Recent California court decisions have begun to show a trend of judicial hostility towards the enforcement of employment arbitration agreements in certain circumstances. In light of this trend it may be time to reexamine dated arbitration agreements and practices.
In the past few years, the legal landscape surrounding arbitration agreements has changed quite a bit. The recent decision in Kec v. Superior Court reminds employers that they should ensure the language in older arbitration agreements remains enforceable.
In Kec, the Court found that an arbitration agreement containing language broad enough to cover PAGA claims was null and void when the agreement also contained a provision that the class action and PAGA waiver was not modifiable or severable. The arbitration agreement was drafted prior to a significant California Supreme Court decision in 2014, which invalidated any provision requiring PAGA claims to be arbitrated or waived.
The Kec case serves as a stark warning that an arbitration agreement may be rendered useless, resulting in the loss of significant benefits, if the agreement is not reviewed occasionally to ensure that all the provisions are still up to date and enforceable.
The recent California Supreme Court decision in Oto, LLC v. Kho, also puts companies on notice that how they present the arbitration agreement to employees could serve to invalidate it.
In Oto, LLC, the employee, Kho, was approached by an HR worker and asked to sign several documents at once, including an at-will employment and arbitration agreement. Kho was given the documents in English, not his first language, and he was not given an opportunity to read or review the documents. Further, the HR worker made no attempt to explain the document and waited in Kho’s workspace while he signed the agreement.The court also found that the agreement was written densely, in very small typeface, and was filled with legalese.
Ultimately the Court refused to enforce the agreement where the employee was induced to sign it through sharp practices and surprise. The Court held that arbitration is a matter of consent, not coercion.
Given the ever changing nature of the law surrounding arbitration, it is crucial to routinely reevaluate both your company’s arbitration agreement and the practices in place in presenting it to your employees.
If you have questions or need further guidance as to your company’s policies and practices, please contact Drew Pomerance at (818) 992-9999, ext. 212, Michael Adreani, at ext. 234, Marina Vitek, at ext. 236, or Trevor Witt, at ext. 224.
In the meantime, we hope you are healthy and staying safe.
