Sparks v. Vista Del Mar: In Wrongful Termination Action, Court of Appeal Rejects Arbitration Agreement Found In Employee Handbook

In Sparks v. Vista Del Mar Child and Family Services (7/30/12) --- Cal.App.4th, the trial court denied a petition to compel arbitration of an individual wrongful termination action, and the Court of Appeal affirmed.

The Court held that the arbitration clause, which was included in an employee handbook, was not enforceable because the arbitration clause: 

was included within a lengthy employee handbook; the arbitration clause was not called to the attention of plaintiff, and he did not specifically acknowledge or agree to arbitration; the handbook stated that it was not intended to create a contract; the handbook provided that it could be amended unilaterally by defendant and thus rendered any agreement illusory; the specific rules referred to in the arbitration clause were not provided to plaintiff; and the arbitration clause is unconscionable.

Specifically, the Court held that the parties had not reached an agreement to arbitrate: 

The language in the Handbook here, like the language at issue in [Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164], suggests that the Handbook, which was "distributed" to all employees, was informational rather than contractual. Thus, because defendant failed to point out or call attention to the arbitration requirement in the Acknowledgment, plaintiff should not be bound to arbitrate.

The "Acknowledgment of Receipt" that the plaintiff signed also did not bind him to arbitrate.  "At best, it expressed the employee's understanding that he must comply with personnel policies and obligations, rather than an agreement to arbitrate."  

Finally, the Court found the arbitration clause substantively unconscionable for the following reasons:  

The arbitration clause is also substantively unconscionable in that it requires the employee to relinquish his or her administrative and judicial rights under federal and state statutes (cf. Ajamian v. CantorCO2e, supra, 203 Cal.App.4th at pp. 798-799) and it makes no express provision for discovery rights (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 104). As the American Arbitration Association rules specified by the clause were not provided to plaintiff, and according to defendant those rules gave the arbitrator the discretion to deny any discovery, the provision for discovery is insufficient. Accordingly, the clause is unenforceable as unconscionable.

 The opinion is available here with a slight modification on 8/20/12 here.