by Michelle R. Ferber and Julie Ann Giammona

In a victory for employers, a California Appellate Court determined that mandatory arbitration agreements are enforceable where an employee has been given notification that commencement or continued employment constitutes acceptance of the arbitration agreement. In Diaz v. Sohnen Enterprises, the employer announced at a company-wide meeting that it was instituting a mandatory arbitration agreement that would become effective immediately, either upon the employee’s commencement of employment with the company, or the employee’s continued employment with the company. Additionally, the employer specifically advised its employees that a signature on the arbitration agreement was not necessary to implement the arbitration agreement.

In determining that such an agreement is enforceable, the Diaz court stated “California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement.”  The court agreed with the company’s ability to implement the agreement by notifying its employees that no signature was required on the arbitration agreement (even in the presence of written protest by employees); instead, because the employees were at-will, the company had the absolute right to change any term or condition of employment at any time, including implementing a mandatory arbitration agreement. The Diaz court distinguished this case from other cases that had concluded a signature was necessary to enforce an arbitration agreement by noting that the company specifically communicated to all employees that: (1) the arbitration agreement was a mandatory condition of commencement or continued employment; and (2) no signature was required.

Given the Diaz decision, we suggest employers consult with Ferber Law to review their current arbitration agreements and methods of notification to employees. When drafted and implemented with expert legal advice, arbitration agreements can prove to be very useful tools in reducing the cost and exposure of litigation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.