Two California Court of Appeal decisions dropped this week on arbitration. One shows that a narrowly worded clause in an old offer letter may not reach your employment claims at all. The other is a warning to employers that pairing a one-sided confidentiality agreement with an arbitration clause can void the whole arrangement.
It was a quiet week on the California employment law front, but two published arbitration decisions came out of the same appellate court, and they’re both worth a few minutes of your time. One is good news for employees who signed narrowly worded agreements years ago. The other is a reminder to employers that pairing an arbitration agreement with a one-sided confidentiality or non-compete agreement can undo the whole arrangement.
At Sherman Law Corporation, our employment litigation practice helps both employers and employees understand what their agreements actually say and what that means when there is a dispute.
When an Arbitration Clause Doesn’t Actually Cover Your Claims
In Morales v. Superior Court (San Diego Gas & Electric Co.), a longtime SDG&E employee sued the company after her termination, raising disability discrimination, failure to accommodate, retaliation, and related claims. SDG&E pointed to arbitration language buried in her 2005 offer letter and asked the court to force her claims into arbitration instead of court. The trial court agreed, but the Court of Appeal reversed.
The reason matters for anyone who has ever signed an offer letter or onboarding paperwork with an arbitration clause. The clause here was written narrowly, covering only disputes about the agreement itself, not disputes about employment generally. Because Morales’s discrimination and retaliation claims didn’t depend on any breach of that offer letter, the court found they simply weren’t covered by the arbitration language at all.
The takeaway for employees: not every arbitration clause reaches every claim. If your dispute has nothing to do with the specific contract you signed, the wording of that contract matters enormously. For employers, the message is just as clear. If you want broad arbitration coverage, your agreement needs to say so in broad terms, covering employment generally, not just the four corners of a single document.
The same principle applies when the employer never signs the agreement at all. A California arbitration agreement not signed by the employer is also unenforceable, as a separate line of cases has confirmed.
Pairing Arbitration With a One-Sided Confidentiality Agreement Can Backfire
The second case, Cluck v. GEO Secure Services, LLC, involved a wage and hour class action. GEO tried to compel arbitration based on an agreement Cluck signed when he was hired. Both the trial court and the Court of Appeal said no, the agreement was unenforceable, though the appellate court got there using somewhat different reasoning.
The court looked at Cluck’s arbitration agreement alongside a separate confidentiality agreement he signed the same day, applying guidance from the California Supreme Court’s recent decision in Fuentes v. Empire Nissan, Inc. Read together, the two documents created a lopsided deal. Cluck had to arbitrate his wage claims against GEO, but GEO kept the right to sue him in court in Florida over confidentiality or non-solicitation issues. In other words, the company built itself an escape hatch while closing the door on the employee.
For employers, this is a genuine warning sign. It’s not enough to make sure your arbitration agreement looks fair and neutral on its own. Courts will now look at the whole package of documents an employee signs, and if your company quietly reserved its own best claims for court while sending everyone else’s claims to arbitration, that imbalance can sink the entire arbitration clause. For employees, it’s a reminder that if you signed multiple documents on your first day, they may need to be read together, not in isolation, especially if your employer is trying to force your claims out of court.
Have a Workplace Issue?
Whether you’re an employee or an employer, if you have a workplace issue you wish to discuss, do not wait. At Sherman Law Corporation, Lisa Sherman works directly with every client, so you know exactly where you stand, even when that answer is complicated. Contact our office at lisa@sherm-law.com or call 323-488-2087.
This post is attorney advertising and is intended for general informational purposes only. It does not constitute legal advice and does not create an attorney-client relationship. If you have a specific legal question, please consult an attorney.
What Do These Decisions Mean for You?
1. I signed an arbitration agreement in my offer letter years ago. Does it still apply to my claims?
Not necessarily. As Morales shows, the scope of an arbitration clause depends entirely on its wording. A clause written to cover only disputes about the offer letter itself may not reach discrimination, retaliation, or other employment claims at all. If your employer is trying to force your claims into arbitration, the first question is always whether the clause actually covers what you are being asked to arbitrate. Contact our office to have your agreement reviewed.
2. My company has separate arbitration and confidentiality agreements. Could that be a problem?
Yes, potentially. After Cluck v. GEO, California courts will look at the full package of documents an employee signs, not just the arbitration agreement in isolation. If your confidentiality or non-compete agreement reserves the right to sue in court for the company while sending all of the employee’s claims to arbitration, that imbalance can render the entire arbitration clause unenforceable. Now is a good time to have your agreements reviewed together. Our employment litigation team can help.
3. What makes an arbitration agreement broad enough to cover employment claims generally?
The agreement needs to expressly say it covers all employment-related disputes, not just disputes arising from a specific document or contract. Language like “any dispute arising out of or relating to your employment” is far broader than language limited to disputes about “this agreement.” If your current agreements use narrow language, they may not provide the coverage you think they do.
4. As an employer, should I be reviewing all the documents employees sign on their first day?
Yes, and together, not in isolation. Cluck is a clear signal that courts will treat an employee’s first-day paperwork as a package. If any document in that package gives the company preferential access to court while restricting the employee to arbitration, the imbalance can undo your arbitration clause entirely. Our counseling practice works with employers to audit and update their onboarding documents before problems arise.
5. Does any of this change the EFAA analysis for sexual harassment claims?
No. These two decisions are about contract scope and unconscionability, not the EFAA. The federal law giving sexual harassment claimants the right to choose court over arbitration operates separately and is not affected by these rulings.
6. How can Sherman Law Corporation help?
Whether you are an employee trying to understand whether your arbitration agreement actually covers your claims or an employer who wants to make sure your agreements hold up under scrutiny, Sherman Law Corporation works directly with you to give you a clear picture of where you stand. Contact Lisa at lisa@sherm-law.com or call 323-488-2087.
