Kleiner Perkins Caufield & Byers (KPCB), a venture capital firm that helped companies like Amazon and Google get startup money, will not be able to arbitrate its current discrimination case. The San Jose Mercury News reported that Ellen Pao, a former partner at KPCB, filed a sex discrimination claim against the firm. She claimed that she was punished and excluded from important opportunities in the firm after she complained to senior management about being pressured into sex with a former colleague. Pao claims this created a hostile workplace and led to her wrongful termination. KPCB says that Pao was fired because she was not meeting performance standards and because of other unrelated problems.
Due to the nature of this lawsuit, the firm hoped to use Pao’s employment agreement, which had an arbitration clause for disputes with the company, to force the case into arbitration. The firm wanted to keep the details of the matter and the firm’s financial information private. KPCB asked the court to allow the case to go into binding arbitration instead of a public trial. The California Supreme Court ruled that Pao’s employment agreement could not be used to compel arbitration of the sex discrimination case because the agreement was not with KPCB, but with other companies. The case will now go to trial in California state court.
Employment agreements, sometimes called employment contracts, can cover a variety of topics. They create a contractual relationship between an employer and an employee. These agreements can be straightforward with little negotiation like in retail employment where the company sets nearly all of the terms of employment. Or they can be more complicated and require significant negotiation over many of the terms of employment. Either way employment agreements can have great effects on employers and employees beyond setting hours, pay, and benefits. For instance, employers can and frequently do have arbitration clauses in their employment agreements. These clauses can be designed to cover seemingly minor disputes to more complicated claims like sex discrimination. Mandatory arbitration clauses are legal and courts generally do not get involved in disputes covered by the clauses. However in the case of Pao, her arbitration clause was in contracts with companies associated with the firm, but not with the firm itself, so the courts allowed the lawsuit to go to trial.
Arbitration is a form of alternative dispute resolution that attempts to resolve and keep legal matters and disagreements out of court. Unless required by law or contract, arbitration of disputes is voluntary. Another feature of arbitration is that decision can be binding, as in the Pao case, or non-binding. Binding arbitration means that whatever the arbitrator decides is the final verdict and will be applied to both parties. Non-binding arbitration allows the parties to decide whether the decision will work and be applied to their dispute.
Washington State law allows for arbitration, sometimes requires arbitration in certain matters, and sets the rules for arbitrated disputes. If you have questions about employment agreements, arbitration clauses, or feel that you have suffered from discrimination at work, contact a Washington employment attorney.