Filed 8/22/16

                          CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                           SECOND APPELLATE DISTRICT

                                     DIVISION FOUR



JANUARY ESPARZA,                                   B268420

        Plaintiff and Respondent,                  (Los Angeles County
                                                   Super. Ct. No. SC122803)
        v.

SAND & SEA, INC., et al.,

        Defendants and Appellants.



        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.
                                    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

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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 anti-
harassment 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:



                                               3
       “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

                                             5
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



                                               6
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

                                             7
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


       1
        We 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.
                                             8
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

                                                9
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

                                               10
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.



                                            11
       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

                                             12
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.




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