When Are Employment Law Arbitration Agreements Enforceable In California?
Answer
To be enforceable in California, arbitration agreements affecting employees must be reasonably fair. The California Supreme Court has laid out five requirements an employment arbitration agreement must meet before it can be enforced. In addition to these five requirements, the agreement must not be “unconscionable.” In other words, it must not only meet the five requirements, but it also must not shock the conscience of the court.
Understanding Arbitration Agreements
Arbitration agreements are increasingly common in employment contracts. These agreements require disputes between employees and employers to be resolved through arbitration rather than in court. However, in California, these agreements must meet specific criteria to be enforceable.
If a court finds an arbitration agreement unenforceable, the parties can take their case to court or attempt to settle the issue through negotiation.
Five Key Requirements For Enforceability
The California Supreme Court established five essential requirements for enforceable arbitration agreements in employment contracts. These requirements ensure fairness and protect employee rights.
- Neutral arbitrators: The arbitration agreement must ensure that arbitrators are neutral. This neutrality is intended to prevent bias and guarantee a fair arbitration process.
- Adequate discovery: The agreement must allow for more than minimal discovery, which means that each side must hand over all evidence to the other. Adequate discovery is crucial for employees to gather the necessary evidence to support their claims.
- Written award: The agreement must require a written decision from the arbitrator. This written award provides transparency and accountability and is subject to limited judicial review.
- All types of relief: The agreement must permit relief that would be available in a court of law. This requirement ensures that employees can seek and obtain the same remedies through arbitration as they would through a court.
- No additional costs: The agreement must not impose additional costs on the employee beyond those they would incur in court. This stipulation ensures that arbitration remains a viable option for dispute resolution without becoming prohibitively expensive.
By requiring these five things before allowing an employer-employee arbitration agreement to be enforced, the court intended to level the playing field between employers and employees. However, there is one more element to be considered: conscionability.
Conscionability In Arbitration Agreements
In addition to these five requirements, an arbitration agreement must be conscionable. In simpler terms, the agreement should be fair and reasonable, both in how it is presented and in its terms. If the arbitration agreement strikes a court as shockingly unfair, the court will not enforce it.
Conclusion
California does not presume that arbitration is inherently better or worse than court, but it does require that an employment-related arbitration agreement itself be reasonably fair. Employees who wish to resolve a dispute with their employer should seek counsel from an experienced attorney to determine if their case will need to go to arbitration.
The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.
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