In a July 30, 2012 decision the Second Appellate District of the Court of Appeal ruled that an employee was not bound by the arbitration clause in his employee handbook for a slew of reasons:

  • the clause itself was buried (or as the Court said “not specifically highlighted”) in a lengthy handbook and was not called to the employee’s attention;
  • the employee did not specifically acknowledge the clause or agree to arbitrate, but merely signed an acknowledgment of receipt of the handbook itself;
  • the handbook contained a (relatively) standard clause that it was not intended to create a contract but, the employer also “had it both ways” and retained the rights to unilaterally amend the handbook’s provisions;
  • the employer failed to provide the employee with the specific arbitration rules; and
  • the clause itself was found unconscionable:  procedurally, because the employer did not distribute the rules governing the arbitration to employees and because the issue of arbitration was not negotiable and, substantively, because it required the employee to relinquish administrative and judicial rights and made no express provision for discovery rights.

While this decision points out the pitfalls of this particular factual scenario, it also highlights some nuances.  As courts reinvigorate their scrutiny of arbitration clauses and agreements, due to what this Court called “the increasing phenomenon of depriving employees of the right to a judicial forum,” employers may want to revisit and revise their handbook language.