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California Court Says Arbitration Clause Invalid When Paired With Conflicting Confidentiality Terms

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The California Court of Appeals made a big point in one of its recent decisions. It stuck to the state's tough standards for looking at employment arbitration agreements. In the case of Gurganus v. IGS Solutions LLC from September 2025, the court took a close look at an employee's arbitration agreement. It also checked out a separate confidentiality agreement that got signed on the same day. In the end, the court said the arbitration clause was unconscionable. That meant it could not be enforced.

The employee had put their name on an arbitration agreement. This one said all disputes between the employee and the employer had to go through arbitration. At the same time, though, the confidentiality agreement had its own clause. That clause lets the employer take disputes to state courts or federal courts. Those courts would be where the company's main business was based.

The appellate court saw this as a real problem with balance. The employer could still go to court for its own claims. Things like enforcing confidentiality rules would fit there. But the employee's claims had no such option. Wage issues or discrimination cases got stuck in arbitration only. Without that kind of mutuality, the whole arbitration clause came off as unfair. It felt one-sided. That setup matches what California law calls procedural and substantive unconscionability.

When the court threw out the arbitration agreement as unenforceable, it made something clear. You cannot judge arbitration clauses all by themselves. If multiple employment agreements get signed together, courts will read them as a group. They want to check the overall fairness and mutuality across the board.

This ruling acts like a warning for employers in California. It really drives home how key it is to keep arbitration provisions in line with other employment papers. Employers should look at all their documents as a whole. Getting legal advice helps too. That way, they can spot and fix any conflicting terms. Those could mess up arbitration setups down the road in disputes.

California courts keep putting fairness and mutuality first. They do this even over standard arbitration wording. That holds no matter if everything got agreed to in writing.