Court of Appeals Upholds Employer’s “Incomplete” Mandatory Arbitration Agreement

In a development that was all too scarce just a few years ago, another California court has issued a decision upholding a mandatory employment arbitration agreement.  In Cruise v. Kroger Co., the California Court of Appeals (Second Appellate District; Division III) upheld the enforcement of an arbitration agreement contained in Kroger’s employment application, requiring a former employee to arbitrate, rather than litigate, his claims for employment discrimination and wrongful termination.

The twist in this particular case, though, was that the original arbitration agreement, signed by Mr. Cruise as part of his employment application, purported to incorporate a detailed statement of procedures as to how the arbitration would be conducted.  Mr. Cruise asserted, and Kroger could not disprove, that Mr. Cruise never received a copy of those detailed procedures.  For this reason, the trial court originally found that Kroger “failed to meet their burden to prove the existence of a signed arbitration agreement,” and denied Kroger’s petition to compel arbitration.

Kroger appealed the trial court’s ruling, and the Court of Appeals reversed the trial court decision.  The Court of Appeals held that, notwithstanding the absence of the detailed procedures, the language in the application signed by Mr. Cruise “eliminates any argument that the parties did not agree to arbitrate their employment related dispute.”  As a result, “Kroger is entitled to enforce the agreement to arbitrate.”

As for the missing detailed arbitration procedures, the Court of Appeals agreed that it could not enforce those rules, as Kroger could not prove that Mr. Cruise had received them.  As a result, the arbitration being ordered must be conducted pursuant to the provisions of the California Arbitration Act (CCP §1280, et seq.).  As the Court of Appeals required the arbitration to proceed according to rules established by the arbitration statute, any argument that the agreement is unconscionable was held to be “meritless.”

The takeaway for California employers is a good one.  California courts continue to demonstrate more inclination to enforce mandatory arbitration agreements, even if they have “flaws” that, until recently, would have doomed their prospects for enforcement.  Employers who may have been reluctant in the past to adopt such agreements, may wish to rethink their position.

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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.

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