Arbitration clauses that bind the employee but not the employer: no problem, says the Ninth Circuit
Consider the following hypothetical: employer presents employee with an arbitration policy and demands her signature as a condition of receiving her usual annual bonus. The policy mandates binding arbitration for the vast majority of conceivable claims that the employee could bring. The policy allows for the employer, however, to pursue judicial resolution of "any claims by the Company that include a request for injunctive or equitable relief", including claims under certain restrictive covenants and intellectual property rights.
This exact set of facts was before the Ninth Circuit Court of Appeals in Poublon v. CH Robinson Company (9th Cir. 2017). At issue was the enforceability of the arbitration clause, given the judicial carveout in favor the employer (among other provisions, including its unenforceable waiver of PAGA claims). The lower court ruled that the judicial carveout is substantively unconscionable, refused to blue-pencil the clause to render it enforceable, and denied the employer's motion to compel arbitration.
The employer did not appeal the finding of substantive unconscionability. The Ninth Circuit nevertheless enforced the arbitration clause, despite its obvious lack of mutuality, because it was happy to sever the judicial carveout from the remainder of the clause. In other words, the court was willing to come to the rescue of the beleaguered company and rewrite its contract for it: "[T]here is one unconscionable clause in the dispute resolution provision, the portion of the dispute resolution provision that permits C.H. Robinson, but not Poublon, to seek judicial resolution of specified claims. This provision can be extirpated without affecting the remainder of the paragraph and is 'collateral to the main purpose of the contract', which is to require arbitration of disputes." (emphasis added).
This is, to put it charitably, a baffling decision. Requiring the employee to arbitrate, but not the employer, is not "collateral" to the requirement to arbitrate disputes. It is in fact central to the requirement.
In any case, under the Ninth Circuit's logic, employers should now feel free to include judicial carevouts in their binding arbitration agreements. Even if the judicial carveout is unenforceable and unconscionable, the Ninth Circuit says that won't hinder enforcing arbitration on the employee under California law.
Would the result have been different if the employer reserved to itself the right to bring any type of claim in a judicial forum, and not just IP or confidentiality-based claims? Based on the Ninth Circuit's logic, I doubt that would have made a difference. Under the Ninth Circuit's reasoning, there's effectively no downside for employers to mandate binding arbitration only on the employee.