California’s Rules on Mandatory Employment Arbitration

It used to be the rule, that if there was a dispute between two parties such as an employer and employee that the issues would ultimately be decided in court. Either federal courts or the California courts. More often though, employers are trying to stack the deck in their favor by forcing employees to sign employment contracts which mandate that disputes be heard in arbitration.

While there are some advantages to arbitration such as a quicker resolution – there are reasons employers favor arbitration over trials. In arbitration, it is easier to control who makes the ultimate decision. Arbitrators are normally people whose main experience is handling just employment issues and not a full range of issues. Judges ultimately are accountable to the public. Arbitrators are accountable to the people who hire them.

Mandatory arbitration for most employees means – either sign and be hired or don’t sign don’t get the job. California’s rules on mandatory arbitration are governed various court cases. A leading employment arbitration case is Armendariz v. Foundation Health. The case, which is still current law, made the following key rulings:

  • The agreement to arbitrate must be mutual, not one sided.
  • If there is going to be arbitration, there still needs to be adequate discovery
  • Arbitration cannot force the employee to pay any more costs than he/she would have paid if the case had gone to court
  • The selection of the arbitrator should be neutral – it can’t favor one side.

Arbitration agreements must be procedurally fair – give both sides an equal opportunity to have their case heard. The presumption is that mandatory arbitration clauses are unfair.

The arbitration must also be substantively fair which means decisions are made on the current law. and can’t limit any rights or claims that the employee would otherwise have if the case proceeded through the court system.

The law on mandatory arbitration is evolving. Employees should speak with experienced California employment litigation attorneys before proceeding with an arbitration. The employee may be able to challenge the arbitration process and proceed through the courts. If the employment dispute does proceed through arbitration, it is still important to use experienced employment counsel who know the ins and outs of the arbitration process.