Monthly Archives: March 2012

The Court Further Restricts Arbitration Agreements Between Employers and Employees

Many Employers seek to reduce the costs and risks associated with  lawsuits brought by employees and former employees by entering into agreements with their employees stating that all disputes must be brought to binding arbitration, and not filed in court.  These agreements are generally upheld where they contain sufficient information concerning the arbitration process to ensure that employees can make an informed decision, and sufficient safeguards of the employees’ rights.  One of the primary benefits of these agreements to an employer is that they eliminate a jury.  Instead, disputes are decided by an arbitrator, who may be a retired Judge or an attorney.  In February 2012, in Mayers v. Volt Management Corp, et al., the California Court of Appeal struck down an agreement to submit employment related claims to binding arbitration, ruling that it was unconscionable and unenforceable because the employee was not provided with a copy of the American Arbitration Association rules that the agreement said were controlling or advised as to how he could find or review them.  Most importantly, the Agreement provided that the “arbitrator shall be entitled to award reasonable attorney’s fees and costs to the prevailing party,” thus exposing the employee to a greater risk of being liable to his former employer for attorneys’ fees than he would have been had he pursued his claims in court.
 Thus, in order to be upheld, not only must arbitration agreements protect the employees’ rights, they also cannot grant additional rights to the employer or create potential risks for the employee that would not arise if the case were filed in court.