New Arbitration Agreement Requirements for Human Resources
After the California Court of Appeal recently upheld an order denying an employer’s motion to compel arbitration, Mayers v. Volt Management Corp. has established new arbitration agreement requirements. Although Volt Management Corp. had arbitration provisions in its employment application, employment agreement, and employee handbook, Stephen Mayers was still permitted to file a lawsuit alleging several discrimination claims under FEHA against his former employer.
The California Court of Appeal confirmed that the provision requiring employees to submit any employment-related claims to arbitration was unenforceable. The Court reached this conclusion on the basis of two key factors. First, the employee was not provided with a copy of the controlling American Arbitration Association rules to which the employee would be bound or where he could find them. Second, the arbitration provisions included the awarding of attorney fees and costs to the prevailing party. This requirement would have put Mayers at a greater financial risk than if he had pursued his claims in court.
Based on the Mayers decision, California employers must certify that their arbitration provisions clearly set forth which arbitration rules will apply, and attach a copy of the applicable rules or set forth where the employee may find the rules. Employers should also make sure that their arbitration provisions do not contain an unlawful prevailing party attorney’s fees clause. For help constructing an Arbitration Agreement, please contact SharedHR.