Employer is Denied Enforceability of Arbitration Agreement Found in Employee Handbook

In the California Court of Appeals case of Sparks v. Vista Del Mar Child and Family Services, the employee filed a wrongful termination complaint against the company after he complained of various employment practices he believed violated state and federal reporting and compensation laws. The defendant, intendant to compel arbitration based on a provision found in its employee handbook. The court denied enforceability stating that, in general, arbitration agreements in employee handbooks are non-enforceable. This is because they should be signed as a separate document, employee handbooks often state that they are not contracts, that they can be unilaterally changed, etc.

In California and elsewhere, employers are having greater and greater difficulty enforcing arbitration agreements to the point where you have to ask if it is worse than the fight before the fight. What sense does it make to try and compel arbitration if losing costs you $50,000 to do so?

If you have an arbitration agreement, remember to make sure:

1. It is signed as a stand-alone document.
2. It is specific to coverage rights waived and any process to follow.
3. Get it reviewed by a lawyer. It may cost you a few hours of their time, but you are doing it to save many thousands if you do get sued.

California Court Knocks Down Arbitration Agreement Found in an Employee Handbook

We advise all our Members to use stand-alone arbitration agreements, if they use them at all. Here’s one reason why: http://www.courtinfo.ca.gov/opinions/documents/H036242.PDF. This is also a good case to learn about these agreements in general.

In another case, the California Court struck down a portion of the arbitration agreement related to class action and representative action under the Private Attorney General Act. http://www.courtinfo.ca.gov/opinions/documents/B222689.PDF

Lesson for employers: Get a lawyer who stays up on these laws to draft your arbitration agreement so that it complies with the constant scrutiny of the courts. Unfortunately, it’s gotten to a point where even the lawyers can’t guarantee it still won’t get thrown out! All they can guarantee is the first fight will be over the enforceability of the agreement. If that’s the case are they really still worth it?

California Strikes Down Yet Another Arbitration Agreement

Seems like there isn’t an arbitration agreement the California courts like. This time, one used by the California Association of Realtors was struck down (http://www.courtinfo.ca.gov/opinions/documents/G042404.PDF). Know this: If you are going to have somebody sign an arbitration agreement, get some legal counsel to review the agreement…and even then, keep your fingers crossed. In this case, the court didn’t like how it was presented (here, sign this) and they didn’t like the fact that a losing plaintiff may have to pay costs beyond that imposed in a jury case (think of that, having to pay for bringing a poor claim). My personal belief is that the courts should move as many of these cases into arbitration as possible. Arbitration was the “traditional” way of resolving workplace disputes for 40 years before the civil rights laws came along. If properly managed, arbitration can save time, reduce expenses, reduce the impact on the organization and employee as a whole, control runaway verdicts, and make for a saner working experience.