An Employer’s Failure to Sign an Arbitration Agreement May Render It Unenforceable

A recent Fifth Circuit decision in Mertens v. Benelux Corporation delivers a significant reminder for employers: an arbitration agreement that requires both parties’ signatures is only enforceable if both parties actually sign it. An employer’s inadvertent failure to countersign – no matter how routine or accidental – can expose the business to the full range of litigation that arbitration agreements are designed to prevent, including class actions and collective claims under federal wage-and-hour law.

For guidance on arbitration agreements and employment dispute resolution, please contact the ILS Legal Team at contact@consultils.com. We provide tailored legal solutions to help employers manage compliance risks and maintain operational stability.

Case Background

In Mertens v. Benelux Corporation, employees who worked as waitstaff at Palazio Men’s Club in Austin, Texas sued their employer, Benelux Corporation, for alleged violations of the Fair Labor Standards Act (“FLSA”). Benelux moved to compel arbitration based on agreements it had distributed to its employees in 2020. The arbitration agreement at issue contained signature blocks for both the employee and a representative of the Club, and its express language stated that the agreement required the signatures of both “Employee and the Club’s Representative” in order to be effective.

One of the plaintiffs, Belen Cadena, signed and dated both signature lines when she received the agreement. Thus, despite having a standard practice of countersigning employee arbitration agreements, Benelux’s General Manager inadvertently failed to sign Cadena’s agreement. The General Manager later testified that he had mistakenly assumed another representative had already signed on Benelux’s behalf.

When Benelux moved to compel Cadena to arbitrate her FLSA claims, she opposed the motion on the grounds that the agreement was unenforceable because the employer had never signed it. The district court agreed and denied Benelux’s motion. Benelux appealed to the U.S. Court of Appeals for the Fifth Circuit, which affirmed.

Key Legal Reasoning

Under Texas law, a valid contract requires:

1. an offer;

2. an acceptance in strict compliance with the terms of the offer;

3. a meeting of the minds;

4. each party’s consent to the terms; and

5. execution and delivery of the contract with the intent that it be mutual and binding. The court focused its analysis on the execution element.

   
   

The Fifth Circuit emphasized that the arbitration agreement’s language was unambiguous: it expressly required signatures from both the employee and the Club’s representative to become effective. The court noted that while a signature block alone does not necessarily indicate that signatures are a condition precedent to enforceability, the agreement here went further by expressly conditioning its effectiveness on mutual execution. Because the agreement’s plain language required both signatures, the court held the inquiry ended there, without the need to look beyond the four corners of the contract.

Benelux argued that its course of conduct – distributing the agreement, accepting employees’ signed copies, and otherwise treating the agreement as operative – should substitute for the missing signature. The court declined to reach this argument. Where the contract’s express terms unambiguously require mutual signatures, the court held that extrinsic evidence of conduct is irrelevant to the enforceability analysis. In short, when the written terms of an agreement require both parties’ signatures, no amount of subsequent conduct can cure the absence of the employer’s signature.

Implications for Employers

This ruling carries broad practical significance for employers who rely on arbitration agreements as a tool for managing employment disputes. Most directly, the decision makes clear that an employer cannot enforce an arbitration agreement that it has failed to countersign, even if the omission was entirely unintentional and even if the employer otherwise treated the agreement as binding. Employees who were distributed unsigned agreements retain the right to bring claims in court, including collective and class actions under the FLSA – precisely the type of exposure that arbitration programs are designed to minimize.

Moreover, the Fifth Circuit’s refusal to consider Benelux’s conduct as a substitute for the missing signature underscores that there is no easy fix once the omission occurs. Attempting to retroactively enforce an unsigned agreement or arguing that the parties acted as if the agreement were in place are unlikely to succeed where the contract’s language required signatures for validity. Informal or implied agreement are no substitution for a required signature.

Recommendations for Employers

1.  Conduct an immediate audit of all arbitration agreements.

Employers should promptly review their existing arbitration agreements to confirm that both the employee and an authorized company representative have signed each one. Any agreements that are missing the employer’s signature should be identified and addressed before a dispute arises.

2. Implement a mandatory dual-signature protocol.

Establish a clear, standardized process requiring that an authorized company representative countersign every arbitration agreement before it is considered complete. This step should be a mandatory checkpoint in the onboarding workflow, not an optional or administrative afterthought.

3. Assign clear responsibility for countersigning.

Designate specific individuals with authority to countersign arbitration agreements and ensure they understand that this is a legal obligation. Establish a backup protocol so that the obligation does not go unfulfilled due to absences, miscommunication, or an assumption that another representative has already signed.

4. Review agreement language carefully.

If an employer’s arbitration agreement contains express language requiring both parties’ signatures to become effective, that language creates a strict legal requirement. Employers should review their agreements with counsel to ensure that the signature requirements align with actual execution practices, and that the language used reflects the intended legal effect.

For guidance on arbitration agreements and employment dispute resolution, please contact the ILS Legal Team at contact@consultils.com. We provide tailored legal solutions to help employers manage compliance risks and maintain operational stability.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Managing Partner at ILS, Richard Liu ranks among the leading U.S. attorneys in corporate, employment, and regulatory law. He is known for crafting legal strategies aligned with clients’ business objectives and advising Fortune 500 companies, startups, and executives on corporate transactions, financing, privacy, and employment matters across the technology, healthcare, and financial sectors.

Before founding ILS, Richard practiced at top defense firms, where he developed a reputation for anticipating risks and designing strategies that balance protection with growth. He has secured favorable outcomes in contract and intellectual property disputes, represented clients in state and federal courts, and is recognized for combining large-firm expertise with boutique-firm agility. Richard is also a frequent speaker at industry and legal conferences.

Email: contact@consultils.com | Phone: 626-344-8949

Ruthie began her career as an associate at Gutierrez, Preciado & House, LLP, where she advised government entities on civil litigation matters. There, she managed an active caseload of matters from inception through trial. She has experience drafting complex legal documents including motions, discovery, and briefs. She has also played a key role in trial preparation including witness preparation, exhibit organization, trial document drafting, and trial strategy development.

During law school, she worked as a law clerk at Wallin & Klarich, where she conducted extensive legal research and analysis in all areas of criminal law. She also served as the Senior Online Editor of the UC Davis Law Review, as well as the Articles Selection Editor of the UC Davis Business Law Journal.

Email: contact@consultils.com | Phone: 626-344-8949