California Supreme Court Approves Mandatory Predispute Agreements to Arbitrate Statutory and Other Employment Discrimination Disputes

In a broad endorsement of predispute agreements to arbitrate employment claims, the California Supreme Court ruled in Armendariz v. Foundation Health Psychcare Services, Inc. that anti-discrimination claims brought under the California Fair Employment and Housing Act (FEHA) are arbitrable pursuant to a mandatory predispute arbitration agreement if the arbitration agreement permits an employee to vindicate his or her statutory rights. In an opinion dated August 24, 2000, the Court explained that in order for such vindication to occur, the arbitration agreement must assure that the arbitration meets certain minimum requirements, including neutrality of the arbitrator, the provision of adequate discovery, a written decision that will permit a limited form of judicial review, and limitations on the cost of arbitration. The Court also held that predispute arbitration agreements are generally enforceable with respect to nonstatutory claims, such as termination in violation of contract or the covenant of good faith and fair dealing, notwithstanding that the agreements are generally adhesion contracts imposed by employers.

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