Arbitration agreements, at their core, are contracts. As with any contract, there must be “mutuality” or, more colloquially, a “meeting of the minds” on what the contract is intended to encompass. For this reason, employment arbitration agreements are typically limited in scope and drafted to cover only claims or causes of action arising from or related to the relationship between the employee and employer.
A recent case involving the University of Southern California illustrates the importance of careful drafting. An issue in Cook v. University of Southern California was whether an arbitration agreement of infinite duration could be enforced by an employer for any and all claims, irrespective of whether the claims subject to the agreement arose from the employment relationship. The agreement emphasized that the university and the employee agreed to the resolution by arbitration of all claims, “whether or not arising out of Employee’s University employment, remuneration or termination, that Employee may have against the University or any of its related entities…”
Both the trial court and Court of Appeal held that such an overbroad arbitration agreement was “unconscionable” and could not be enforced for several reasons. The most significant among them was the court’s disapproval of the overbreadth of time and scope. In decrying the scope of the agreement, the court opined:
If USC had been concerned about capturing termination or retaliation claims related to Cook’s employment, it simply could have limited the scope of the agreement to claims arising out of or relating to her employment or termination. If it difficult to see how it is justified to expect Cook – as a condition of her employment at the university – to give up the right to ever sue a USC employee in court for defamatory statements or other claims that are completely unrelated to Cook’s employment.
The unlimited duration of the agreement fared no better. The court found that the arbitration agreement specifically provides that it will survive unless and until the employee and the university’s president specifically terminate the agreement in a writing, signed by both parties, which expressly mentions the arbitration agreement; an express term of duration. Such a provision further weighed in favor of the agreement being deemed “unconscionable.” Had no provision been mentioned regarding the duration of the agreement, it would have been presumed to be “terminable at will”; a finding which would have favored enforcement of the arbitration agreement.
Cook v. University of Southern California thus serves as an important cautionary tale for employers. California courts routinely and carefully scrutinize nearly everything in an employment arbitration agreement. Employers should therefore tailor their arbitration agreements sufficiently so that there is no question as to what claims could or would be covered.
