About Us  |  About Cheetah®  |  Contact Us

New hire who attended training before job offer was rescinded was not employee, not bound by arbitration agreement

By Lorene D. Park, J.D.

Because Fannie Mae placed a newly hired individual on administrative leave pending the completion of the hiring process and then rescinded the job offer, he was not bound by a dispute resolution policy that was a condition of employment, even though he was paid for the time he spent training and believed himself to be an employee, a federal court in the District of Columbia held, denying Fannie Mae’s motion to compel arbitration.

The plaintiff received a letter from Fannie Mae that offered him a job and included several terms and conditions of employment, including an acknowledgment that by accepting employment, he agreed to be bound by its dispute resolution policy (DRP). The policy required pre-litigation arbitration. He participated in orientation and training for 22.5 hours before being put on administrative leave while Fannie Mae completed its pre-hiring procedures. He was paid for the hours he worked and was assured he still had the job. However, a month after he received the offer letter, he received a second letter stating that the company decided to “rescind his conditional offer of employment and not employ [him].” He filed a demand for arbitration, implicitly and explicitly asserting his belief that he was a bona fide Fannie Mae employee. He then filed suit and Fannie Mae moved to compel arbitration.

Not an employee. In the court’s view, the plaintiff could only be bound by the DRP if he accepted Fannie Mae’s offer of employment. However, based on the second letter he received, it was clear that there was no offer to accept. There was nothing in the letter mentioning termination of employment; rather, the company decided not to employ him and rescinded its offer. That rescission released him from any obligations under the DRP.

The court rejected Fannie Mae’s argument that the language of its second letter was “nothing more than an arbitrary choice of words,” finding that the company clearly showed its intent to rescind the offer of employment. Nor was the court swayed by Fannie Mae’s claim that the plaintiff was an employee under common law, which the company based on inapposite cases involving respondeat superior liability for tort claims.

Here, the second letter left “no doubt” that the plaintiff was not an employee and his attestations to the contrary in his pre-litigation demand for arbitration did nothing to change that fact. Accordingly, Fannie Mae’s motion to compel was denied.