Two recent court decisions provide valuable lessons for California employers. The first is a $27 million award in favor of a nurse who raised safety concerns against her employer, Dignity Health, and convinced a Los Angeles jury she was fired in retaliation. The second is an appellate decision invalidating an employer’s arbitration clause based on language found in a confidentiality and inventions agreement distributed by the employer.
Let’s break this down.
Weisfeiler v. ByteDance Inc. (Cal. App. Ct, June 2025). Reviewing the arbitration decision first, as it’s the easiest issue to address. In an unpublished opinion on June 16, 2025, a California state appellate court rejected ByteDance Inc.’s attempt to force a former employee to arbitrate her pay discrimination claims. The appellate court affirmed the trial court’s ruling that the underlying arbitration agreement was unenforceable for requiring her to arbitrate claims while preserving all the employer’s legal rights and remedies.
The three-justice panel of California’s First Appellate District affirmed a trial court’s order denying ByteDance’s bid to compel arbitration, holding that the arbitration agreement was “substantively unconscionable” because it required only the employee to submit disputes to arbitration and to waive her right to a jury. Instead, the arbitration clause, which was contained in the company’s technology and inventions agreement, expressly preserved all of ByteDance’s rights and remedies, “including its right to seek injunctive and equitable relief in court without posting a bond and establishing the necessary elements for injunctive relief.”
As you all know, we include our arbitration agreement in employee handbooks, and we also provide the option for the arbitration agreements to be signed separately or attached to offer letters, as was done here. But we also find arbitration clauses included in other employment related agreements, such as non-disclosure or confidentiality agreements, or “technology” and invention agreements, often drafted independent of our arbitration agreements. Sometimes, like here, these agreements retain the right of the employer to seek court action to enforce its rights against the employee, which can be inconsistent with arbitration. To the extent that the employer can still initiate a court proceeding to enforce its rights, but require employees forego their rights to a jury trial, the arbitration clause will be deemed “substantively unconscionable” and unenforceable.
There are ways to draft arbitration agreements to preserve both parties’ rights to seek “provisional remedies” without compromising the arbitration agreement, but that was not done properly here. And as you all know, sometimes other attorneys draft these agreements and clauses, with unintended consequences.
This is just another reminder to have us review ALL employment related agreements signed by your employees, in order to preserve the integrity of these crucial arbitration provisions. We need to ensure that all of your written agreements play well together. Another reason for us to conduct these audits I keep mentioning.
Valla v. Dignity Health Et Al. (Superior Court of California, County of Los Angeles, June 2025). The second case involves a recent jury verdict in a single plaintiff wrongful termination case. This past week, a Los Angeles jury found in favor of a nurse and awarded her $27 million against her former employer, Dignity Health, finding that she faced retaliation after raising safety related concerns regarding patient care. Obviously, if indeed this happened, it was outrageous conduct on behalf of the employer. And the large verdict reflects the size of an entity such as Dignity Health.
But the decision raised several red flags for me.
First, California has changed the procedural rules regarding these retaliation or “whistleblower” cases, making it much easier for employees to prevail. For example, if an employer takes adverse action against an employee within 90 days of raising protected concerns about their employment, the action is presumed to be retaliatory. That shifts the burden to the employer to prove their actions were appropriate.
California case law also does not help us here. The courts have held that even if an employee raises invalid complaints, they can prevail on a retaliation theory, so long as the employee has a good faith, reasonable basis for making the complaints (Yanowitz v L’Oreal USA, Inc, 36 Cal.4th 1028 (2005)). To make matters worse, the California Supreme Court recently ruled that the plaintiff simply needs to show that retaliation for whistleblowing was a contributing factor in the adverse action the employer took against them (Lawson v PPG, 12 Cal. 5th 703 (2022)).
So yes, retaliation cases are particularly messy. But even more worrisome is the frequency with which our employees are raising workplace complaints.
Enter AI. I know I have written before about our employees’ growing reliance on ChatGPT. But even in the few months since I wrote about this issue last, the prevalence of AI in the workplace has skyrocketed. Employees, emboldened by the ability to better articulate their concerns, are increasingly sending us long winded, verbose AI drafted emails. Sometimes, they raise valid issues. Sometimes, these are employees managing performance challenges, who are trying to shift the narrative. As someone recently pointed out to me, AI is unduly supportive. It will convince its human author of the legitimacy of their position.
This phenomenon creates substantial hurdles for employers already facing a workforce that often fails to take accountability for its performance issues. As a society, we are just starting to grapple with the legal, ethical, and moral challenges that AI raises. But we cannot ignore its growing presence in the workplace.
So, what can we do? First, as always, make sure you are addressing any valid safety issues raised by employees. It’s very possible that Dignity Health was engaged in unsafe patient care, and this nurse may well have been terminated for raising awareness. Let’s face it, as tough as California laws are on employers, sometimes employers do bad things and deserve to be held accountable.
But if you investigate the claims raised by employees and determine they lack merit, document it. Meet with the employee and put your findings in writing. Unfortunately, we will have to counter these AI fueled diatribes, and make sure our files reflect this. And as always, document the real basis for any adverse action you take. Documentation means more now than ever.
And of course, keeping lawsuits in arbitration helps all of this. It’s why I led today’s article with this issue. Our arbitrators are very expensive and will not always issue a favorable ruling. But they are generally smart, critical thinkers who hear these cases every day. They are more inclined to apply the law correctly and render an unbiased decision.
