Morales: A Narrow Arbitration Clause Did Not Reach FEHA and CFRA Claims

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In Morales v. Superior Court, a nearly 20-year employee sued San Diego Gas & Electric after termination, alleging FEHA, CFRA, and public-policy claims. The Court of Appeal held that the operative arbitration clause was too narrow to reach those claims and directed the trial court to deny arbitration.

The claims arose from statutes and public policy

Morales alleged disability discrimination, failure to accommodate, failure to engage in the interactive process, retaliation, and wrongful termination in violation of public policy.

Her theories did not allege breach of the written employment agreement or require interpretation of its terms.

The clause used limited language

The operative 2005 agreement required arbitration of disputes regarding an aspect of that agreement or acts violating it. The employer argued that the agreement’s at-will language swept in claims based on exceptions to at-will employment.

The appellate court rejected that reasoning. A reference to at-will status did not transform independent statutory and public-policy duties into disputes about the agreement.

Arbitration depends on consent and scope

California’s policy favoring arbitration does not expand an agreement beyond the disputes the parties actually agreed to arbitrate.

The court compared the specific language with broader employment-arbitration provisions and asked whether the text reasonably covered the asserted dispute.

Mandate issued to deny the motion

The court granted writ relief and directed the superior court to vacate its order compelling arbitration and enter a new order denying the motion.

The holding is clause-specific. Employers and employees should preserve every version of hiring documents and identify the precise agreement, claim source, and wording before assuming a dispute belongs in arbitration.

Limits and practical implications

The court did not create a categorical rule against employment arbitration. Its holding follows the language of this clause and the independent source of the pleaded statutory and public-policy duties. A broader clause, a delegation provision, a later amendment, or claims requiring interpretation of the employment agreement may present a different problem. The operative contract and every incorporated or superseding document must therefore be identified before the scope analysis begins.