This Everything Employment Blog post is one of many in our ongoing discussion regarding the utility of employer use of arbitration agreements.
Arbitration agreements are often designed to keep disputes out of court, but recent decisions show that both how they are drafted and who decides their enforceability can make all the difference. Taken together, Sandler v. Modernizing Medicine, Inc. (9th Cir. 2026) and Wright v. WellQuest Elk Grove, LLC (2026) highlight the growing reality for employers that arbitration agreements are being tested, and courts are not hesitating to intervene where fairness is lacking.
In Sandler, the Ninth Circuit addressed a threshold question that frequently arises in arbitration disputes, that is who decides whether an agreement is enforceable. The employer moved to compel arbitration based on an agreement containing a delegation clause assigning issues of arbitrability to the arbitrator. The district court denied the motion, finding the agreement unconscionable. The Ninth Circuit reversed, holding that because the delegation clause was not specifically challenged, the court was required to enforce it and allow the arbitrator to decide enforceability. The decision reinforces that properly drafted delegation clauses can significantly limit early judicial involvement.
By contrast, Wright reflects the continued scrutiny California courts apply to the substance of arbitration agreements themselves. There, the Court of Appeal affirmed the denial of a motion to compel arbitration, finding the agreement both procedurally and substantively unconscionable. The agreement was presented as a condition of employment and imposed terms that the court found to be insufficiently mutual. The court declined to sever the offending provisions, instead finding that the lack of fairness permeated the agreement as a whole. This holistic approach is a hallmark of California bench law.
Together, Sandler and Wright illustrate the dual pressures facing employers. On one hand, federal courts continue to enforce delegation clauses that shift key questions to arbitrators. On the other, California courts remain focused on whether arbitration agreements are fundamentally fair in structure and application. Employers must account for both dynamics when drafting and implementing arbitration policies.
Practice Tips for Employers
- Use clear delegation clauses: Properly drafted provisions can ensure that arbitrators (not courts) decide enforceability issues.
- Prioritize mutuality: Arbitration agreements must operate as a balanced framework for both parties.
- Review onboarding practices: Agreements imposed as non-negotiable conditions of employment may raise procedural concerns.
- Avoid overreliance on severance: Courts may refuse to enforce agreements that are
fundamentally imbalanced.
We remain ready to assist you with the creation of an arbitration agreement, updates to your existing arbitration agreement, or any other employment challenges you face as an employer in California.
