Employers Seeking To Enforce Arbitration Agreements
Against Their Employees In Wrongful Termination Cases Have
Suffered Yet Another Setback.

In the latest of a series of cases that have struggled over the question of when agreements to arbitrate employment termination cases can be enforced under the Armendariz standards, a California appeals court has again refused to give effect to such an agreement. In Abramson v. Juniper Networks, Inc., which was decided on February 6, 2004, the plaintiff, who had signed an arbitration agreement at the time of his hire, was terminated. When he sued over his termination, the employer petitioned to compel arbitration of the dispute. After a series of procedural battles before the trial court and the appeals court, the appeals court ultimately ruled that the plaintiff was not bound by the arbitration agreement.

Applying the State Supreme Court’s decisions in Armendariz v. Foundation Health Psychcare Services, Inc., and Little v. Auto Stiegler, Inc., which issued in 2000 and 2003, respectively, the court observed that the arbitration agreement was unenforceable for two reasons. First, it required plaintiff to share equally in the arbitration costs, something that Armendariz and Little have said violates public policy (in that it requires employees to pay costs they otherwise would not have to pay had they pursued their claims in court); second, the agreement contained a “carve-out” provision which excluded from arbitration any claim relating to trade secrets, confidential information and other intellectual property. While this provision purported to apply mutually to the plaintiff and the employer, the court concluded that, in reality, the claims covered under the “carve-out” provision were of a type that likely would be pursued only by the employer. The court further concluded that this provision was imposed on the employee without any meaningful opportunity to negotiate, and was, therefore, “unconscionable.”

The court also refused the employer’s request to “sever” the offending provisions from the arbitration agreement and enforce the remainder. According to the court, severance would not cure the “illegal” purpose or object in the agreement, which was to preclude the employee from pursuing judicial relief to resolve claims arising out of his termination of employment.