Readers of this blog are, by now, aware of California’s judicial and legislative hostility toward arbitration.  Over the last few months, however, employers have seen a surprising number of appellate victories in their respective bids to enforce valid arbitration agreements with their employees.  The recent opinion in Vo v. Technology Credit Union continues this recent trend.

Prior to Vo, it had been well-established that, absent an explicit reference to the California Arbitration Act (“CAA”) which includes provisions providing for discovery in arbitration, an arbitrator did not have authority to order prehearing third party discovery.  The employee in Vo, seeking to avoid arbitration, argued that his agreement did not include the requisite CAA reference and thus the agreement was substantively unconscionable because he did not have access to discovery that would otherwise have been available in court.  In its defense, the employer argued that the procedural rules of the arbitration forum (here, JAMS) were expressly incorporated by reference; and those rules provided for the arbitrator’s authority to authorize third-party discovery.  The trial court agreed with the employee and denied the employer’s motion to compel arbitration.   

In a carefully detailed opinion, the Court of Appeal not only reversed the trial court’s decision, but upended the prior precedent.  In so doing, the appellate court pointed out that “[e]ven when an arbitration agreement contains no discovery provision at all […] courts ‘must infer that when parties agree to arbitrate statutory claims, they also implicitly agree, absent express language to the contrary, to such procedures as are necessary to vindicate that claim.’” (Emphasis added.)  The appellate court found that there was no limitation on expanded discovery and no additional burden on either party to justify such discovery.  This finding was critical because, “when assessing an agreement for unconscionability, [the court] must assume that an arbitrator will act ‘reasonably and in conformity with the law.’”  The opinion further acknowledged and followed the California Supreme Court’s admonition to define the scope of an arbitrator’s authority in a way as to make an arbitration agreement enforceable.  Applying these logical foundations, the court concluded that an arbitrator has authority to make available additional nonparty discovery if necessary to allow fair arbitration of the claim.

While Vo is a welcome win for employers, it is a necessary reminder that careful drafting of employment arbitration agreements remains fundamental and paramount to avoid judicial challenges.

This publication is published by the law firm of Ervin Cohen & Jessup LLP. The publication is intended to present an overview of current legal trends; no article should be construed as representing advice on specific, individual legal matters. Articles may be reprinted with permission and acknowledgment. ECJ is a registered service mark of Ervin Cohen & Jessup LLP. All rights reserved.