Enforcing Arbitration Agreements in California: What You Need to Know
Arbitration is a method of alternative dispute resolution that has become increasingly popular in recent years. Many companies choose to include arbitration clauses in their contracts with customers and employees, which require any disputes to be resolved through arbitration rather than through the court system.
However, enforcing arbitration agreements in California can be a complex and contentious process. Here is an overview of what you need to know.
The Federal Arbitration Act (FAA)
The FAA is a federal law that governs arbitration agreements. It requires courts to enforce valid arbitration agreements, and it preempts state law that would otherwise prohibit or restrict arbitration.
However, the FAA does not apply to all types of disputes. For example, California courts have held that certain types of statutory claims, such as claims under the California Labor Code, cannot be waived through an arbitration agreement.
The California Arbitration Act (CAA)
The CAA is a state law that provides additional requirements for enforcing arbitration agreements in California. For example, it requires that arbitration agreements be in writing and signed by the parties. It also provides certain procedural requirements for arbitration, such as the appointment of an arbitrator and the timeline for the arbitration process.
The CAA also provides some protections for consumers and employees. For example, it prohibits arbitration agreements that waive the right to a jury trial, that limit damages available, or that require the consumer or employee to pay for the arbitration.
Challenges to Arbitration Agreements
Despite the FAA and CAA, there are still challenges to enforcing arbitration agreements in California. For example, a party may argue that the agreement is unconscionable, meaning that it is unfair or oppressive.
California courts have held that arbitration agreements are unconscionable if they are one-sided, if they are buried in fine print, or if they require the consumer or employee to pay for the arbitration. However, courts have also upheld many arbitration agreements as valid and enforceable.
Enforcing arbitration agreements in California can be a complex and contentious process, but it can also provide a quicker and less expensive resolution to disputes. If you are considering including an arbitration clause in a contract, it is important to consult with an attorney who is experienced in both arbitration and California law.