Filed 8/22/16

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

JANUARY ESPARZA,

Plaintiff and Respondent,

v.

SAND & SEA, INC., et al.,

Defendants and Appellants.

 B268420

 (Los Angeles County

 Super. Ct. No. SC122803)

APPEAL from an order of the Superior Court of Los Angeles County, Gerald 

Rosenberg, Judge. Affirmed.

Telep Law, Desiree Telep, Tina Dao for Plaintiff and Respondent.

Greenberg Traurig, Mark D. Kemple, Karin L. Bohmholdt and Nicholas A. 

Insogna for Defendants and Appellants.
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INTRODUCTION

The question in this case is whether an arbitration provision in an employee 

handbook is legally enforceable. The employee handbook containing the arbitration 

provision included a welcome letter as the first page, which stated, “[T]his handbook is 

not intended to be a contract (express or implied), nor is it intended to otherwise create 

any legally enforceable obligations on the part of the Company or its employees.” The 

employee signed a form acknowledging she had received the handbook, which mentioned

the arbitration provision as one of the “policies, practices, and procedures” of the 

company. The acknowledgement form did not state that the employee agreed to the 

arbitration provision, and expressly recognized that the employee had not read the 

handbook at the time she signed the form. Under these circumstances, we find that the 

arbitration provision in the employee handbook did not create an enforceable agreement 

to arbitrate. We therefore affirm the trial court‟s denial of the employer‟s petition to 

compel arbitration.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff and respondent January Esparza began employment at Shore Hotel on 

November 19, 2012. On her first day of work, Esparza was given an employee 

handbook. The first page of the handbook stated:

“Welcome to Shore Hotel!

“We are excited to have you as a member of our team. At Shore Hotel, every 

team member plays a vital role in the success of our organization and we look forward to 

your many contributions.

* * * 

“This handbook will give you both an overview and a better understanding of 

Shore Hotel and the core policies by which we operate. . . . You should never hesitate to 

ask questions or speak directly to your supervisor or the Human Resources department.

“This handbook replaces and supersedes all prior verbal descriptions, written 

policies and other written materials and memorandum [sic] that may have been 
3

distributed; unless otherwise notes [sic]. Employees should understand, however, that 

this handbook is not intended to be a contract (express or implied), nor is it intended to 

otherwise create any legally enforceable obligations on the part of the Company or its 

employees. [Emphasis added.] The Company reserves the right to revise, modify, delete, 

or add to any and all policies, procedures, work rules, or benefits stated in this handbook 

or in any other document at any time (except as to its at-will employment policy) without 

prior notice. . . .

“Welcome aboard!”

We will refer to this page of the employee handbook as the “welcome letter.”

A section titled “Agreement to Arbitrate” spanned pages 3 and 4 of the employee 

handbook. Unlike the rest of the employee handbook, this section was printed in all 

capital letters, and it was written in the first person from the employee‟s perspective. The 

section began, “I further agree and acknowledge that the company and I will utilize 

binding arbitration to resolve all disputes that may arise out of the employment context. 

Both the company and I agree that any claim, dispute, and/or controversy that either I 

may have against the company . . . or the company may have against me . . . shall be 

submitted to and determined exclusively by binding arbitration under the Federal 

Arbitration Act. . . .” The section discussed the scope of disputes under the agreement, 

the qualifications for an arbitrator, and other procedural issues relating to arbitration. It 

continued, “I understand and agree to this binding arbitration provision, and both I and 

the company give up our right to trial by jury of any claim I or the company may have 

against each other.” 

The handbook then explained employment basics such as the company antiharassment policy, the attendance policy, the dress code, and payroll. The last two pages 

of the 52-page employee handbook consisted of identical copies of a “policy 

acknowledgement,” one labeled as the employer copy, and one labeled as the employee

copy. The policy acknowledgement stated:
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“This handbook is designed to provide information to employees of Sand & Sea, 

Inc. (Shore Hotel) regarding various policies, practices and procedures that apply to them 

including our Arbitration Agreement. Shore Hotel and its employees acknowledge that 

their relationship is „at will‟ and that either party can terminate that relationship at any 

time for any reason. Shore Hotel reserves the right to modify, alter or eliminate any and 

all of the policies and procedures set forth herein at any time, for any reason, with or 

without notice. Neither this manual nor its contents constitute, in whole or in part, either 

an express or implied contract of employment with Shore Hotel or any employee. 

[Emphasis added.]

“While this handbook is not intended to state all of the conditions of employment 

and all of the principles which help to guide our people in the performance of their duties, 

it will give you general information in regard to certain policies and benefits related to 

your employment.

* * *

“I acknowledge that I have received Sand & Sea Inc.‟s (Shore Hotel) Employee 

Handbook. I also acknowledge that I am expected to have read the Employee Handbook 

in its entirety no longer after one week after receiving it, and that I have been given 

ample opportunity to ask any questions I have pertaining to the contents of the employee 

handbook. I also understand that this Handbook is Company property and that it must be 

returned upon termination of my employment. I understand that failure to abide by these 

provisions may result in disciplinary action up to and including the termination of my 

employment.” 

Esparza signed the policy acknowledgement on November 19, 2012, her first day 

of work. Esparza‟s employment with Shore Hotel ended on August 2, 2013. On July 8, 

2014, Esparza filed a complaint against Shore Hotel; she later added Steve Farzam, 

identified as the owner of the hotel, as a defendant. In her first amended complaint, 

which was the operative complaint below, Esparza alleged causes of action for sexual 
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harassment, sex discrimination, wrongful termination, and intentional infliction of 

emotional distress. 

On July 28, 2015, more than a year after Esparza first filed her complaint, 

defendants filed a petition to compel arbitration. Defendants argued that Esparza‟s 

claims arose from her employment at Shore Hotel, and “because Plaintiff signed her 

assent to a conspicuous and unambiguous agreement to arbitrate claims of the very type 

at issue here, arbitration is mandatory.” Defendants acknowledged that both parties had 

served discovery requests, and defendants‟ demurrer to the first amended complaint was 

pending before the court. With their motion, defendants submitted the entire employee 

handbook, including the welcome letter and the policy agreement signed by Esparza. 

Esparza opposed defendants‟ petition to compel arbitration. She argued, “Ms. 

Esparza did not assent or agree to arbitration . . . . Ms. Esparza simply acknowledged that 

she received Shore Hotel‟s Employee Handbook, and she also acknowledged that she 

was to have read the Employee Handbook one week after receiving it.” Esparza also 

argued that the arbitration provision was procedurally and substantively unconscionable, 

and that defendants forfeited their right to demand arbitration by engaging in litigation 

for a year before seeking to enforce the arbitration provision. 

In their reply, defendants argued that Esparza “freely agreed to arbitrate all 

disputes arising from her employment.” They argued that the policy acknowledgment 

Esparza signed “expressly incorporated the employment terms and conditions of 

employment [sic] set forth in the preceding pages.” Because Esparza had a week to 

review the handbook, defendants argued, she had the opportunity to “accept employment 

subject to [the handbook‟s] terms, or to seek employment elsewhere.” Defendants also 

argued that the terms of the employment agreement were not unconscionable, and that 

defendants‟ participation in the very early stages of litigation should not be deemed a 

forfeiture of their right to arbitrate. 

The trial court denied defendants‟ petition. It held, in full, “Defendants‟ motion to 

compel arbitration is denied. [¶] There is no agreement to arbitrate. [¶] The Policy 
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Acknowledgement signed by plaintiff does not impose an obligation to arbitrate nor is the 

arbitration provision in the handbook incorporated by reference. To the contrary, the 

acknowledgement states that the handbook is not an employment agreement.” 

Defendants timely appealed. 

STANDARD OF REVIEW

There is a strong public policy favoring contractual arbitration, but that policy 

does not extend to parties who have not agreed to arbitrate. (Molecular Analytical 

Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 704 (Molecular 

Analytical Systems).) To establish a valid agreement to arbitrate disputes, “[t]he 

petitioner bears the burden of proving the existence of a valid arbitration agreement by 

[a] preponderance of the evidence, and a party opposing the petition bears the burden of 

proving by a preponderance of the evidence any fact necessary to its defense.” (Engalla 

v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) California law governs 

the determination as to whether an agreement was reached. (Rosenthal v. Great Western 

Fin. Securities Corp. (1996) 14 Cal.4th 394, 409-410 (Rosenthal).) “[W]hen a petition to 

compel arbitration is filed and accompanied by prima facie evidence of a written 

agreement to arbitrate the controversy, the court itself must determine whether the 

agreement exists and, if any defense to its enforcement is raised, whether it is 

enforceable.” (Id. at p. 413; see also Code Civ. Proc., § 1281.2 [“the court shall order the 

petitioner and the respondent to arbitrate the controversy if it determines that an 

agreement to arbitrate the controversy exists”].)

An order denying a petition to compel arbitration is an appealable order. (Code 

Civ. Proc., § 1294, subd. (a).) “When „the language of an arbitration provision is not in 

dispute, the trial court‟s decision as to arbitrability is subject to de novo review.‟ 

[Citation.] Thus, in cases where „no conflicting extrinsic evidence is introduced to aid 

the interpretation of an agreement to arbitrate, the Court of Appeal reviews de novo a trial 

court‟s ruling on a petition to compel arbitration.‟ [Citation.]” (Molecular Analytical 
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Systems, supra, 186 Cal.App.4th at p. 707.) Here, the evidence is not in dispute, and 

therefore we review the trial court‟s decision de novo. 

DISCUSSION

Defendants argue that Esparza‟s signature on the policy acknowledgement 

indicates that “Plaintiff expressly acknowledged that the terms and conditions in the 

Employee Handbook would bind her should she accept employment with Shore Hotel.” 

As a result, defendants argue, they presented prima facie evidence of an agreement to 

arbitrate, and the trial court erred by concluding that there was no agreement. The 

language of the policy acknowledgement does not support defendants‟ conclusion.

“„In California, “[g]eneral principles of contract law determine whether the parties 

have entered a binding agreement to arbitrate.” [Citations.]‟ (Pinnacle v. Museum Tower 

Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236, [145 

Cal.Rptr.3d 514, 282 P.3d 1217].) „An essential element of any contract is the consent of 

the parties, or mutual assent.‟ [Citation.] (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 

270 [109 Cal.Rptr.2d 807, 27 P.3d 702].) Further, the consent of the parties to a contract 

must be communicated by each party to the other. (Civ.Code, § 1565, subd. 3.) „Mutual 

assent is determined under an objective standard applied to the outward manifestations or 

expressions of the parties, i.e., the reasonable meaning of their words and acts, and not 

their unexpressed intentions or understandings.‟ (Alexander v. Codemasters Group 

Limited (2002) 104 Cal.App.4th 129, 141 [127 Cal.Rptr.2d 145], disapproved on other 

grounds in Reid v. Google, Inc. (2010) 50 Cal.4th 512, 524, [113 Cal.Rptr.3d 327, 235 

P.3d 988].)” (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 173

(Serafin).)

The issue here is whether the employee handbook created a mutual agreement to 

arbitrate. Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164 (Mitri), which 

neither party cites, is on point in two respects. In that case, the defendant employer 

supported its petition to compel arbitration with documents showing that its employee 

handbook contained a section titled “Arbitration Agreement,” and that the plaintiff 
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employees acknowledged receiving the employee handbook. (Id. at pp. 1167-1168.) The 

arbitration agreement in the handbook said, “As a condition of employment, all 

employees are required to sign an arbitration agreement,” and “Employees will be 

provided a copy of their signed arbitration agreement.” (Ibid.) However, the employer 

did not produce evidence of any signed arbitration agreements. (Ibid.) The trial court 

denied the employer‟s petition, and the defendants appealed.

The Court of Appeal held that the employer failed to establish the existence of an

agreement to arbitrate, citing two separate bases relevant here. The employer argued, as 

defendants do here, that the employees‟ acknowledgement that they received the 

handbook, coupled with the fact that the handbook contained an arbitration provision,

was sufficient to show that the employees agreed to the arbitration provision. The Mitri

court rejected that argument because the handbook‟s reference to a separate arbitration 

agreement that the employees were required to sign “completely undermines any 

argument by defendants [that] the provision in the handbook itself was intended to 

constitute an arbitration agreement between [the employer] and its employees.” (Mitri, 

supra, 157 Cal.App.4th at pp. 1170-1171.) In addition, the handbook‟s statement that 

employees would be provided with a copy of their signed arbitration agreement 

“reinforc[ed] an intent to have employees sign a separate arbitration agreement to 

effectuate [the employer‟s] policy of arbitrating employment claims.” (Id. at p. 1171.) 

The language of the handbook itself therefore suggested that the handbook did not create 

an agreement between the parties.

Here, the handbook also indicated to the reader that it was not intended to 

establish an agreement.1 The welcome letter at the beginning of the handbook explicitly 

stated that “this handbook is not intended to be a contract (express or implied), nor is it 

intended to otherwise create any legally enforceable obligations on the part of the 

 

1We note that this case differs from Mitri in that defendant asserts that the 

handbook and policy acknowledgement are “a single integrated document” so that no 

separate arbitration agreement was required. 
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Company or its employees.” This statement undermines defendants‟ argument that the 

handbook and its arbitration provision actually was intended to create a legally 

enforceable obligation to arbitrate. 

Defendants argue that welcome letter‟s statement that the handbook did not create

a contract “was intended only to disclaim that the Employee Handbook creates an 

employment contract” and that the policy acknowledgement “clarifies” this by stating that 

the handbook is not a “contract of employment.” However, the language of the welcome

letter was extremely broad, stating that the handbook “is not intended to . . . create any 

legally enforceable obligations.” Defendants now ask us to find that the arbitration 

provision did create a legally enforceable obligation, despite the express language to the 

contrary. We decline to do so. Mutual assent is determined by the reasonable meaning 

of the parties‟ words and acts. (Serafin, supra, 235 Cal.App.4th at p. 173.) When 

language in a contract is clear and explicit, that language governs interpretation. (Civ. 

Code, § 1638.) To the extent there is any ambiguity in this language we construe it 

against defendants, the drafters of the language. (Rebolledo v. Tilly’s, Inc. (2014) 228 

Cal.App.4th 900, 913.) “If a party can show that it did not know it was signing a 

contract, or that it did not enter into a contract at all, both the contract and its arbitration 

clause are void for lack of mutual assent.” (Saint Agnes Medical Center v. PacifiCare of 

California (2003) 31 Cal.4th 1187, 1200.) Here, the reasonable interpretation of the 

welcome letter is that it meant exactly what it said—that the handbook was not intended 

to create “any legally enforceable obligations,” including a legally enforceable obligation 

to arbitrate.

The second basis for the Mitri court‟s holding focused on the language of the 

acknowledgement form. The acknowledgement form in Mitri stated that the handbook 

was intended to be “„an excellent resource for employees with questions about the 

Company,‟” and “„[e]mployees are encouraged to carefully review the Employee 

Handbook and become familiar with the contents and periodic updates.‟” (Id. at p. 1173.) 

The court noted, “Conspicuously absent from the acknowledgment receipt form is any 
10

reference to an agreement by the employee to abide by the employee handbook‟s 

arbitration agreement provision.” (Mitri, supra, 157 Cal.App.4th at p. 1173.) The court 

concluded, “We cannot and will not create a term of a contract between the parties that 

the evidence does not show was ever agreed upon by the parties. . . . Taken as a whole, 

the documents submitted by defendants in support of their motion do not constitute an 

arbitration agreement.” (Ibid.)

Here, the policy acknowledgement that Esparza signed also did not state that she

agreed to abide by the arbitration agreement within the handbook. Instead, the policy 

acknowledgement stated that the handbook “is designed to provide information to 

employees . . . regarding policies, practices and procedures that apply to them including 

our Arbitration Agreement.” As in Mitri, therefore, the policy acknowledgement 

suggests that it is merely informational. In addition, the policy acknowledgement 

explicitly recognized that Esparza had not read the handbook yet. Presumably, therefore, 

Esparza would not know the contents of the handbook or the arbitration provision at the 

time she signed the form. We have no basis to assume that Esparza agreed to be bound 

by something she had not read. (See, e.g., Rosenthal v. Great Western Fin. Securities 

Corp., supra, 14 Cal.4th at p. 421 [a contract is void where a party, before making the 

agreement, lacks a reasonable opportunity to learn its terms].)

Defendants argue that because Esparza was expected to read the handbook within 

a week, and she continued to work at Shore Hotel after that week, she must have 

impliedly agreed to the arbitration provision. But “„[a]bsent a clear agreement to submit 

disputes to arbitration, courts will not infer that the right to a jury trial has been waived.‟ 

[Citations.]” (Adajar v. RWR Homes, Inc. (2008) 160 Cal.App.4th 563, 569.) 

Furthermore, this case is unlike Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 

373 (Harris), where the arbitration provision, set apart from the employee handbook as 

an appendix, stated, “If Employee voluntarily continues his/her employment with TAP 

[Worldwide, LLC] after the effective date of this Policy [or January 1, 2010], Employee 

will be deemed to have knowingly and voluntarily consented to and accepted all of the 
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terms and conditions set forth herein without exception.” (Harris, at p. 379.) Based on 

this language, the court held that “upon commencing employment, the employee was 

deemed to have consented to the agreement to arbitrate by virtue of acceptance of the 

Employee Handbook. Plaintiff cannot have it both ways, acceptance of the at will job 

offer with all its emoluments and no responsibility to abide by one of its express 

conditions.” (Id. at p. 384.) No such contractual language existed in the employee 

handbook here. To the contrary, the welcome letter declared that the handbook did not 

“create any legally enforceable obligations,” the policy acknowledgement said the 

handbook provided “general information” about employer policies, and there was no 

stated requirement that the employee agree to any of these policies. These facts do not 

support a conclusion that the parties mutually assented to be bound by the arbitration 

provision in the handbook.

“To support a conclusion that an employee has relinquished his or her right to 

assert an employment-related claim in court, there must be more than a boilerplate 

arbitration clause buried in a lengthy employee handbook given to new employees. At a 

minimum, there should be a specific reference to the duty to arbitrate employment-related 

disputes in the acknowledgment of receipt form signed by the employee at 

commencement of employment.” (Sparks v. Vista Del Mar Child and Family Services

(2012) 207 Cal.App.4th 1511, 1522, abrogated on other grounds by Harris, supra, at p. 

390.) Defendants argue that because the policy acknowledgement referenced the 

arbitration agreement, it was binding on Esparza. However, the policy acknowledgement

only referenced the arbitration agreement as one of the “various policies, practices, and 

procedures that apply” to employees. It did not indicate that Esparza agreed to be bound 

by it. Rather, the end of that paragraph stated, “Neither this manual nor its contents 

constitute, in whole or in part, either an express or implied contract of employment,” 

which, along with the language in the welcome letter discussed above, suggested that 

nothing in the handbook was legally binding on the parties. 
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In addition, the policy acknowledgement stated that the handbook was company 

property that had to be returned when Esparza‟s employment terminated. Its last 

sentence, just above Esparza‟s signature, stated that “failure to abide by these provisions 

may result in disciplinary action up to and including the termination of my employment.” 

The policy acknowledgement gave Esparza no notice that it created an agreement binding 

her to any of the handbook provisions after her employment at Shore Hotel terminated. 

Coupled with the language acknowledging that Esparza had not read the handbook yet 

(and therefore had not read the arbitration provision), the policy acknowledgement does 

not support defendants‟ argument that Esparza agreed to the arbitration provision when 

she signed the policy acknowledgment. 

Defendants argue that the trial court erred when it reasoned that there was no 

arbitration agreement in part because the policy acknowledgement “is not an employment 

agreement.” They point out that an employment contract is not necessary to establish an 

enforceable arbitration agreement, and we agree. (See, e.g., Sanchez v. Carmax Auto 

Superstores California, LLC (2014) 224 Cal.App.4th 398, 401-402.) But this critique of 

the court‟s reasoning does not affect defendants‟ burden to demonstrate the existence of 

an enforceable arbitration agreement. Moreover, we review the trial court‟s ruling, not its 

reasoning. (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 994.) The court‟s 

statement about an employment agreement does not undermine its ruling that the 

handbook and policy acknowledgement do not evidence a mutual agreement to arbitrate. 

Defendants urge us to follow 24 Hour Fitness, Inc. v. Superior Court (1998) 66 

Cal.App.4th 1199 and Serpa v. California Surety Investigations, Inc. (2013) 215 

Cal.App.4th 695, which, according to defendants, demonstrate enforceable arbitration 

agreements in employee handbooks under similar circumstances. These cases are not on 

point. In 24 Hour Fitness, the Court of Appeal considered whether an arbitration 

agreement between an employee and employer was enforceable against defendants other

than the employer, and whether the agreement was unconscionable. In Serpa, the court 

also considered whether an arbitration agreement between an employee and employer
13

was unconscionable. Neither of these cases considered whether the parties had reached 

an agreement to arbitrate in the first instance, which is the question here. Instead, they 

only considered the applicability of defenses to the enforceability of existing arbitration 

agreements. Cases are not authority for propositions not considered. (See Kinsman v. 

Unocal Corp. (2005) 37 Cal.4th 659, 680.)

In sum, the handbook, including the welcome letter and policy acknowledgment, 

was insufficient to meet defendants‟ burden to demonstrate an agreement to arbitrate. 

The trial court did not err by denying defendants‟ petition to compel arbitration.

DISPOSITION

The trial court‟s order denying defendants‟ petition to compel arbitration is 

affirmed. Esparza is entitled to costs on appeal. 

CERTIFIED FOR PUBLICATION

COLLINS, J.

We concur:

EPSTEIN, P. J.

WILLHITE, J.