A California Court of Appeal issued a decision an employment law decision on arbitration this week that is remarkable in the clarity of its logic. In Roman v. Superior Court, the appellate court considered whether an agreement to arbitrate employment-related claims was enforceable. The arbitration agreement contained a clause providing, "I agree, in the event that I am hired by the company, that all disputes and claims that might arise out of my employment with the company will be submitted to binding arbitration."
The employee tried to prevent her case (disability discrimination) from being submitted to arbitration. She claimed that the agreement was one-sided, requiring only the employee, not the company, to arbitrate claims. She also argued that because the agreement was a pre-printed, "take it or leave it" document, it was a contract of adhesion.
The court noted that although the agreement was an adhesion contract, it was still enforceable. The arbitration agreement was not buried in small type, and was clearly presented to the employee in a stand-alone paragraph that the employee initialed.
In addition, the agreement was not unilateral. It plainly applied to "all disputes," and thus covered any claims by the employer. Moreover, the agreement did not limit the employee's rights under the California Fair Employment and Housing Act, which governed her disability claims.
Finally, the court had no problem with the fact that the agreement required costs of the arbitration to be split 50/50 by the employee and the company. The agreement was written prior to a California Supreme Court case, Armendariz v. Foundation Health Psychcare Servs., Inc., that requires employers to bear all costs unique to arbitration. The court solved this problem by simply severing the cost-splitting provision from the agreement, so that costs unique to the arbitration would be borne by the employer.
Over the past decade, numerous California decisions have been issued denying enforcement of arbitration agreements. This case renews hope for California employers that at least some judges will apply common sense and basic logic when ruling on arbitration agreements.
