California law now allows workers and job seekers to refuse to accept their employer’s arbitration agreement as of 2020. Your employer cannot fire you or take any other adverse action against you if you decline. Employees must, however, normally abide by any prior arbitration agreements.
Employers and employees that have signed an arbitration agreement agree to settle any disputes through private arbitration rather than through a civil court case. Usually, when a new employee is entering the company, their documentation includes an arbitration agreement. The majority of the time, your business won’t ever tell the employee that they must arbitrate any conflicts, and even fewer will explain what it implies.
What Exactly is an Arbitration Contract?
A contract stating that any disputes between an employee and employer must be resolved by private arbitration, not a California court, is known as an employment arbitration agreement. Such agreements are rarely found on their own documents and are usually included in a bigger agreement. Arbitration agreements can be brief and tucked away in a longer document.
Alternative dispute resolution includes arbitration. In comparison to civil court litigation, it is a simpler, more efficient process. The fact that it is typically less expensive is another factor that appeals to employers. In the following aspects, arbitration and lawsuit are comparable:
- Both the employer and the employee may have legal representation
- The parties share information with one another
- It is possible to call and interrogate witnesses
- A decision-maker is the subject of a hearing
Why do Employers Insist That Workers Sign Arbitration Contracts?
Employers favor arbitration over civil action for a variety of reasons. Most importantly, arbitration is less expensive than civil litigation. They typically move forward considerably more rapidly and are consequently less expensive because they save so much on legal bills. Additionally, the parties share information considerably more swiftly during the discovery phase. Since there are typically fewer documents to analyze and consider, the process can move along more swiftly.
Selecting the arbiter is a crucial component of the arbitration procedure’ flexibility. In contrast to civil court proceedings where it is mandatory for them to comply with the judge, arbitration allows the parties to select an arbitrator who is knowledgeable in the subject area of the dispute. This has the downside that employers frequently attempt to select arbitrators who they believe will be helpful to their case.
Which Laws Apply to Arbitration Contracts?
Two significant laws, one produced by the California legislature and the other by the federal government, control arbitration:
- The California Arbitration Act (CAA)
- Act Federal Arbitration Act (FAA)
Each statute’s particular criteria might vary, and disagreements between federal and California law are common. State laws are superseded by federal law, and any contradictions will be resolved in favor of the federal law.
What Kinds of Disputes are Eligible for Arbitration?
Any legal dispute that results from the employment connection between an employer and employee may be subject to arbitration agreements. The following claims are examples of those that could be arbitrated:
- Back pay issues in the workplace
- Charges of harassment
- Retaliation, discrimination
- Wrongful termination
- Litigation based on failure to promote
- Personal injury lawsuits connected to the workplace are all common
This is merely a representative list; a legal arbitration agreement should be addressing a resolution for many other types of conflict between an employee and an employer.
When is a Clause Requiring Arbitration Enforceable?
Arbitration agreements must follow specific guidelines in order to have support by federal and California law. These conditions must be met for an arbitration agreement to be enforceable. This means that an employee will not be able to file a lawsuit; rather, they must arbitrate problems in accordance with the contract.
In California, all agreements must:
- Be reasonable
- Have support by a thought
- Written and signed without fraud, coercion, error, or incapacity
Conscionability is a legal term that describes fairness in contract discussions. An agreement’s terms are deemed unconscionable if they unjustly favor one party over another, particularly if that party is regarded as the more powerful one, such an employer.
Do not hesitate to contact us if you have any questions concerning California’s arbitration agreement rules or if you would want to privately discuss your case with one of our knowledgeable California employment attorneys. You can reach us at 310-933-5171