Don’t Have an Arbitration Agreement in Your Handbook? Better Re-Think That.

It seems that every other day a court decision comes out regarding whether arbitration agreements in the employment setting are enforceable.  Many courts have seemed to look for ways to invalidate them, while other courts have said they apply and bar an employee from enforcing their claims in court rather than through arbitration.

Because of the back and forth decisions on whether these agreements are valid, some employers have elected to leave them out of employment contracts or employee handbooks. Given the number of cases that have recently said they were valid, employers should re-think their positions on arbitration agreements and include them if they currently do not.  Just last week, the appeals court covering San Francisco said that an arbitration agreement was enforceable against the employee even though there was a carve out that allowed the employer to go to court if it believed the employee had taken confidential information.  The court found that exception did not invalidate the entire arbitration agreement and directed that the employee proceed through arbitration rather than through the court process.

We have long recommended that employers include arbitration agreement in the agreements they have their employees sign at the time of hire and when handbooks are updated.  Generally costs are reduced in arbitration and the potential uncertainty  of having a jury decide the employee’s claims is a significant benefit of an enforceable arbitration agreement.

While there has been the occasional frustration when a court elected not to enforce a carefully drafted arbitration agreement, with recent decisions trending more toward enforcing them, we reiterate our view that they should be included and updated periodically to keep up with recent trends.