Upon hiring a new employee, it is a common practice for most employers to provide the new employee with an employee handbook stating the general policies and procedures of the employer. Sometimes employers will have an arbitration clause within the employee handbook, and thereby attempt to impose binding arbitration on the parties for any disputes between the employer and employee. Most employers are also advised to have their new employees sign an acknowledgment which indicates that the employee read the handbook, understands its contents, and agrees to its terms.
Most employers assume, or are told, that receipt of the signed acknowledgment form ensures that the employee is bound by the handbook’s provisions, including the requirement that the employee arbitrate any employment-related disputes. But, according to a recent California Court of Appeal, most employers are wrong. Employers should not rely upon an arbitration clause in a prolix employment handbook unless the handbook is carefully crafted to ensure the arbitration clause’s enforceability.