What Does Signing an Arbitration Agreement Mean for a California Employee?
You start a new job and HR places a stack of documents in front of you. Somewhere between the handbook acknowledgment, tax forms, and benefits paperwork is an agreement stating that employment disputes must be resolved through arbitration.
Most employees sign it and move on.
The significance of that document may not become apparent until years later, when the employee has an unpaid wage, discrimination, retaliation, harassment, or wrongful termination claim. At that point, the arbitration agreement can determine where the case is heard, who decides it, and what litigation procedures are available.
Signing an arbitration agreement usually does not mean that an employee gives up California employment-law rights altogether. It generally changes the forum in which those rights are enforced.
KEY TAKEAWAYS
- Arbitration usually replaces a lawsuit in court with a private proceeding before an arbitrator.
- A valid arbitration agreement may eliminate the right to have a jury decide the case.
- Arbitration agreements can also contain class, collective, or representative-action provisions that require separate analysis.
- Signing an agreement does not automatically make every provision enforceable.
- Federal law now gives individuals alleging qualifying sexual assault or sexual harassment disputes an important right to elect court instead of predispute arbitration in covered cases.
What Is Employment Arbitration?
Arbitration is a private dispute-resolution process. Instead of filing a case and ultimately presenting it to a judge or jury, the parties present the dispute to an arbitrator.
The arbitrator performs many of the functions a judge would perform. The arbitrator can decide motions, resolve discovery disputes, hear testimony, evaluate documents, determine liability, and issue an award.
That award can generally be enforced through the court system. At the same time, judicial review of arbitration awards is ordinarily much narrower than appellate review of a court judgment.
What Are You Usually Giving Up?
The biggest change is generally the right to a jury trial.
For many employees, that is the most important practical consequence. A discrimination, retaliation, harassment, or wrongful-termination dispute that might otherwise be decided by a group of jurors may instead be decided by one private arbitrator.
Arbitration may also have different discovery procedures, deadlines, hearing rules, and confidentiality provisions depending on the particular agreement and arbitration provider.
Know Your Rights
An arbitration agreement is not the same thing as a release of claims. You may still have the right to pursue unpaid wages, discrimination damages, retaliation damages, attorney's fees, and other remedies. The primary issue is often where those claims must be pursued, not whether the claims disappeared.
Does Signing Mean the Agreement Is Automatically Enforceable?
No.
California courts analyze contract formation, scope, unconscionability, and other defenses when deciding whether an arbitration agreement may be enforced. California’s Supreme Court has also imposed protections when employers require arbitration of unwaivable statutory employment rights, including requirements concerning a neutral arbitrator, adequate discovery, a written decision, access to statutory remedies, and arbitration costs.
That does not mean every employee can simply avoid arbitration because the employee later prefers court. It means the actual agreement needs to be reviewed rather than assuming that the words “binding arbitration” end the analysis.
Who Pays for the Arbitrator?
This is another major distinction from ordinary litigation.
Arbitrators and arbitration organizations can charge substantial fees. In mandatory employment arbitration involving statutory rights, California law generally does not permit an employer to impose arbitration-specific forum expenses on an employee that the employee would not have incurred in court.
California also has statutory rules addressing situations in which the drafting party fails to timely pay required arbitration fees. Code of Civil Procedure section 1281.97 provides that, in covered employment arbitrations, failure to pay specified fees within 30 days after their due date can constitute a material breach and waiver of the right to compel arbitration.
What About Sexual Harassment Claims?
There is now a major federal exception employees should know about.
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act allows a person alleging a qualifying sexual assault or sexual harassment dispute to elect not to enforce a predispute arbitration agreement with respect to a case relating to that dispute. The federal law applies to disputes or claims arising or accruing on or after March 3, 2022.
This is a federal law, so it applies in California as well. Recent California and Ninth Circuit decisions continue to address the reach and timing of that protection.
The rule is therefore more precise than saying that “sexual harassment can never be arbitrated.” The date of the dispute, allegations, agreement, and other circumstances can matter.
Can Arbitration Still Be a Good Forum for an Employee?
Sometimes.
Arbitration is not automatically bad for an employee. It may produce an earlier hearing than an overcrowded court system, the employer will generally bear substantial arbitration costs, and the arbitrator may have significant employment-law experience.
But arbitration also eliminates a jury in many cases and significantly limits appellate review. Those differences can matter substantially depending on the evidence and claims.
What Should You Do If You Signed an Arbitration Agreement?
Keep a copy.
If an employment dispute develops, provide the complete agreement, not just the signature page, to your attorney. The arbitration language, delegation clause, choice of arbitration provider, cost provisions, discovery provisions, amendments, electronic acceptance records, and surrounding agreements may all matter.
Do not assume that signing the agreement means you have no case.
How GS LAW Can Help
GS LAW, APC evaluates employment arbitration agreements together with the underlying employment claims. That includes determining what claims fall within the agreement, whether enforceability issues exist, who must pay arbitration costs, whether federal sexual-harassment protections apply, and whether the dispute should proceed in court or arbitration.
An arbitration agreement changes litigation strategy. It does not necessarily eliminate the employee’s rights.