Parties agreed to arbitrate based only on California law, but court steps in

A newly enacted provision in the Federal Arbitration Act (FAA) says an agreement to arbitrate sexual harassment disputes is unenforceable. However, in a recent case from the California Court of Appeal, an employer and employee signed an arbitration agreement providing that California law would apply, and that the case would be governed by the California Arbitration Act. Can they thereby contract away the federal prohibition?

Sexual assault at work

Kristin Casey began working in 2015 as a real estate agent for D.R. Horton, a national homebuilding company. In 2017, she signed a new employment contract, which included an arbitration clause agreeing that if the parties are unable to resolve a dispute through negotiation or mediation, they agree to binding arbitration administered by JAMS, a private provider of arbitration services.

The arbitration agreement further provides that by entering into it, Casey and D.R. Horton agree they are giving up their right to litigate in court and that a party that refuses to submit to arbitration “may be compelled to arbitrate under the authority of the California code of civil procedure.” A separate clause, titled “Governing Law,” provides that “this Agreement shall at all times and in all respects be governed by the laws of the State of California.”