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The California Court of Appeal’s 2024 decision in Cook v. University of Southern California (2024) 102 Cal.App.5th 312 and the California Supreme Court’s follow-on discussion in Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478 has turned a spotlight on employer arbitration agreements and Plaintiffs’ lawyers are increasingly invoking Cook to challenge motions to compel arbitration.
What Cook Said
In Cook, the Court of Appeal refused to enforce USC’s arbitration agreement, finding it substantively unconscionable in several key respects. The agreement:
- Swept in essentially all disputes between the employee and USC, not just those arising out of the employment relationship.
- Was drafted to operate with an effectively infinite duration, surviving termination and revocable only through a particular written agreement signed by specific USC
- Imposed asymmetrical obligations, requiring the employee to arbitrate claims against USC’s related entities, while not clearly obligating those related entities to arbitrate their own claims against the employee
The court concluded that the agreement was heavily one-sided and declined to salvage it by severing the language it found to be unenforceable.
How Courts Are Responding
Employers might be tempted to think that the large and all-encompassing nature of USC serves as a meaningful difference that brings their business outside of Cook. After all, the Cook court made specific note of the trial court’s analysis that if Cook was “the victim of a botched surgery in a USC hospital in 15 years, her claims could be subject to the arbitration agreement.” However, appellate decisions since Cook show a mixed picture:
- Some courts have distinguished Cook and enforced agreements where the language can reasonably be read as limited to employment-related disputes, or where any one-sidedness is theoretical and has little practical effect in the context of a smaller
- Other courts, including several Los Angeles Superior Court departments, have denied motions to compel when they see the same language that troubled the Cook court regardless of its practical effect.
The bottom line: Cook has become a standard plaintiff’s playbook argument, and courts are now reading arbitration clauses more closely than many employers assume.
Drafting Lessons: Where Agreements Are Most Vulnerable
In light of Cook, Ramirez, and the growing body of post-Cook decisions and tentative rulings, employers should reassess their arbitration forms in at least four areas:
1. Tie the Scope to Employment
Agreements that purport to cover “all disputes of any kind” between the employer and employee are inviting Cook-style attacks. A safer approach is to limit coverage to claims arising out of or relating to:
- the employee’s employment or separation, and
- the employment relationship with the company (and any clearly identified affiliates).
2. Revisit Duration and Termination Mechanics
Indefinite survival language is not automatically fatal, but pairing it with revocation or modification provisions that only the employer can realistically trigger increases risk. Employers should consider:
- clarifying that the agreement applies to disputes arising during employment (and, if desired, for a defined period thereafter), and
- ensuring that any modification or termination mechanism is bilateral and prospective only.
3. Ensure Real Mutuality—Including for Affiliates and Carve-Outs
A modern arbitration agreement should be genuinely two-way. That means:
- affiliates, officers, and related entities that enjoy the benefit of employee arbitration should also be bound when they bring covered claims, and
- carve-outs (for example, injunctive relief, IP claims, or certain statutory claims) should not overwhelmingly favor claims the employer is likely to pursue.
4. Use Severability as a Backstop, Not a Crutch
A strong severability clause is still important, but Cook and subsequent cases show that courts will not always edit an agreement that is fundamentally unbalanced. The primary goal should be to draft a fair, enforceable agreement up front, not to rely on severance to rescue problematic terms later.
What Employers Should Do Now
Given the litigation trend, California employers should not wait for a Cook-based challenge in their next lawsuit before acting. Practical next steps include:
- Audit existing arbitration forms
- Prioritize high-risk populations update and standardize templates
- Update and standardize templates
- Plan a thoughtful roll-out
Courts will still enforce reasonable and fair arbitration agreements, but they are clearly signaling that “maximally broad” and one-sided agreements are vulnerable. Employers who proactively tighten their arbitration programs now will be in a far stronger position when the next claim arrives.
JMBM’s Labor & Employment attorneys counsel businesses and management on workplace issues, helping to establish policies that address problems and reduce job-related lawsuits. We act quickly to resolve claims and aggressively defend our clients in all federal and state courts, before the Department of Labor, the NLRB, and other federal, state and local agencies, as well as in private arbitration forums. We represent employers in collective bargaining negotiations and arbitration. If you have questions or need guidance on how these changes may affect your business, please contact a JMBM attorney.
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