When it comes to employee arbitration agreements, more may not be better

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Contributors

The courts, over the past few years, have substantially refined the concept of unconscionability as it relates to employer-employee arbitration agreements. That’s great for employers presenting new employees with arbitration agreements, because both parties can feel more confident of the agreements’ legality. But it has created problems for employers with longer-term employees, whose arbitration agreements include provisions that the courts have now determined to be unconscionable—in some cases invalidating the agreement altogether. What is an employer in this situation to do?

The obvious choice, and one chosen by numerous employers, is to present their longer-term employees with new and improved arbitration agreements. Some employers have required employees to execute a new agreement with each evolution of the law, with the result that some long-term employees have been required to sign three or more arbitration agreements over the course of their employment. This can create a new problem if the employee is pressured to execute the agreement without review, without the opportunity to read and understand it or discuss it with counsel of the employee’s choosing, or, worse, without being told what it is. If that happens, there is a reasonably likelihood that a court will find that the agreement was procedurally unconscionable, and therefore invalid (See, OTO, L.L.C. v. Kho, 8 Cal.5th 111). To avoid this problem, employers should take care to clearly inform existing employees that they are being asked to execute a new arbitration agreement, and should give them a reasonable time to review and understand it.

But it is not only over time that some employers wind up with multiple arbitration agreements with individual employees. Some employers have employees execute multiple agreements within minutes of each other during the intake process. Unless the agreements are substantively identical in all material respects, if an employment dispute later arises, the employer will be left to argue about which agreement applies, and the risk that the court will conclude that none of them do. One solution to this is to ensure that all arbitration agreements given to an employee for signature at the time of hiring are identical. A far better solution is give the employee only one.

And, of course every arbitration agreement provided by an employer should be written in plain English and broken into readable paragraphs, preferably with appropriate headings signaling with what subject the following paragraph or paragraphs deal.