4 | 2025 Cal-Peculiarities ©2025 Seyfarth Shaw LLP www.seyfarth.com Arbitration Agreements Heeding wishes of the plaintiffs’ bar, California legislators and courts repeatedly have invented special reasons not to enforce employer-mandated arbitration agreements, despite the pro-arbitration policy of the Federal Arbitration Act that the U.S. Supreme Court has often applied to preempt state rules—both legislative and judicial—that frustrate arbitration by design or in effect. California has succeeded in subjecting arbitration agreements to certain peculiar conditions. Under California’s peculiar law, arbitration agreements must be “mutual,” requiring the employer as well as the employee to use arbitration instead of litigation in initiating claims (including claims for injunctive relief to prevent unfair competition), must (as to statutory claims) provide adequate discovery and have the employer pay all costs unique to arbitration, must permit employees to bring representative PAGA actions in court (although the individual portion of a PAGA claim can be arbitrated), generally cannot shorten statutory limitations periods, may be unenforceable if an employer does not timely pay arbitration fees, and often are unenforceable if they have more than one “unconscionable” provision—notwithstanding the general rule that courts will sever unenforceable provisions and enforce the rest (see § 5.2). Litigation Issues California has tilted the litigation playing field to the advantage of plaintiffs suing employers, deviating from the law of many jurisdictions by requiring whistleblower defendants to justify allegedly retaliatory employment actions by producing clear and convincing evidence that the actions reflected legitimate reasons independent of the whistleblowing (see § 3.5), forbidding pre-dispute waivers of jury trial (see § 5.1), forbidding employers from imposing forum-selection or choice-of-law agreements that would avoid California courts or California law (see § 5.3), creating broad-ranging contract and tort theories by which employees can challenge terminations (see §§ 5.4, 5.5, 5.6), limiting the efficacy of summary judgment motions that would screen out unmeritorious litigation (see §§ 5.7, 6.5), expanding potential employer liability for defamation and negligent misrepresentation (see §§ 5.8, 5.9), expanding employer liability to third parties for employee torts (see § 5.10),
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