Arbitration agreements are very common in today’s society. What does signing up for Google, creating an iTunes account, and applying for a job at your local grocery all have in common? Arbitration agreements. Employers use arbitration agreements to avoid the steep costs of litigation, to create a faster timeline to a resolution, to ensure an amicable solution is more easily met and to keep confidentiality a top priority. Business owners should generally use arbitration agreements often.

Recently, there’s been a new arbitration update in California that all employers should be aware of. The U.S. Supreme Court decided in Morgan v. Sundance, Inc., 596 U.S. 411 (2022) that there is no prejudice requirement for cases governed by the Federal Arbitration Act (FAA). In laymen’s terms, it would be easier for an employee to oppose a motion to compel arbitration on waiver grounds because the Supreme Court asserted that the FAA’s policy of favoring arbitration over litigation does not allow other courts to create specific procedural rules just to move more cases into arbitration.

In Quach v. California Commerce Club, Inc. (2024), Commerce Club was sued and instead of immediately moving to compel arbitration, they had answered the complaint. They engaged in long and costly discovery and only after 13 months did Commerce Club finally move to compel arbitration. Their motion was denied and the reason cited was that they essentially waived their right to arbitrate as the delayed motion would prejudice Quach. While the appellate court overturned this decision, the California Supreme Court reversed, asserting that courts cannot require a party opposing a motion to compel arbitration to prove they were prejudiced.

While the above is a quick summary of the case, business owners should know this: if there is a binding arbitration agreement in place, do not wait! Move to compel arbitration as soon as proper, or else it may be too late. Also, having an arbitration agreement that will stand up to the court’s scrutiny and save business owners time and money is invaluable. So, if you need assistance drafting or reviewing an arbitration agreement, please do not hesitate to reach out to our office.