Thursday, February 4, 2010

Court of Appeal Upholds Employment Arbitration Agreement

By Christopher S. Andre and Scott K. Dauscher

Arbitration can streamline the process of resolving disputes between employers and current or former employees and can reduce the costs of resolving such disputes. However, for approximately the last 10 years, California appellate courts have closely scrutinized employment arbitration agreements and have frequently invalidated such agreements on a variety of grounds, finding them to be procedurally unconscionable, substantively unconscionable, or both procedurally and substantively unconscionable. Most commonly, when courts invalidate such agreements, it is because the court finds that the arbitration agreement in question unfairly stacks the deck in favor of the employer.

In Dotson v. Amgen, Inc., the California Court of Appeal reversed the trial court's determination that an employment agreement containing an arbitration agreement was unenforceable because it limited the parties each to one percipient or eye witness deposition, unless the arbitrator decides additional depositions are necessary based on a showing of need. The court held the provision authorizing the arbitrator to permit additional depositions upon a showing of need was a sufficient safeguard of the parties' rights to vindicate their claims and defenses. The court explained that "arbitration is meant to be a streamlined procedure" and that while parties are entitled to conduct discovery sufficient to prosecute their claims or defenses, "'adequate' discovery does not mean 'unfettered' discovery." The court further concluded that "the trial court [incorrectly] assumed that the arbitrator would not be fair in determining whether additional depositions were needed" and that the law requires courts to "assume that the arbitrator will operate in a reasonable manner in conformity with the law."

The Dotson decision appears to be good news for employers seeking to enforce arbitration agreements.

Click here to download and read the opinion.