Most employment agreements typically contain an arbitration clause. This requires that any employment-related dispute that cannot be resolved by direct communication or other informal means is to be arbitrated instead of going to court. Arbitration is a form of private dispute resolution that takes the place of a lawsuit and court trial.

Arbitration has many business-related advantages, including a process much more efficient than the often-prolonged procedures of the courts. Thus, employers naturally favor this alternative. The key is ensuring the terms of the arbitration are enforceable.

Many employers make the mistake of providing an “arbitration clause” in employment applications or contracts without attention to the very specific requirements of California and/or other applicable law. If a court finds that the arbitration agreement is so one-sided in favor of the employer as to be “unconscionable” (i.e., there is no equal bargaining power, no meaningful choice and the terms are grossly unfair to the employee), the court can refuse to enforce the arbitration clause.

Moreover, the applicable California law on unconscionable arbitration agreements continues to change, with major Supreme Court decisions on the subject over the last several years.