California Court Enforces Arbitration Provision in Employment Application
A California Court of Appeal issued a surprising opinion last week in Roman v. Superior Court (Flo-Kem, Inc.), holding that an arbitration provision in an employment application signed by an employee constituted an enforceable agreement to arbitrate the employee's discrimination and wrongful termination claims.The specific language in the application was as follows: "I agree, in the event I am hired by the company, that all disputes and claims that might arise out of my employment with the company will be submitted to binding arbitration." The application did not contain any substantive rules governing the arbitration process, instead stating simply that the arbitration would be conducted under the rules of the American Arbitration Association. The employee initialed the arbitration provision in the application.
Following the employee's termination later the same year, the employee filed suit alleging discrimination. The employer demurred to the complaint without raising the issue of arbitration, and also served written discovery followed by a motion to compel. Before hearing on the demurrer and motion to compel, the employer filed a motion to compel arbitration. The employee opposed the motion to compel arbitration, arguing that the arbitration agreement was unenforceable, on the grounds that it was procedurally and substantively unconscionable. The employee also argued that the employer had waived any right to compel arbitration by participating in the litigation. The court rejected all of the employee's arguments. Of note, the court held that the agreement was a mutual agreement to arbitrate, even though the agreement stated "I agree" to arbitrate. The court also held that the agreement's lack of any substantive rules governing the arbitration process did not render the agreement substantively unconscionable. The court held that the agreement's incorporation of AAA rules sufficed to satisfy minimal standards of fairness in the arbitration process. Finally, the court held that the employer's participation in the litigation prior to moving to compel arbitration, did not constitute a waiver of the right to arbitrate. The court held that the employer moved to compel arbitration prior to any hearing on the demurrer or motion to compel discovery, and the fact that some written discovery had been exchanged was insufficient to constitute a waiver because even in arbitration the parties would have to respond to some written discovery.
The Roman case is an interesting one, given the recent trend of California courts to closely scrutinize and refuse to enforce employment arbitration agreements. Notwithstanding the result in the Roman case, employers are cautioned against relying on the same type of agreement utilized by the employer in Roman, and are further cautioned against affirmatively participating in litigation prior to seeking enforcement of an arbitration agreement because it is far from clear whether another court would reach the same result on the issues of enforceability of the arbitration agreement and waiver.