Law Firm’s Arbitration Procedures Ruled Improper

Jacqueline Davis began working for O’Melveny & Meyers, a Los Angeles-based law firm, in June 1999. Following her hire, O’Melveny implemented a mandatory dispute resolution program for employment-related disputes for its employees. Excepted from the program were claims for workers’ compensation or unemployment benefits as well as claims by the firm associated with disclosure of confidential materials.

    The program included an option for mediation and mandatory final and binding arbitration for employment-based claims against O’Melveny. Disclosure to third parties of the existence or nature of any disputes submitted to the program was prohibited under the policy.

    Davis filed a lawsuit against O’Melveny for failure to pay her for overtime and work during meal and break periods. A U.S. district court ordered the matter to final and binding arbitration pursuant to the terms of the program.

    On appeal, the U.S. Court of Appeals for the 9th Circuit held that the program was procedurally and substantively unconscionable—and, accordingly, unenforceable.

    The court reasoned that the arbitration provisions were imposed on a “take it or leave it” basis, leaving Davis with the “choice” only to accept its terms or seek employment elsewhere. O’Melveny’s plan improperly imposed a substantially shortened statute of limitations that deprived employees of a number of available employment claims under the continuing violation doctrine. Also, the confidentiality provisions of the program stifled an employee’s investigation of claim and placed O’Melveny in a superior position to defend. Davis v. O’Melveny & Meyers, 9th Cir., No. 04-56039 (5/14/07).

    Impact: California law has for several years prohibited enforcement of mandatory arbitration procedures that are unconscionable. Employers are advised to carefully review the costs involved in mandatory arbitration and the specific process by which employment-based claims can be resolved by arbitration which have met with court approval.

Workforce Management, July 23, 2007, p. 10 — Subscribe Now!