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A rare ruling on the enforceability of arbitration clauses

For businesses, arbitration represents an efficient and cost-effective means to resolve employment-related disputes outside of the courtroom. Rulings are final and binding with limited grounds for review or appeals. Final decisions are rarely made public, unlike court rulings.

Many judges see arbitration as a process that provides relief to their overloaded dockets. However, one judge saw things differently.

A Contractual Clause Hiding In Plain Sight?

Like many high-profile corporations, Cisco has arbitration clauses as part of their contractual agreements. As a condition of her employment with the San Jose-based company, Ann Bark was presented a lengthy document to read and sign in 1998. A clause in the paperwork covered mandatory arbitration for age discrimination.

San Francisco Superior Court Judge Harold Kahn ruled that the arbitration requirement as part of a larger agreement was unconscionable, both procedurally and substantively. According to the jurist, the clause was hidden deep into a boilerplate form on intellectual property issues.

In his ruling, Kahn claimed that Bark was surprised by the clause when she filed an age discrimination claim. In addition to her "shock," she was also placed in a disadvantageous position against Cisco, a company that possesses resources to cover legal costs.

Cisco argued that Bark was surprised at the clause because she failed to read what she was signing.

The ruling was considered by legal experts to be extremely rare. It also represents a setback for employers and the arbitration clauses in their employment and other agreements. The ripple effects of the decision could spread throughout the country with similar cases waiting to be heard.

Cisco is appealing the decision.

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