In Mendoza v. Trans Valley Transport, the California Court of Appeal held that an arbitration agreement contained in an employee handbook was unenforceable by the employer because the parties did not enter into a binding agreement to arbitrate. The appellate court’s analysis in Mendoza illustrates some problems for employers who place arbitration agreements in employee handbooks instead of having a standalone arbitration agreement.
Placing arbitration agreements within employee handbooks creates greater risk that the agreements may be found unenforceable.
Employee handbooks typically contain language that the handbooks do not create a contract with the employee and that the employer can revise the employee handbook at any time.
In Mendoza, the court noted that other courts have not enforced arbitration agreements in employee handbooks when other language in the handbooks or acknowledgement forms indicate that (1) the handbook was intended to be informational, not contractual, (2) could be changed by the employer at any time, or (3) did not create a contract of employment. Oftentimes employee handbooks contain this type of language to avoid creating employment actual or implied in fact contractual obligations arising from the employee handbook. But as the court in Mendoza explained, employers need to be careful to clearly set out the arbitration agreement if contained in the handbook, and explain that the arbitration agreement is a binding contract.
Therefore, it is best...
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