Over the last twenty years, it has become increasingly common for companies to require their employees to sign arbitration agreements. These agreements require that all disputes related to someone’s employment (including claims for discrimination or harassment) be resolved in private arbitration, rather than in a courtroom, which is open to members of the public. And, typically, these arbitration agreements provide that the decision of the arbitrator is not subject to judicial review, which means that the decision of the arbitrator is final, even if the arbitrator misinterpreted the law, or misunderstood the facts.
Typically, an arbitration agreement is presented to someone at the time that they are hired (either as part of a longer employment agreement, or as a separate document). But, sometimes an company decides to ask current employees to sign an agreement. In either case, people often wonder: do I have to sign the agreement? Sadly, if signing an employment agreement is a condition of employment — regardless of whether you are about to join the company or you are already an employee — then you have to sign it if you want the job. Under California law, as well as the law of every other state, an employer can refuse to hire you (or can terminate you) if you refuse to agree to arbitrate all of your employment disputes.
At the same time, California law requires that an arbitration agreement must include certain terms to be enforceable. For example, the employer must pay all of the costs of arbitration, including the fees for the arbitrators, which can easily be tens of thousands of dollars. And, an arbitration agreement cannot limit an employee’s rights to “discovery” or the damages that can be recovered. Moreover, in recent years, state and federal courts in California courts have refused to enforce provisions in arbitration agreements that prevent employees from bringing class actions. However, not a single court in California has held that it is improper to require an individual to sign an arbitration agreement.
