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Operate in several states? Beware arbitration pacts referencing states other than California

by on
in Employment Law,Human Resources

Employers that do business in several states often have a single employee handbook covering all workers at all locations. If that de­­scribes your organization, be careful about how you handle details like arbitration agreements.

Watch for potential problems such as a choice-of-law clause that refers to another state’s statutes even though employees may be working in California. That can cause needless complications later.

Recent case: Hartwell sued, claiming she was unlawfully fired from her California job after requesting a reasonable accommodation for her disabling sleep disorder.

Her former employer, a large international law firm, wanted the case moved to arbitration because Hartwell had signed an arbitration agreement for all claims arising from her employment.

The agreement didn’t specify any particular laws, but included a clause that said the agreement was governed by Massachusetts state contract laws.

A California court, applying Massachusetts contract law, said the agreement was invalid because it didn’t specify which laws it covered. Now the case will go to trial, not arbitration. (Harris v. Bingham McCutchen, No. B240522, Court of Appeal of California, 2nd Appellate District, 2013)

Final note: Sometimes, trying to use arbitration leads to more litigation, not less. That’s particularly true if you operate in several states and want to use a standard arbitration agreement. Before doing so, have an attorney in each state review the agreement. It may be best to have multiple agreements, one for each state.

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