Reported / Citable
Background
After nearly 20 years at San Diego Gas & Electric, Sylvia Morales was fired and sued for disability discrimination, failure to accommodate, failure to engage in the interactive process, retaliation, and wrongful termination in violation of public policy. Her theories arose under the Fair Employment and Housing Act, the California Family Rights Act, and the common-law rule barring termination that violates fundamental public policy.
SDG&E relied on documents Morales signed when hired. They required arbitration of disputes regarding an aspect of the employment agreement or conduct allegedly violating that agreement, including certain termination disputes. The trial court compelled arbitration, and Morales sought writ review.
The Court’s Holding
The Court of Appeal ordered the motion to compel arbitration denied. Contract language controls the scope of arbitration, and this wording was materially narrower than clauses covering every dispute related to or connected with employment. Morales did not allege that SDG&E breached the offer letter or another promise in the employment agreement.
Her claims instead enforced independent, unwaivable statutory protections and the public-policy exception to at-will employment. A reference to termination did not expand the clause beyond disputes about the agreement itself. Because the claims neither challenged an aspect of that agreement nor alleged an act violating it, the parties had not agreed to arbitrate them. The court therefore did not need to decide Morales’s additional enforceability arguments.
Key Takeaways
- An arbitration clause reaches only disputes covered by its actual text; an employment relationship alone is not enough.
- Language limited to violations of an employment agreement may exclude FEHA, CFRA, and public-policy claims arising independently of the contract.
- Mentioning termination in a clause does not necessarily capture every legal claim following a discharge.
- Employers should compare older onboarding forms with current dispute-resolution goals, while employees should separate contract claims from independent statutory rights.
Why It Matters
The ruling is a drafting lesson with immediate litigation consequences. California courts generally enforce arbitration agreements according to their terms, but they will not supply broad “related to employment” language that the parties did not use.
Businesses relying on legacy agreements should audit scope provisions before assuming a statutory claim is arbitrable. Practitioners opposing arbitration should map each cause of action to its legal source and ask whether it truly concerns a promise in the signed agreement.