In 2024, the California Court of Appeal issued a significant decision in Cook v. University of Southern California that serves as an important reminder that, despite the strong public policy favoring arbitration, employment arbitration agreements must still meet basic standards of fairness and mutuality to be enforceable. The case did not turn on opposition to arbitration itself, but on the breadth, duration, and one-sided nature of the agreement the employer sought to enforce.
USC is a large, complex institution with statewide and international reach. It operates numerous educational programs, hospitals, clinics, research facilities, and affiliated entities, and employs a vast workforce across academic, medical, and administrative settings. That institutional scale mattered to the court’s analysis, because the arbitration agreement at issue was drafted broadly enough to encompass disputes involving not only the university itself, but also a wide range of related entities and individuals across that sprawling system.
The plaintiff, a former employee of the University of Southern California, filed suit alleging discrimination, harassment, retaliation, and related employment claims. USC moved to compel arbitration based on a stand-alone arbitration agreement the employee had signed as a condition of employment. The trial court denied the motion, finding the agreement unconscionable and declining to sever its offending provisions. The Court of Appeal affirmed.
At the outset, the Court of Appeal confirmed that USC had met its initial burden of establishing the existence of an arbitration agreement. The employee’s assertion that she did not recall signing the agreement was insufficient to defeat enforcement at that stage. As the court reiterated, an employee who signs an agreement is generally bound by it absent fraud, duress, or other recognized defenses.
The court then turned to unconscionability, which under California law requires both a procedural and substantive component, evaluated on a sliding scale. The procedural unconscionability was relatively modest but undisputed, as the agreement was presented on a take-it-or-leave-it basis as a condition of employment. The decisive issue was substantive unconscionability.
The Court of Appeal identified three independent features of the agreement that rendered it substantively unconscionable. First, the scope of the agreement was extraordinarily broad. By its plain terms, it required the employee to arbitrate all claims against USC and a wide range of affiliated entities and individuals, whether or not the claims arose out of her employment. The court rejected USC’s argument that the agreement should be judicially narrowed to employment-related claims, emphasizing that unconscionability is evaluated based on the agreement’s language at the time it is made, not on how an employer later proposes to interpret it.
Second, the agreement was unconscionable because of its indefinite duration. The arbitration obligation survived termination of employment and could be revoked only through a written agreement signed by the university president. The court concluded that this effectively bound the employee for life, requiring arbitration of claims that might arise years or decades later and that had no meaningful connection to her employment.
Third, the agreement lacked mutuality. While it required the employee to arbitrate claims against USC and its officers, trustees, administrators, employees, and agents, it did not impose reciprocal obligations on those related entities to arbitrate claims they might have against the employee. The court found this one-sided allocation of rights unjustified and inconsistent with the requirement that arbitration agreements contain at least a modicum of bilaterality.
Having found multiple substantively unconscionable provisions, the Court of Appeal upheld the trial court’s refusal to sever and enforce the remainder of the agreement. The court agreed that severance would require rewriting the contract in a way that fundamentally altered its nature and would improperly reward the employer for drafting an overreaching agreement. The agreement, the court concluded, was permeated by unconscionability.
Cook v. USC illustrates that California courts continue to closely scrutinize employment arbitration agreements, even in the wake of federal and state decisions enforcing arbitration in many contexts. Employers remain free to require arbitration of employment disputes, but the agreement must be reasonably limited in scope, of fair duration, and genuinely mutual. Arbitration cannot be imposed as a lifetime waiver of access to the courts for claims unrelated to the employment relationship.
For employers, the case underscores the importance of careful drafting and periodic review of arbitration agreements. Overly broad, indefinite, or one-sided provisions may jeopardize enforceability entirely, leaving the employer without the benefit of arbitration at all. Cook reinforces that arbitration is favored as an alternative forum, not as a mechanism to secure unfair procedural advantages.