When Arbitration Agreements Fail: Key Lessons from Velarde v. Monroe Operations, LLC
June 2025 | Employer Advisory

Arbitration remains a cornerstone strategy for employers seeking to manage workplace disputes
efficiently and privately. However, the recent California Court of Appeal decision in Velarde v.
Monroe Operations, LLC (June 2025, No. G063626) serves as a stark reminder that an
arbitration agreement's enforceability depends not just on its language, but on the integrity of the
process used to secure it.

This case underscores a critical principle: even legally sound arbitration language can be
rendered worthless if courts find the agreement was improperly presented or
explained—particularly in the employment context where power imbalances are inherent.

The Case That Should Concern Every Employer
Newport Healthcare hired Karla Velarde as a care coordinator. On her first day, she faced a
daunting stack of over 30 onboarding documents, including a five-page arbitration agreement
referencing complex procedural frameworks such as the Federal Arbitration Act and Federal
Rules of Civil Procedure.

When Velarde expressed concern about the agreement's complexity, an HR representative
assured her that signing was necessary to begin work and characterized the document as simply
helping to "resolve issues more easily, without the need for lawyers." Relying on this
representation, Velarde signed.

After her employment ended and Velarde filed suit on various employment claims, Newport
moved to enforce the arbitration agreement. Both the trial court and Court of Appeal declared it
unenforceable—a costly lesson in the importance of proper implementation.

Why the Court Rejected the Agreement
The court identified fatal flaws in both the presentation process and the substance of what
employees were told, establishing grounds for both procedural and substantive unconscionability.

Procedural Unconscionability: A Flawed Presentation Process
The court scrutinized the circumstances surrounding Velarde's signature, finding several
concerning elements:

• Information overload: The arbitration agreement was buried among dozens of other
  documents
• Pressure tactics: A manager stood by during signing, creating implicit coercion 
• No meaningful review time: Velarde had no advance notice or opportunity to carefully
  consider the terms
• Last-minute presentation: The agreement appeared only at the moment of signature

This highlights a crucial vulnerability: when arbitration agreements are presented as routine
paperwork in a high-pressure onboarding environment, enforceability becomes questionable.

Substantive Unconscionability: Promises vs. Reality
More damaging was the fundamental mismatch between what Velarde was told and what she
actually agreed to. The HR representative's assurance that arbitration would be "simple" and
wouldn't require lawyers directly contradicted the agreement's actual terms, which:

• Imposed formal arbitration procedures governed by federal rules
• Required each party to bear their own attorney fees unless an arbitrator ruled otherwise
• Created a complex legal framework far from the "simple" process described

The court emphasized that employees must understand the rights they are waiving and the
mechanisms they are accepting. When employers mischaracterize arbitration as informal while
imposing formal legal procedures, they undermine the entire agreement's validity.

Strategic Recommendations for Employers
The Velarde decision does not eliminate arbitration as a viable tool, but it significantly raises the
standards for proper implementation. Employers should adopt these best practices:

Present Arbitration Agreements as Standalone Documents
Remove arbitration clauses from general onboarding packets. Present them as distinct, important
documents that deserve focused attention and consideration.

Provide Adequate Review Time
Allow new hires meaningful time to review and understand the agreement. Consider providing
the document before the first day of work, enabling consultation with counsel if desired.

Ensure Accurate HR Communications
Train HR personnel on the actual terms and implications of your arbitration agreements. Well-
intentioned but inaccurate explanations—such as claiming employees "won't need
lawyers"—can invalidate otherwise sound agreements.

Maintain Transparency About Employment Conditions
While arbitration agreements can legally be conditions of employment, this requirement must be
communicated clearly and without misleading information or undue pressure.

Document the Process
Create clear protocols for presenting arbitration agreements and train staff consistently on proper
procedures to ensure uniform, defensible implementation.

The Bottom Line
Velarde v. Monroe Operations reinforces that arbitration agreement enforceability requires both
careful drafting and thoughtful implementation. Courts increasingly scrutinize not just what
agreements say, but how they are presented and whether employees genuinely understood their
commitments.

The decision serves as a valuable reminder that shortcuts in the implementation process can
render even the most carefully crafted arbitration language ineffective. Employers who invest in
proper presentation procedures will find their arbitration agreements far more likely to withstand
judicial scrutiny.

At García & Gurney, we help employers design robust arbitration agreements and train HR
teams on implementation best practices. If your organization currently uses arbitration
agreements—or is considering their adoption—now is an opportune time to evaluate and
strengthen your approach.

For more information about arbitration best practices or to schedule a consultation, contact
García & Gurney.