A recent ruling by a federal district court in California underscores the importance of a well-drafted and well-communicated arbitration agreement. In Doubt v. NCR Corp., the court rejected NCR Corporation's motion to compel arbitration in an age discrimination and retaliation suit brought by a former NCR employee. Although NCR's Internal Dispute Resolution (IDR) policy provided that all disputes were to be resolved in binding arbitration before a neutral arbitrator, the court refused to enforce the arbitration clause on the grounds that NCR's IDR was procedurally and substantively unconscionable. With respect to procedural unconscionability, the court emphasized the fact that NCR notified employees of the IDR in an email and then posted it on the intranet, without ever asking them to sign it (rather, employees were informed that their continued employment and receipt of benefits would be deemed as a consent to the IDR's terms). The court found the "take it or leave it" manner in which NCR's employees were presented with the IDR as indicative of oppressiveness. In finding the IDR to be substantively unconscionable, the court pointed to the "non-mutuality" of the IDR's arbitration terms, including: 1) the IDR compelled arbitration for claims more likely to be brought by the employee, such as wrongful termination and employment discrimination, but exempted from arbitration claims more likely to be brought by the employer, such as trade secret misappropriation; and 2) the discovery provision in the policy was insufficient because it did not provide the plaintiff, the weaker party, with sufficient discovery to vindicate her claims.
This ruling is an important reminder that in order to ensure the enforceability of a binding arbitration agreement, employers should be careful to consider the method in which the agreement is delivered to employees in addition to its substance.