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Arbitration agreement should stand on its own, separately from employee handbook

by on
in Employment Law,Human Resources

California law makes it difficult for employers to solve workplace disputes through arbitration. Even if an arbitration agreement is fair and evenhanded enough to meet California standards, employers still have to clear the hurdle of showing that employees knew about the policy and agreed to it.

That means making sure that employees actually read the document—or at least sign off that they did or had the opportunity to do so. Without a signature on the dotted line, chances are a court interpreting California law will throw out the agreement before even considering whether the arbitration process was in fact valid, legal and fair.

The best approach is to have employees read the agreement and sign on the actual document, indicating they have read it, understand that it’s binding and agree to the terms. Then keep the original, signed document in the employee’s personnel file.

Recent case: Sujla Maharaj worked for California Bank and Trust for just over 30 years until she was terminated. Claiming she was fired while on protected medical leave, she sued under the ADA, the FMLA, the California Family Rights Act and the California Fair Employment and Housing Act.

The bank asked the court to dismiss the case and allow the discharge dispute to go to arbitration.

It argued that back in 2007, it implemented mandatory arbitration for all employees, including Maharaj. The arbitration agreement was included in an updated employee handbook. It specified that all past, present and future claims arising out of employment would be subject to binding arbitration under the American Arbitration Association code.

Maharaj did sign an acknowledgment that she had reviewed the handbook, but did not sign on the dotted line on the page that described the arbitration program and specified that it was a binding condition of her continued employment. She testified that no one told her about the arbitration clause.

Plus, she said the manager who gave her the handbook asked her to sign only the first page, and not anywhere else.

She also said the manager immediately took the handbook back and didn’t give her a chance to review it in any detail.

The court said Maharaj in effect never agreed to the arbitration clause. Therefore, the court didn’t even need to decide whether the terms were valid. It simply didn’t apply to Maharaj at all. (Maharaj v. California Bank and Trust, No. S-11-315, ED CA, 2011)

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