Employment Arbitration Clauses Limiting Discovery are Allowed

I draft a lot of employment agreement for clients and always recommend some kind of ADR (Alternative Dispute Resolution) provision or separate agreement.  An Arbitration arrangement, for example, is many times preferable to public trial to resolve employment related disputes because it is faster, less expensive and more private than the public trial alternative. But drafting these ADR agreements or clauses can be tricky and we have many cases on the books that have stricken some or all of such provisions as invalid or illegal.

In a recent case from the Second District in California, the Court of Appeal has clarified the extent to which some of the details of these arrangments are deemed permissible,.

In Sanchez v. CarMax Auto Superstores California, LLC – the Court found that an arbitration agreement was not rendered substantively unconscionable by limitations on discovery, where the limitations were applicable to both parties, and employee failed to show that the limitations would prevent him from obtaining necessary evidence.  Additional provisions in the agreement requiring a written award, and that the proceedings remain confidential, and prohibiting consolidation of claims of different employees were all held not to be unconscionable – which means they were allowed.

Properly crafted ADR agreements in employment relationships can save both sides time and expenses if a dispute arises either during or after the employment.

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