In a recent opinion affirming an arbitrator’s judgment in favor of an employer on various employment law claims, the California Court of Appeal held that an employee agreed to arbitrate all claims against her former employee when she signed an arbitration policy contained in an easy-to-read document distinct from any other document the she signed at the time of her hiring.  In doing so, the Court clarified important aspects of the test for enforcing an arbitration agreement signed by a company’s employees. 

In Serafin v. Balco Properties Ltd., LLC, the plaintiff, Serafin, filed a state court action against Balco, her former employer, asserting causes of action for wrongful termination, harassment, and defamation.  Balco moved successfully to stay the lawsuit pending the completion of binding arbitration, based on an arbitration agreement that Serafin signed when she was hired.  After the arbitrator found in Balco’s favor on all issues, Serafin appealed the state court’s finding that her claims were subject to arbitration.  Serafin argued, among other things, that her signature acknowledging Balco’s arbitration policy did not constitute consent to arbitration, relying on cases in which courts found that the circumstances surrounding an employee’s written agreement to an arbitration clause did not establish that the agreement was knowing, voluntary, and fair.

The Court of Appeal rejected this argument.  It distinguished the case from those in which courts found that an arbitration agreement was not enforceable where it was one of many policies contained within an employee handbook, nor where disclaimers in such a handbook made clear that the employer did not intend for it to have the force of contract.  Unlike in those cases, Balco’s arbitration policy was set forth in easy-to read language, in a standalone document distinct from the company’s employee handbook.  The document was labeled “MANDATORY ARBITRATION POLICY” in capitalized lettering, and, in contrast to a policy intended not to be binding, stated that all employees would be required to “comply with” the policy.  Finally, as part of Balco’s employee orientation process, a human resources manager explained the document and offered to answer any questions about it.  As such, the Court held, it was “a case where every effort was made to call Serafin’s attention to the arbitration policy she was agreeing to at the time she signed the acknowledgement.”

This case assures employers that California courts will uphold a clear arbitration agreement governing employment-related disputes, but should also remind employers to take steps to ensure that its employees’ agreements to arbitrate are knowing, voluntary, and fair.

A copy of the decision in Serafin v. Balco Properties Ltd., LLC, can be found here.