The New Santana Band’s Employee Handbook on Binding Arbitration Hits More Than One Wrong Note

According to a California Court of Appeal, the Binding Arbitration section found in the New Santana Band’s Employee Handbook contained three unlawful provisions: a time restriction that limits employee’s public rights, arbitration cost-sharing, and a unilateral waiver.

In Kuhlman v. New Santana Band, Inc., No. A111428, 2006 WL 1589716 (Cal. Ct. App. June 12, 2006), Kuhlman, former employee of the New Santana band (“Santana”), brought an action against Santana for wrongful termination when he was replaced by his assistant who, according to Deborah Santana, had a higher “enlightenment/consciousness level.” Santana moved to compel arbitration according to the Employee Handbook (“the handbook”).

The Court denied the motion to compel arbitration because of unlawful provisions in the handbook. First, the Court concluded that the arbitration provision that restricted the time period in which Kuhlman could bring a claim against Santana was unlawful because it limited his statutory remedies. The provision gave Kuhlman less time to seek redress for his claims than he would have been entitled to under the law.

Second, the Court held that the handbook’s requirement that Kuhlman pay half the cost of arbitration violated the categorical rule in employment arbitrations that “the employer is obligated to pay all costs unique to arbitration.” Finally, the Court found the provision that waived Kuhlman’s right to raise “any claim in any forum” after a year lacked mutuality because Santana did not face the same possibility of waiver. “Because mutuality is the paramount consideration in assessing substantive unconscionability, this unilateral provision of the Binding Arbitration section is substantively unconscionable.”