Mayers v. Volt Management Corp.: California Court Finds Employee Arbitration Agreement Unenforceable

by Sayema Hameed

The California Court of Appeal has issued a decision holding that an employee arbitration agreement is unenforceable.  In Mayers v. Volt Management Corp. (filed February 2, 2012, publication ordered February 27, 2012, Fourth District, Div. Three, Case No. G045036), the plaintiff filed a lawsuit against his former employer alleging various claims under the California Fair Employment and Housing Act (Gov. Code, § 12940 et seq.) (“FEHA”).  The defendant employer filed a motion to compel arbitration based on the plaintiff’s agreement to submit employment-related claims to final and binding arbitration, as evidenced by his signed employment application, employment agreement, and acknowledgment of receipt of employee handbook.  The trial court denied the motion to compel arbitration. The Court of Appeal affirmed the trial court’s decision.

The arbitration provisions in the employment application, employment agreement, and employee handbook each required that the plaintiff submit employment-related claims to arbitration pursuant to the “applicable rules of the American Arbitration Association in the state” where plaintiff was employed.  However, Plaintiff was not provided with a copy of the controlling American Arbitration Association (“AAA”) rules or advised as to how he could find them.

The arbitration provisions also failed to identify which set of AAA rules would apply.  They further stated that the “arbitrator shall be entitled to award reasonable attorney’s fees and costs to the prevailing party.”  That language exposed the plaintiff to a greater risk of liability for attorney fees than he would have been if he pursued his FEHA claims in court.  The Court of Appeal, therefore, concluded that the above provisions were unconscionable and unenforceable, and plaintiff could not be compelled to arbitrate his claims against the defendant.