mployment Contract’s Choice-Of-Law Provision Governs Question of Arbitrability, Court of Appeal Rules

In Harris v. Bingham McCutchen, the California Court of Appeal, Second Appellate District held that the drafter of an adhesion contract could not avoid the contract’s choice-of-law provision in determining the enforceability of an arbitration provision.

Harris sued her employer, alleging it had wrongfully terminated her employment after she requested reasonable accommodations for a disabling sleep disorder.

The employer moved to compel arbitration pursuant to a letter agreement that provided that all disputes related to Plaintiff’s employment would be arbitrated. The contract had a choice-of-law provision that applied Massachusetts law to the employment relationship.

The trial court denied the arbitration petition, finding that the arbitration agreement was unenforceable under Massachusetts law. The California Court of Appeal affirmed.

First, the Court of Appeal found that the arbitration agreement’s choice-of-law provision governed the question of arbitrability.

As the Court explained, although the weaker party to an adhesion contract may avoid enforcement of a choice-of-law provision where enforcement would work substantial injustice, the same argument is not available to the stronger party. In this case, Bingham, the employer and the drafter of the agreement, was the stronger party and thus could not avoid the choice-of-law provision. Furthermore, California strongly favors choice-of-law provisions.

Second, the Court determined that, under Massachusetts law, parties seeking to provide for arbitration of statutory discrimination claims must state clearly and specifically that such claims were covered by the contract’s arbitration clause. The arbitration provision here did do so.

Thus, the Court concluded, the arbitration provision was unenforceable.