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Good news: Properly worded arbitration agreement valid in California

by on
in Discrimination and Harassment,Human Resources

A federal court has ruled that an arbitration agreement—even an admittedly oppressive one—can be enforced in California if it’s drafted broadly enough.

Recent case: A busboy who worked for a seafood restaurant sued for racial harassment and disability discrimination after he was terminated. He had signed an arbitration agreement when first hired, which was a condition of employment.

The agreement said both employee and employer agreed to arbitrate any “disputes relating to their employment relationship or the termination of that relationship that are not resolved informally” or at the EEOC or the California Department of Fair Employment and Housing. In short, the agreement allowed the EEOC or the state agency a first crack at solving the problem.

The agreement also specified that the arbitration had to follow the National Rules for the Resolution of Employment Disputes and the arbitrator had to be neutral.

The court said the agreement was legal under the California Supreme Court’s most important arbitration decision.

That decision required a neutral arbitrator, a written decision, discovery, reasonable employee costs and no limits on the award employees can receive. It didn’t matter that the agreement itself was a condition of employment and therefore oppressive. (Cornejo v. Spenger’s Fresh Fish Grotto, No. 09-055564, ND CA, 2010)

Final note: Always have an attorney review arbitration agreements, especially if you operate in several states. Each state may have different requirements and you’ll need to tailor the agreement accordingly.

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