Good morning (er, afternoon?), and welcome to the latest edition of my Monday Morning Briefing.   We continue to pray for peace in the Ukraine, and I can’t for the life of me figure out if Mayor Garcetti signed the order dropping the LA vaccine mandate.  But like I said last week, nobody cares anymore.  So we are officially NOT talking about COVID this week.  Wow. 

QUESTION –  DO WE INCLUDE ARBITRATION AGREEMENTS IN EMPLOYEE HANDBOOKS?  ONE LAWYER’S OPINION:

The recent California appellate decision of Mendoza v Trans Valley Transport invalidated an arbitration agreement that was included in an employee handbook and sent a few of you to question the wisdom of why we are still including arbitration clauses in the employee handbooks we prepare for our clients.  Indeed, many of my fellow employment lawyers immediately responded to the Mendoza case with cautionary articles, reminding their clients and the public at large why they have always taken the position that arbitration provisions should only be found in standalone agreements.   Indeed, for years, clients have come to us claiming that the “other” employment lawyers they know all tell them that arbitration clauses in handbooks will not be enforced. 

And my response to everyone when they ask me this question is, yes.  A standalone agreement is probably the better option to enforce in court.   And it would be fine for those clients to adopt as an overall practice so long as they can promise me that they are PERFECT when it comes to getting those separate agreements signed (with a wet signature) upon hire.   And then promise that they will be perfect and ensure that those agreements will always, ALWAYS remain in the personnel file, and ensure that those personnel files will NEVER go missing.  EVER.   Because we need that agreement – at all costs. 

Here is why that little agreement causes me so much distress.   I will get a call or email from your company that you have a new lawsuit.   Or perhaps we find your name listed in a CNS report that you have a new lawsuit.    And let us say that the lawsuit is for a wage and hour class action, which could be alleging damages going back four years, and even with a small company, easily involving a seven figure assessment, plus attorney’s fees to defend.  This litigation could last years, and it could threaten the viability of a small business, even just to defend it.    But I know that your company has had us prepare your handbook for many years, and that in our handbook, we have an arbitration agreement with a class action waiver.  It has been in there for over a decade now.  So all we need to do is make sure that whatever employee has sued you has signed that handbook JUST ONE of the years that they have worked there.  Because if we can do that, just find that one signature for one year, that class action waiver will be your golden ticket to make that entire class action GO AWAY.  That huge lawsuit will essentially dissolve down to one case, in arbitration, with just this one employee, which usually can be resolved for a few thousand dollars.  THAT is how important it is to find this one piece of paper.

Now, let’s say you have this arbitration agreement only signed once, as a stand alone agreement, when the employee was hired.  But oops, maybe it went missing.  Or maybe the manager forgot to get that agreement signed.  Or maybe the employee didn’t sign it; they signed the handbook, but not the agreement for some reason. I mean, it was seven years ago, so who knows why?  Who remembers?   Or maybe we lost the file.  I cannot tell you how many times my clients find PIECES of employee files, even when files are being kept online.  Or some documents are signed and others are not.   Documents go missing.  Files go missing.  Even when you think you have great systems in places, no systems are perfect.

However, when you include the arbitration agreement in the handbook, and the handbook is updated regularly and distributed every year, or at least most years, we are more likely to at least get one handbook acknowledgment over the course of an employee’s lifetime at a company.  And that is all I need.  And MOST times, when my clients have been handing out our handbooks, year after year, and an employee has worked there for a few years, we find we have at least one signed handbook acknowledgment.  Sometimes that is all we have.  But we have one.  And that is all we need.   And we go into court, make our motion, and we get our class action dismissed. 

And you ask, how often are we successful getting class actions dismissed with the arbitration agreement included in the handbook instead of as a standalone?  All the time.  We make these motions successfully all the time, based on arbitrations included in employee handbooks.  Because every time a case like Mendoza comes down from the California courts, we learn something about what the courts want to see, and we adjust our handbooks a little.  And we will, here, too.  But we have been doing this now for decades, ever since arbitration agreements were permitted in California, back in the early 2000s, which is why you have us prepare your handbooks.  We are pretty good at what we do. 

Now, we have been giving you an option to offer a standalone arbitration agreement along with or in place of the arbitration agreement in the handbook for years, and we can continue to do that for you.  One thing that the Mendoza court did make clear – having a standalone, unsigned arbitration agreement alongside arbitration in a handbook is problematic.  So if you are not going to be diligent about getting your standalone agreements signed, do not put them out there.   And don’t forget that we won’t be able to have arbitration as an option at all with sexual harassment and sexual assault cases arising after March, 2022.   We are always here to talk to you about the ways in which you may or may not want to introduce arbitration into your workforce.

Arbitration is a controversial issue, with many people feeling it is still a way to suppress voices.  I do not feel arbitration is a panacea, and it has gotten very expensive for employers lately.  Unfortunately, in California, class action litigation is handled so differently, especially with the addition of PAGA, that until and unless it is fixed, class action waivers feel like the only way small businesses have to fight back.  It’s like a runaway train, and they just keep adding new violations to the Labor Code to make matters worse.   The entire system needs an overhaul, and I am afraid I do not see that coming any time soon.  In the meantime, as always, thank you for the indulgence of this platform. 

Sorry for the lateness of this Briefing – dental crises and client needs drove the order of the day.  Hope to be back on track next week.  In the meantime, Happy Pesach and Easter for those who celebrate!  I for one am enjoying the longer Spring days.  Hope you are as well. 

#StandWithUkraine