Many employers desire that their employers be subject to mandatory arbitration agreements with class-action waivers on employees although California discourages such agreements. Some employees refuse to sign arbitration agreements. So, what can an employer do with employees who refuse to sign? One solution is to dismiss the employees who don’t sign the arbitration agreement. However, a dismissal for refusal to sign an arbitration agreement could be challenged as a wrongful termination in violation of public policy. Fortunately, there is a case, Lagatree v. Luce, Forward, Hamilton & Scripps, in which the Court of Appeal decided, since public policy favors arbitration, an employer can lawfully dismiss an employee for refusing to sign an arbitration agreement presented as a condition of employment. However, such an approach poses practical problems. An employer may not want to dismiss each such employee, and selective enforcement may generate discrimination claims.
Another option available to employers is to live with the employee’s choice after the employee is educated about the benefits of arbitration. This path is often chosen where the employer seeks to obtain a voluntary arbitration agreement. Even so, California courts are prone to view employer comments about arbitration as inherently coercive. Therefore, to demonstrate the voluntary nature of the agreement, some employers also offer an extra payment or benefit to those employees who do sign the arbitration agreement. The problem with living with the employees’ choice for employers is, should an employee decide not to sign, the employer is left only with the options to terminate the employee or continue the employment.
An alternative to obtaining the employees’ signatures to an arbitration agreement is to create an arbitration program as a condition of employment, which does not require an employee’s signature for proof of consent. Instead, employee consent is proven by distribution of the arbitration program with a notice that employees will accept the arbitration agreement through continued employment. These agreements are generally enforceable as to at-will employees, so long as they are not unreasonably one-sided.
Due to the lack of settled law many employers will choose not to terminate an employee who refuses to sign an arbitration agreement. Instead, as a business decision, the employer may quantify the risk of class-action litigation and that some employees’ claims will not be subject to arbitration.
Whether you are considering an employee arbitration program or are confronted with a potential claim that may involve an arbitration provision, you should promptly contact your legal counsel.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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