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California courts will generally enforce arbitration clauses in contracts.  But arbitration provisions in employment contracts are subject to stricter scrutiny.  Below are some guidelines to help make your employment arbitration agreement more likely to be enforceable. 
 
Do:
 
1.   Do make the arbitration agreement a stand-alone agreement.  Some employers attempt to include arbitration agreements in handbooks or include them in larger agreements that cover several subjects.  Courts are more likely to enforce an arbitration agreement if it is a separate agreement signed by the employee.
 
2.  Do prominently state in the agreement that the employee is waiving his or her right to a trial by jury. 
 
3.  Do include a copy of the arbitration rules with the agreement.  Most arbitration agreements provide that the arbitration will proceed according to the rules of some arbitration service, for example, the American Arbitration Association.  You should provide a copy of the relevant rules to the employee. 
 
4.  Do include the Armendariz requirements.  The California Supreme Court in Armendariz v. Foundation Health Psychcare Services, Inc. found that employment arbitration agreements must provide for:  (a) a neutral arbitrator; (b) sufficient discovery; (c) all relief that is available in court; (d) a written decision; and (e) the employer’s payment of all costs that are unique to arbitration. 
 
5.  Do delegate “arbitrability” to the arbitrator.  While some older decisions found that delegating the issue of arbitrability (essentially, whether the arbitration agreement is enforceable) to the arbitrator was improper, recent authority has found such delegation to be enforceable.  
 
Don’t:
 
1.  Don’t make the remedies unilateral.  Courts are likely to invalidate agreements that compel arbitration of the types of claims that employees are most likely to bring, but exempt from arbitration the types of claims that employers are likely to bring. 
 
2.  Don’t shorten the deadline for demanding arbitration.  Various statutes prescribe the time limit by which an employee must file a claim in court.  An arbitration agreement should not attempt to shorten those time limits. 
 
3.  Don’t attempt to alter attorneys’ fees law.  For example, prevailing employees are entitled to recover attorneys’ fees on claims brought under the Fair Employment and Housing Act, while prevailing employers are entitled to fees only if the claim was frivolous or filed in bad faith.  Courts are not likely to enforce an arbitration agreement that alters these rules, for example by providing that prevailing employers are entitled to fees whether or not the employee’s claim was frivolous or filed in bad faith. 
 
4.  Don’t include any provisions that obviously favor the employer only.  Courts are less likely to enforce provisions that appear to favor only the employer.   For example, an agreement that provides that arbitrator awards over $50,000 would be reviewed by a second arbitrator improperly favors the employer because it is unlikely that the employer would obtain an award of $50,000 or more against an employee. 
 
5.  Don’t forget to include a class action waiver.  Class action waivers are still controversial.  Recent case law from the United States Supreme Court suggests that class action waivers should be enforceable even in the employment context.  While the California Supreme Court has yet to decide the issue, it is recommended that employers include class action waivers for the time being.  The agreement should also provide that in the event any portion of it (e.g., the class action waiver) is deemed illegal, the remainder of the agreement will be enforced. 
 
 
 
 
 

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