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Opt-Out Provisions, Handbook Policies, and Arbitration Agreements: When Are Arbitration Agreements Enforceable Under California Law?


It is a common fact. Employment Handbooks can be lengthy. While employment handbooks can contain very valuable information for employees, such as appropriate workplace conduct and policies, some handbooks may also contain agreements for employees to be bound, like an arbitration agreement. If you are an employee who received an employment handbook with an arbitration provision, are you bound by that agreement?

Calif. Court Finds Employer Failed to Prove Existence of Valid Arbitration Agreement with Employee

This was the issue before the California appeals court in Ruiz v. Oakley, Inc., Ct. App., No. G055611 (Sept. 9, 2019). This case involved an employee who sued her employer in court for violations of the California Fair Employment and Housing Act as well as Labor Code Violations. The employer responded to the lawsuit by moving to compel arbitration.

In litigation and in support of the motion to compel arbitration, the employer produced a copy of its employee handbook. The handbook referred to a “dispute resolution agreement” the employee was required to abide by unless they signed an “opt-out provision” within 30 days. The dispute resolution agreement itself purports to describe an arbitration process and states the employer and employee “each agree that” neither party will file a lawsuit “against the other party … that relates in any way to your employment.”

In defense that she did not accept the terms of the agreement, employee explained the employer “handed her a booklet and demanded that she sign the top page, rip out the page, and return it to” the employee. She was given “only seconds” to complete this process and was given “no explanation of its contents.” Nor was she ever informed about any “opt-out” provision.

Based on this evidence, a trial court determined there was no valid arbitration agreement between the employer and the employee. The employer appealed this decision, but the Fourth District agreed with the trial court. Indeed, the appeals court noted that while there was “a lot of verbiage” in the handbook “about an arbitration agreement,” there was no actual agreement.

“Like the trial court,” the Fourth District observed, “we have looked in vain for language such as ‘I agree to arbitrate’ in the exhibits submitted by [the employer].” The handbook language cited above only provides that the employer and employee will not sue each other, and that the employee is required to “abide by the terms of the dispute resolution agreement.” But critically, the appeals court said, nothing in this language actually obligates the parties “to arbitrate.”

Always Read Before You Sign on the Dotted Line

If you have questions about the enforceability of an employment agreement, employment handbook, or arbitration agreement, you should contact a qualified California employment attorney right away.





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* Cathleen Scott is licensed to practice in Florida only.

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