In a recent unpublished California appellate court decision, the Court unanimously reversed the lower court’s ruling that an agreement to arbitrate contained in an employee handbook was unenforceable.
Case Background
In May 2023, former employee Seth Robert Nelson filed a lawsuit against Golden Queen Mining Company LLC, alleging violations of California wage and hour laws. The Company sought to compel arbitration of the claims, citing an arbitration agreement kept within the Company’s employee handbook that Nelson had signed during his employment. The trial court denied the motion based on its determination that two provisions in the handbook acknowledgment, which also contained the employee’s agreement to arbitrate, were inconsistent and rendered the agreement unenforceable. One provision stated that the handbook’s "guidelines" did not create any contractual rights, while the other acknowledged receipt of a voluntary agreement to contractually arbitrate employment disputes.
The Appellate Court Decision
The Court of Appeal disagreed with the trial court’s conclusion, finding that the agreement was separate from the handbook’s guidelines and therefore, enforceable. The court explained that although both the arbitration agreement and the handbook’s guidelines appeared in the same acknowledgment, they were not part of the same contractual framework.
Key to the decision was the court’s distinction between the terms “guidelines” and “arbitration agreement.” The court noted that the "guidelines" in the handbook referred to general policies, which were not intended to create enforceable contractual obligations. In contrast, the arbitration agreement was a distinct and specific contract designed to resolve disputes through arbitration. The Court noted that the separation of the two provisions within the acknowledgment made it evident that the arbitration agreement was not part of the “guidelines” contained in the employee handbook.
As a result, the Court reversed the trial court’s order denying the motion to compel arbitration and remanded the matter for the trial court to resolve the remaining issue of whether the agreement was unconscionable.
Implications for Employers and Employees
This ruling is a win for employers seeking to enforce arbitration agreements, particularly in cases where those agreements are included in employee handbooks. Nonetheless, the decision underscores the importance of clear and distinct language when drafting arbitration clauses and employee acknowledgment forms, and serves as a reminder that the best practice is to issue a separate arbitration agreement.
