Nordstrom, and the Appellee, Faine Davis, a Nordstrom employee. When Davis began her employment with Nordstrom, the company gave her a copy of the employee handbook. The handbook contained, amongst other things, a provision that delineated the circumstances in which Nordstrom employees were required to arbitrate rather than litigate employment-related disputes. In addition, the handbook contained provisions requiring Nordstrom to provide employees with 30 days notice of any substantive changes to the arbitration provision in order to “allow employees time to consider the changes and decide whether or not to continue employment subject to the changes.” Before 2011, the arbitration provision required employees to arbitrate individual disputes, but allowed employees to bring class action claims against Nordstrom. But in July and August 2011, Nordstrom changed the arbitration provision—precluding almost all class action lawsuits. Nordstrom sent employees notice informing them of each change.

Despite the new provision preventing class actions, Davis nonetheless filed a class action lawsuit against Nordstrom in August 2011, seeking redress for nonpayment of wages, failure to provide proper breaks, and unfair competition. Citing the employee handbook, Nordstrom moved to compel Davis to submit to individual arbitration of her claims. The district court denied Nordstrom’s motion to compel, finding that the new arbitration agreement did not bind Davis, since she never affirmatively agreed to it. Nordstrom then appealed.

The Appeal

Under the FAA, the district court must determine whether or not a valid arbitration exists, and if so, whether the agreement encompasses the dispute. Davis had argued that there was no valid agreement, because she never affirmatively accepted the revised terms. The Ninth Circuit did not agree. The court noted that, in California, agreement to arbitrate can be express or implied. When Davis began her employment with Nordstrom, she expressly agreed to the arbitration terms in the first handbook. Under California law, Nordstrom could unilaterally change the employee handbook, so long as Nordstrom provides notice. And when an employee continues in her employment after being given notice of changed terms, her continued employment constitutes acceptance of the new terms. So, here, Davis implicitly agreed to the new arbitration terms, because she continued working after Nordstrom informed her of the new terms.

Davis had argued that Nordstrom did not comply with the notice requirement. But the Court found that, by sending a letter to Davis and the other employees, informing them of the new terms and not seeking to enforce the new terms within the 30 day notice period, Nordstrom complied with the minimum requirements under California law. The Court also rejected Davis’ argument that Nordstrom should have explicitly informed her that her continued employment constituted acceptance of the new terms of employment. The Court found no California precedent requiring employers to give such notice. The court therefore reversed the district court and remanded for further proceedings. Ultimately finding that Nordstrom complied with the notice requirement when it sent employees notice that the terms had changed, and California law does not require Nordstrom to specifically inform employees that their continued employment constitutes acceptance of the new terms.

Impact of Davis

Davis has a significant impact on how employees should react when their employers change the terms and conditions of their employment. Employees should make sure to read and review the terms and conditions of their employment. Since California law does not require employers to inform employees that continued work constitutes acceptance, employees should make every effort to carefully review notifications from their employer. In addition, employers, whose contracts empower them to make unilateral changes, should nonetheless give employees fair and advanced notice of any such changes. If you have a wage or hour dispute, contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside, and Los Angeles. Call 714-937-2020.