The Quality of Employment Agreements Matters

contract-analyzingEmployers be forewarned: The quality of your employment agreements matter. For present purposes, “employment agreements” include arbitration provisions, confidentiality policies, meal period waivers and just about any understanding or agreement with your employees that you would like enforced by a court if a dispute arises. The quality matters because poor quality agreements do not get enforced. A recent decision from the California Court of Appeals illustrates the point. The case involved a wage and hour class action lawsuit filed by car wash employees against several car wash companies. The car wash companies filed a petition to compel arbitration to get the case out of the court system. Each of the plaintiffs had filed an employment agreement which contained an arbitration provision. The agreements also contained “confidentiality” provisions. Reading all of the relevant provisions together, the trial court ruled that the arbitration agreement was unenforceable because it was both procedurally and substantively unconscionable. The court of appeal agreed. The employer should not have been surprised by the rulings. The employment agreements in question had major quality flaws. It appears that the flaws were the result of poor drafting, poor understanding of the applicable law and poor human resource practices. The court started its opinion by noting that “[T]he employment agreements contain numerous apparent errors such that they are unnecessarily confusing at points . . .” The court was referring to sentences rendered confusing by typographical errors and missing key words. It was also referring to the fact that apparently little thought was given to how various provisions fit together. Citing basic contract interpretation law the court noted; “Despite the fact that these clauses are under separate headings and, in the case of the enforceability clause, are on different pages, they are all parts of the same employment agreement and should be read in conjunction to ascertain the entire ‘arbitration agreement.’” This coalescing of provisions was likely unintended, particularly in light of the fact that it helped undue the arbitration provision. There was also apparently little thought given to the necessity and effect of the provisions. For instance, the agreements contained confidentiality provisions that arguably violated the National Labor Relations Act and completely unnecessary for hourly workers at a car wash. The drafter of the employment agreements apparently lacked knowledge of the requirements for an enforceable arbitration agreement in California. The agreement contained virtually none of the specifically enumerated employee protections required by the California Supreme Court in the Armendariz decision. The agreements also required arbitration of employee claims, but not employer claims—a no-no under California arbitration law. Poor human resource practices also appeared to play a significant role in the court refusing to order arbitration. Despite being similarly situated employees, the plaintiffs did not all have the same employment agreement. Some of the agreement was translated into Spanish, some was not. This was particularly problematic because one of the plaintiffs did not speak English. Copies of the arbitration rules were not provided, and no one explained the purpose or meaning of the agreements. The employees were given little time to review the agreements, and they believed that they had to sign the agreement to be permitted to work. The message from this recent case: If you want your agreements to actually work as intended, the quality matters. The quality comes from expert subject matter knowledge, careful drafting, effective implementation strategies and attentive human resource practices. The court’s opinion can be found at: