The recent California case Vazquez v. Sanisure, Inc., provides an important lesson on one of the basic premises of arbitration; an arbitration agreement is tied to the underlying contract containing it and as such it can be revoked on the same grounds as exist for the revocation of any contract.

Initially hired by the company in 2019, employee Vazquez signed, as part of the hiring process, an agreement to “utilize binding arbitration as the sole and exclusive means to resolve all disputes that may arise from or be related in any way to [her] employment.” The agreement also included a class or collective action waiver and noted that any changes to the agreement could only be made in writing.

Vazquez terminated her employment in May 2021. Four months later she negotiated a new employment offer and returned to work. During negotiations the parties did not discuss whether Vazquez would be required to sign a new arbitration agreement or whether claims related to her employment would be subject to arbitration. Vazquez’s second stint of employment ended in July 2022.

In October of that year, Vazquez filed a class action suit alleging a failure to provide accurate wage statements during her second stint of employment. The employer requested Vazquez submit her claims to binding arbitration in accordance with the arbitration agreement she signed when initially hired in 2019. This attempt to compel the matter to arbitration was denied and a subsequent appeal was filed.

Ultimately, the Court of Appeal upheld the lower court’s denial finding that while an employer and employee can agree to arbitrate claims related to their employment relationship, termination of that relationship can revoke the arbitration agreement.

What Does It All Mean?

An arbitration agreement, absent language to the contrary, is applicable only to the current employment relationship. Under such circumstances, subsequent employment requires the parties to enter into a new arbitration agreement that will govern the renewed/subsequent employment relationship.

In other words, when there is no evidence that the parties agreed to arbitrate claims arising from a subsequent employment relationship, any claims arising solely from that subsequent relationship are likely not subject to arbitration.