Legal Briefing: ‘Bargain’ Hunters Beware

Employers often include arbitration provisions in their employee applications, handbooks, agreements and other documents. In the case of Universal Protection Service LP v. Superior Court, the employer, Universal Protection Service, also known as UPS, included an arbitration provision in its employment agreements. The arbitration agreement referenced the American Arbitration Association’s, or AAA’s, rules for employment arbitrations. When a group of employees sued, bringing a representative action and a purported class-action lawsuit against UPS, the company filed a cross-complaint seeking to compel individual arbitration.

While the trial court did stay the action pending the outcome of arbitration, the trial court did not provide UPS with the requested declaration that the arbitration agreement barred class-action relief. The court of appeals agreed with the trial court’s decision, noting that the arbitration agreement, drafted by UPS, incorporated the AAA rules. As such, the appeals court declined to order the trial court to decide the issue of class arbitration. Universal Protection Service LP v. Superior Court 239 Cal. App. 4th 697 (Aug. 18, 2015)

Impact: Employers must be careful in crafting their arbitration agreements in order to get the full benefit of the bargain. Incorporating documents by reference in arbitration provisions or other contracts runs the risk that the terms of the incorporated document will be interpreted as modifying the apparent meaning of the agreement. Given the skepticism some courts appear to have regarding employer-employee arbitration, employers must be particularly careful to avoid any possible pitfalls.