©2024 Seyfarth Shaw LLP www.seyfarth.com 2024 Cal-Peculiarities | 89 A 2023 Court of Appeal decision took this a step further and affirmed a trial court’s invalidation of an arbitration agreement because a confidentiality agreement—and not the arbitration agreement itself—contained similar unenforceable provisions. The confidentiality agreement had a waiver of the employee’s duty to post a bond or to show irreparable injury to obtain injunctive relief for disclosure of proprietary information. Even though the offending provisions were not in the arbitration agreement itself, the trial court reasoned (and the Court of Appeal agreed) that because the confidentiality agreement was signed on the same day as the arbitration agreement, both agreements could be read together and invalid provisions in one agreement could be imputed to the other.79 In yet another 2020 case, the Court of Appeal observed at the outset that the arbitration agreement had an invalid waiver of PAGA claims, but the employer had not sought to enforce the invalid PAGA waiver; rather, the employer had sought to selectively enforce the rest of the arbitration agreement, against the plaintiff’s Labor Code claims. The Court of Appeal held that the employer could not pursue this path, because the PAGA waiver occurred in a provision that was expressly deemed not severable, and so when it fell the entire agreement failed.80 In a final 2020 case, the Court of Appeal held that two substantively unconscionable provisions could be severed to save the agreement, and directed the trial court to sever them on remand,81 but then the Supreme Court depublished the decision and granted review, to decide whether the two invalid provisions could doom the arbitration agreement on a theory that they had been included within the agreement as a matter of “bad faith.”82 The Supreme Court declined to proceed, however, when the parties settled their case.83 5.2.5 Judicial reluctance to find employee consent and class action waiver and willingness to find employer waiver Just as judges can invoke unconscionability to avoid enforcing arbitration agreements, they can creatively find that the employee never consented to the agreement in the first place. In one case, decided in 2020, the trial court did just that, denying a motion to compel enforcement of a stand-alone arbitration agreement simply because the employee had failed to initial an individual paragraph calling for waiver of jury trial. The Court of Appeal corrected this mistake by holding that the employee’s failure to initial a paragraph was immaterial in light of his signing the agreement immediately below language—prominently displayed in ALL CAPITAL LETTERS— stating that he agreed to “all of the terms of this agreement” and had “no right to pursue claims against the company in court and before a jury but only through the arbitration process.”84 The Court of Appeal rebuked the trial court for crediting the employee’s “undisclosed assertions he did not want to arbitrate or waive his jury trial right”; even if the trial court found the employee credible, the court should not have considered his “unexpressed intentions as evidence of the lack of mutual assent. The law is well settled that unexpressed subjective intentions are irrelevant to [this] issue …”85 Inadvertently overbroad contractual disclaimer. California courts have ensnared employers in traps of their own making when the employer handbook containing an arbitration policy comes with a disclaimer (as some handbooks do) that the handbook is “not a contract.” In one case, the Court of Appeal, while giving lip service to the “strong policy favoring contractual arbitration,” emphasized that this “policy does not extend to parties who have not agreed to arbitrate.”86 The Court of Appeal thus upheld the denial of arbitration because the handbook containing an arbitration policy came with a welcome letter stating that the handbook was “not intended to … create any legally enforceable obligations[.]”87 Inadvertent effect of requiring employees to sign arbitration agreements. The Court of Appeal refused to compel arbitration against an employee who was subject to a handbook containing an arbitration agreement, because the handbook said that employees must sign an arbitration agreement, yet the employer could not produce any signed agreement. The Court of Appeal reasoned that the handbook had evinced an intent that employee consent to arbitration would be obtained only through a signed separate agreement, which here was absent.88
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