Nothing lasts forever, not even arbitration agreements

In a ruling filed on April 3, 2024, a California Court of Appeal in the case of Jasmin Vazquez v. SaniSure Inc. has set a significant precedent that could reshuffle the landscape of employment law and arbitration agreements. This decision affirms the trial court’s denial of SaniSure Inc.’s motion to compel arbitration, highlighting a nuanced interpretation of arbitration agreements and their applicability to subsequent stints of employment.

Background and procedural history

Jasmin Vazquez started her job with SaniSure through a staffing agency in July 2019. During her employment onboarding, Vazquez agreed to binding arbitration as the sole means to resolve disputes related to her employment. However, after resigning and later rejoining the company under the terms of a new offer letter and onboarding package, this time, arbitration was not discussed. A dispute arose and SaniSure sought to compel arbitration based on the agreements signed during Vazquez’s first period of employment. The crux of the matter was whether these agreements extended to Vazquez’s subsequent employment term (her second stint with the company), given there was no explicit discussion or agreement regarding arbitration during the negotiations to rehire her.

The court’s analysis

The appellate court’s analysis focused on whether the arbitration agreements from Vazquez’s first employment stint applied to disputes arising from her second stint. The court underscored a key principle: an arbitration agreement is inherently tied to the underlying employment contract it is part of. Accordingly, the termination of the employment relationship effectively terminated the arbitration agreement for disputes arising in the future, unless explicitly stated otherwise or agreed upon by both parties.

In Vazquez’s case, the absence of a new or extended arbitration agreement upon her reemployment meant that any disputes arising out of this subsequent employment were not subject to the previous arbitration agreements. The court emphasized that for claims to be arbitrated under a prior agreement, there must be evidence of the parties’ intention for the agreement to apply beyond the termination of the initial employment contract. The court found that there was no evidence of such intention here.

Implications for the working world

The Vazquez decision highlights the necessity for employers to make a point to explicitly renew or discuss new arbitration agreements upon rehiring a previous employee. Employers and their legal counsel must tread very carefully. This decision shows that courts will require a clear, explicit, current agreement on arbitration as part of any rehiring process. Employers must ensure that any intent to maintain arbitration as a dispute resolution mechanism is explicitly ongoing or that subsequent employment terms again include arbitration as a binding process and that the new agreements expressly communicate and show agreement on that point. This will certainly involve revisiting and revising onboarding documentation and rehiring protocols to include explicit discussions and agreements regarding arbitration and just how long the clause shall last.

Beyond the immediate legal community

The implications of the Vazquez decision extend beyond the immediate legal community. Human resources professionals, corporate executives, and employees stand to be affected by the evolving landscape of employment arbitration law. HR departments, in particular, will need to be re-trained to ensure they understand and require compliance with the nuanced rules for maintaining valid arbitration agreements across different terms of employment. For corporate leaders, this shows that, while courts in California are likely to enforce arbitration agreements, they will not do so under all circumstances. Ultimately, what may seem like form over substance or a mere technicality to many lawyers and non-lawyers alike is quite the opposite.

Conclusion

In summary, the Vazquez v. SaniSure Inc. decision acts as a pivotal point in employment arbitration law, compelling both legal practitioners and employers themselves to re-evaluate their approaches to drafting and implementing constantly updated arbitration agreements.