Mandatory arbitration is legal in California. As you are updating your handbooks and other policies for 2025, don’t forget to revisit your arbitration agreement. Some key issues to look for include:
- If you have an opt-out, you might not need it anymore. Mandatory arbitration is now ok!
- Confirm the agreement is in the name of the correct entity (the same employer listed on the Labor 2810.5 notice).
- Make sure the agreement is translated, especially if other employment documents and policies are translated.
- Many plaintiffs challenge their signatures or electronic signatures, so double check that any electronic signatures are traceable back to the employee only (as Jeffrey Horton Thomas explains in his post).
- Ensure the agreement clarifies that it is governed by the FAA (“Federal Arbitration Act”) (as Steven Gallagher explains in his post).
- Update your class action waiver section to reflect new developments in PAGA reform (as Steven Gallagher explains in his post).
- Consider expanding carve outs given the EFAA (the federal “Ending Forced Arbitration and Sexual Harassment Act”).
- If you have provisions in your agreement about confidentiality of the arbitration beyond the applicable JAMS or AAA rules, you might want to revisit. This seems to be an area that plaintiffs’ counsel like to challenge.
- Make sure a viable company representative signs it.
If you are going to have an arbitration agreement, it might as well be enforceable. The law in California has evolved quite a bit of late, so if your agreement hasn’t been revised in a while, it is time to revisit it.