California: Arbitration Updates
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APPLIES TO All Employers with Employees in CA |
EFFECTIVE As Indicated |
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Quick Look
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Discussion:
Two recent rulings review the enforceability of arbitration agreements. While they involve different scenarios, they highlight the need to regularly review arbitration agreements for compliance with applicable law.
Headless PAGA Claims
On December 30, 2024, in Leeper v. Shipt, Inc., the California Court of Appeal said that an individual could not bring a PAGA claim as a representative without also having their own individual PAGA claim. There, an employee attempted to circumvent their arbitration agreement by filing a PAGA lawsuit purely as a representative, and without making their own individual claim. Ultimately, the Court of Appeal said that the trial court must order the employee’s “individual PAGA claim to arbitration” and must stay the litigation in accordance with state civil procedure law.
Arbitration Agreements in Handbooks
On January 7, 2025, in Nelson v. Golden Queen Mining Co., LLC, a California Court of Appeal said that an arbitration agreement contained in an employee handbook acknowledgment was enforceable. There, the employee handbook acknowledgment said: (1) “I understand that the guidelines contained in the Handbook are not intended to create any contractual rights or obligations, express or implied” and (2) “My signature also acknowledges and certifies that I understand and voluntarily agree to terms of the Company Arbitration Agreement.” The plaintiff argued that these two statements conflicted, which meant that the acknowledgment was too vague to create an arbitration agreement.
Ultimately, the court said there was no conflict between the two statements because the disclaimer relates to “guidelines contained in the Handbook” and the arbitration agreement is not a guideline. However, this determination was made following scrutinization of the acknowledgment terms seemingly justifying a distinction between guidelines, which indicate the handbook policies, and the arbitration agreement which was separately stated with its own heading. Even though this ended in a favorable result for the employer, it highlights the tenuous position for employers who combine an employee handbook acknowledgment with their arbitration agreement. Best practice remains to separate arbitration agreements from employee handbooks.
Action Items
- Review arbitration agreements with legal counsel for compliance.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase