In Gurganus v. IGS Solutions LLC (2025), the California Court of Appeal affirmed a trial court’s denial of an employer’s attempt to force an employee into arbitration. The court ruled that an employer’s arbitration agreement was unconscionable after determining that the trial court could look beyond the arbitration agreement and consider it together with the employer’s confidentiality and non-disclosure agreement to determine the net effect of both agreements.
When the employee initially completed onboarding documents, they did not include an agreement to arbitrate or mention arbitration. About five months later, the employer asked the employee to sign several additional employment documents, including an arbitration agreement and a confidentiality and non-disclosure agreement.
The arbitration agreement contained a broad confidentiality provision that prohibited a party from disclosing any information in the arbitration to any person not involved in the arbitration. The agreement also stated that it was not a required condition of employment and that the employee could opt out. The confidentiality and non-disclosure agreement, signed by the employee at the same time, permitted the employer alone to bring disputes to court and seek injunctive relief without a bond or proof of actual damages. In contrast to the arbitration agreement, the confidentiality and non-disclosure agreement did not say that the employee could opt out or that it was not a condition of employment.
The court interpreted the arbitration agreement and the confidentiality and non-disclosure agreement together to determine whether the arbitration agreement was unconscionable. It was determined that there was a lack of mutuality that was substantively unconscionable because the arbitration agreement required arbitration of any employment-related dispute, which is more likely to be brought by an employee, while expressly excluding from arbitration claims that are more likely to be brought by the employer against its employees. The court also concluded that the arbitration agreement’s confidentiality clause was substantively unconscionable because it was so broad that it could hamper the employee’s ability to investigate or interview witnesses as part of their informal discovery.
The court also stated that arbitration contracts are typically adhesive, as they are drafted by the party with greater bargaining strength and imposed upon the other party, usually on a “take it or leave it” basis. It also stated that the employer had failed to raise any specific arguments in support of its claim that the arbitration agreement was not a contract of adhesion, and had therefore forfeited this claim.
Gurganus has implications for any employer seeking to enforce an arbitration agreement under California law. It highlights the importance of ensuring that contract terms are clear and consistent not only within the arbitration agreement, but also throughout all employment documents. In determining the enforceability of an arbitration agreement, courts can evaluate arbitration clauses in the context of all employment documents that an employee signed. Employers who wish to minimize legal challenges to compel arbitration should closely evaluate their arbitration agreements and other employment documents to ensure that they do not favor the employer’s interests to the extent that they lack mutuality, present them transparently at the start of employment with an opportunity to understand the documents, and maintain consistency across all onboarding documents so that the overall process appears fair and voluntary.
Gurganus v. IGS Solutions LLC, No. A170738.