California court finds arbitration clause buried in employee handbook invalid
In Sparks v. Vista Del Mar Child and Family Services, a California Appellate court recently decided that an employee who sued his former employer was not bound by an arbitration clause in a lengthy employee handbook that was not called to his attention and to which he did not specifically agree.
Sparks, the employee, worked for Vista Del Mar Child and Family Services. Vista terminated Sparks’ employment. Sparks sued alleging he was terminated because of complaints he made about practices that, he asserted, violated federal and state reporting and compensation laws. Vista petitioned to compel arbitration based on an allegedly mutual arbitration policy in the employee handbook that was distributed to all employees.
The court decided that in order to determine an employee has given up her right to assert an employment-related claim in court, there must be more than a boilerplate arbitration clause buried in a lengthy employee handbook given to new employees.
In addition, the employee handbook provided that it could be amended unilaterally by the employer, which made the arbitration agreement illusory, or, in other words, deceptive. The court reiterated that, under Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, adhesion contracts in the employment setting are typically unenforceable. An adhesion contract is one that is so imbalanced in favor of one party over the other that there is a strong implication it was not freely bargained.
Employees represented by a union, a collective bargaining representative, are unlikely to be faced with an arbitration clause like this buried in an employee handbook because of protections against this provided for by the collective bargaining agreement between the union and employer. However, it benefits all employees and their advocates to be aware that these types of arbitration clauses are out there, and that they may not be valid.