Arbitration Agreements and Employment

EMPLOYMENT ARBITRATION AGREEMENTS:  Good news for employers, at least those outside of California   The Case & Ruling: Rent-A-Center v. Jackson, the United States Supreme Court held that arbitration agreements are contracts, and, like other contracts, should be enforced according to their terms which terms may include a provision allowing an arbitrator to determine that arbitration is appropriate.   The Issue: whether an arbitrator is empowered to determine the validity of a clause within an arbitration agreement giving the arbitrator the right to determine if the matter can be submitted to arbitration. Facts: The agreement granted the arbitrator exclusive authority to determine arbitrability.   The Court stated that this provision must be enforced just as is the case with other similar provisions such as those that require that all disputes be submitted to a particular ADR provider or that arbitrations be held in a certain city.   The court calls these types of provisions “gateway provisions.”  Another example of a “gateway provision” would be a determination of whether the agreement or a clause in the contract is unconscionable and therefore unenforceable. The sole caveat is that the parties’ intention to delegate the decision to the arbitrator be clear and unmistakable.   The Court did suggest, that the result might have been different had the employee expressly claimed that the delegation provision itselfwas unenforceable due to unconscionability.  Unconscionable generally applies if a court determines that due to the uneven bargaining positions of the parties one was forced to accept either the entire agreement or particular clause which if enforced would be oppressive, overreaching and or shocking to the conscience.   California: It remains to be seen whether a California court interpreting the California Arbitration Act (CAA) would reach the same conclusion as the US Supreme Court. The California Supreme Court in Armendariz v. Foundation Health Psychare Services, Inc. remarked that arbitration agreements are generally imposed on employees with no power to bargain over their terms. As such, the California Supreme Court would likely insist that any “gateway provision” be determined by a court—not by an arbitrator—even if the arbitration agreement delegated the decision to the arbitrator.