California: Employees Can Provide Implied Consent to Arbitration Agreements Over Their Own Objections

In Diaz v. Sohnen Enterprises, the California Court of Appeal stated that an agreement to arbitrate employment disputes was formed by implied consent following notice to the employee. There, the employer notified its employees that it was changing the terms of its dispute resolution agreement, including requiring arbitration of all claims. A copy of the agreement was provided to employees, the terms were discussed in a staff meeting in English and Spanish, and the employees were told that continuing to work for the employer would constitute acceptance of the agreement, regardless if the agreement was actually signed. An employee subsequently indicated her refusal to sign the agreement but intended to continue working. She then filed a discrimination lawsuit against the employer.

Under the facts, the Court of Appeal stated that a binding arbitration agreement was formed. Because the employment relationship was at-will, the employer could “unilaterally change the terms of [the employee’s] employment agreement, as long as it provided [her] notice of the change.” Moreover, the court acknowledged that it is settled California law that, “when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement.” This is apparently true even where the employee voiced an objection to the agreement, yet continued her employment. Notably, the court also stated there was no evidence “of surprise [or] of sharp practices demonstrating substantive unconscionability.”

While this is encouraging for employers, the case highlights the need to have sufficient evidence to support a claim that an implied agreement to arbitrate was formed. Employers should review appropriate steps with legal counsel before taking this approach to ensure enforceability.