California Court Upholds Expedited Discovery and Hearing Provisions in Employee’s Arbitration Agreement

An employment arbitration agreement may restrict the breadth of discovery or length of arbitration hearings without offending California law, as long as the agreement gives the arbitrator discretionary authority to extend discovery or proceedings upon a showing of good cause, according to a California federal district court.

In Rutter v. Darden Restaurants, Inc., No. CV 08-6106 AHM (SSx), 2008 WL 4949043 (C.D. Cal. Nov. 18, 2008), Rutter filed wrongful termination and discrimination claims against former employer Darden. Darden responded by moving to compel arbitration of the claims pursuant to an agreement between the parties. Rutter resisted arbitration, alleging that the agreement merely provided that arbitration was permissive, not mandatory. Also, Rutter argued that the agreement was unconscionable under the minimum standards for employment arbitration agreements articulated in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000).

The Court found the plain language of the agreement required arbitration of Rutter’s claims. While one section of the agreement stated that the employer or employee “can” seek arbitration, the Court pointed to other sections in the agreement that clearly established arbitration as the “only” method of resolving employment-related claims such as the ones brought by Rutter.

The Court agreed that the arbitration agreement was procedurally unconscionable because it was imposed on Rutter as a condition of employment, but found that the agreement was not substantively unconscionable. Rutter alleged that the agreement failed to comply with Armendariz by providing only minimal time to conduct discovery and by imposing a two-day limit on the duration of the arbitral hearing. 

These limitations, coupled with discretionary authority held by the arbitrator to extend the breadth of discovery and length of the hearing upon a showing of good cause, were not sufficient to demonstrate substantive unconscionability, according to the Court. At such an early stage, Rutter’s objections to expedited discovery and hearings were merely “speculative.”

Finally, the Court rejected Rutter’s non-mutuality challenge, noting that both parties were clearly allowed to seek injunctive relief from a court of law in limited circumstances that did not favor the employer over the employee.

Accordingly, the Court compelled arbitration of Rutter’s claims, dismissing the case without prejudice.