Geonetta & Frucht, LLP
By: Geonetta & Frucht, LLP

What is an Arbitration Agreement?

When employment disputes arise, business and employment lawsuits can take a long time and a lot of money to resolve. In many such legal cases, after all of the time spent in court, attorney fees, and challenges between employer and employee, both parties walk away feeling unsatisfied. For this reason, some employers ask their employees to sign arbitration agreements.

Arbitration is the process of handling an employment dispute and resolving matters outside of courtroom settings by hiring a neutral third party to review the situation. After the arbitrator has looked at the evidence of the employment dispute, the employer and employee must agree to accept whatever decision the arbitrators render. Then, the courts will enforce the arbitrator’s judgment in a similar fashion to the way that they enforce their own judgments. There will be no jury involved. And, in most circumstances, the decision of the arbitrator is final, with no opportunity for appeals.

Even in situations where arbitrators make an error in their rendering of their decisions, both employers and employees usually have to accept the arbitrator’s decision regardless.

In employment situations, it is the employer who will ask their employee to sign an arbitration agreement. With such an agreement in place, arbitration will be the method for resolving a dispute should such a dispute ever arise.

What Are the Rules of Arbitration in California?

Arbitration is a type of alternative dispute resolution (ADR) that is considered easier and cheaper than civil court litigation. However, arbitration is similar to court litigation in a few ways. Both the employer and the employee may be represented by lawyers, witnesses may be called for questioning, information will be exchanged, and a final hearing will be held before the decision maker.

There are notable differences, however. The hearings typically occur in a conference room, the legal right to obtain documents is more limited, and the assigned arbitrator is often a lawyer, retired judge, or, in some cases, a licensed arbitrator.

The rules for arbitration in California include:

  • The arbitration process must select a neutral arbitrator.
  • The arbitrator must be given the legal right to conduct adequate discovery.
  • The arbitrator is required to issue their written opinion on the reasoning behind their decisions.
  • There is a mutual obligation between employee and employer to use the arbitration procedure for their employment dispute claim.
  • The average reader has the right to issue any award that could be issued by a court order.
  • There is no limitation on the statute of limitations provided by California law.
  • This arbitration must not cost employees anything more than an employment lawsuit would cost in court litigation.
  • If an appeal process is provided in the arbitration agreement, this appeals process must be fair and equal to both employees and employers.

There are many reasons why your employer may prefer the arbitration process over the prospect of civil litigation. If you are uncertain about how to proceed in arbitration, or the arbitration process has already begun, it is highly recommended that you retain professional legal counsel from experienced employment attorneys. Please contact our law firm to schedule your free case review today.

Are Mandatory Arbitration Agreements Legal in CA?

AB 51, which initially took effect in January 2020, prohibited most types of mandatory arbitration agreements for employment law in California. However, in February of 2023, A new court decision again allowed mandatory arbitration agreements to take effect in the state. Now, California businesses, companies, and employers who employ workers and seek job applicants subject to the Federal Arbitration Act (FAA) can once again require said workers to sign an arbitration agreement as a condition for employment.

The new court decision reinforces federal policy that favors arbitration and permits employers whose workers are subject to the FAA to require arbitration agreements to be signed in order for a worker to secure a job. There are, however, express exceptions for business contracts for classes of workers engaged in foreign or Interstate commerce.

Both employees and employers faced with signing arbitration agreements in their employment contracts should consider working with highly skilled employment lawyers for legal guidance. An improperly worded or unfair arbitration agreement may be unenforceable under California law.

Are Arbitration Agreements for Sexual Harassment and Assault Claims Enforceable Under California Law?

Employers cannot require arbitration for any claims concerning sexual assault or harassment in the workplace setting.

Arbitration agreements that prevent an employee from filing a sexual harassment or sexual assault lawsuit in court are unenforceable and void in California. The belief, according to President Biden, who signed the bill into law, was that arbitration shielded perpetrators and silenced survivors, enabling businesses to sweep ugly business under the rug.

If a pre-existing arbitration agreement states that sexual harassment and sexual assault claims must be arbitrated, employees have the right to challenge those agreements. Additionally, employers should revise their agreements accordingly to ensure that they exclude claims related to sexual harassment or sexual assault.

Schedule a Free Consultation with Experienced Business Lawyers Today

Arbitration is widely considered one of the preferred methods for resolving conflicts between employers and employees facing employment disputes. It is typically faster, cheaper, and less stressful for both parties. Is every arbitration agreement enforceable, though? No. Certain requirements apply to every situation, and some arbitration agreements are written improperly, rendering them invalid. Additionally, employment contracts in California must no longer require arbitration for sexual assault and harassment claims that arise from workplace misconduct.

The legal landscape for employment law is ever-changing. Mandatory arbitration agreements are no longer banned in California and may be enforceable under the law. Whether you are considering signing an arbitration agreement or are going through the arbitration process, you should seek professional legal representation from experienced employment attorneys.

Our law firm has extensive experience in employment and business law in the state of California. We would be proud to represent your legal rights in any employment disputes, arbitration cases, and negotiating new business contracts. To discuss your case in more detail, please contact our law firm to schedule your free initial consultation today.

You can contact our Oakland, CA, law offices at 510-254-3777. Alternatively, you may reach our San Francisco law office at 415-433-4589.

Geonetta & Frucht, LLP
By: Geonetta & Frucht, LLP