Employment Mediation in California: What Employers Should Know

Many California employment lawsuits settle at mediation, and the deal is only as good as the paper signed before everyone goes home. Under Evidence Code section 1123, a settlement document written at mediation stays confidential and inadmissible unless it meets one of the statute’s exceptions, and the common one is that the agreement “provides that it is enforceable or binding or words to that effect.” A term sheet missing that language can leave the employer with a settlement no court will enforce.

What does mediation confidentiality protect?

Nearly everything said or written for the mediation.

Evidence Code section 1119 provides that “No evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible or subject to discovery.” The same rule covers writings, and the statute adds that “All communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation shall remain confidential.”

That gives the company room to talk candidly. An HR director can admit a termination was handled badly. That statement won’t turn up later as an admission, and neither will the company’s first offer. The Supreme Court of California has read the protection broadly. In Cassel v. Superior Court (2011) 51 Cal.4th 113, it held that even private attorney-client conversations about an upcoming mediation were covered, explaining that such communications “like any other communications, were confidential, and therefore were neither discoverable nor admissible.”

The protection has a limit employers should understand. Section 1120 says evidence that is otherwise admissible “shall not be or become inadmissible or protected from disclosure solely by reason of its introduction or use in a mediation.” Showing a damaging email to the mediator doesn’t bury it. Timecards and personnel files that exist apart from the mediation stay discoverable.

What makes a mediated term sheet enforceable?

Express language that the parties intend to be bound.

The leading case is Fair v. Bakhtiari (2006) 40 Cal.4th 189. The parties ended a mediation by signing a handwritten page of settlement terms that included an arbitration clause, but nothing saying the terms were binding. The Supreme Court held the document inadmissible and set a clear rule: “a writing must directly express the parties’ agreement to be bound by the document they sign.” The court explained that “A tentative working document may include an arbitration provision, without reflecting an actual agreement to be bound.”

The fix costs one sentence. A term sheet should state that it is enforceable and binding, that it is admissible under Evidence Code section 1123, and that either party may enforce it under Code of Civil Procedure section 664.6. Section 1123 also exempts an agreement that “provides that it is admissible or subject to disclosure, or words to that effect,” so belt-and-suspenders drafting covers both routes. The employer’s lawyer should bring a term sheet template to the mediation instead of drafting one by hand at 9 p.m.

Who has to sign the term sheet?

The parties, or since 2025, their attorneys.

Code of Civil Procedure section 664.6 lets a court enter judgment on a settlement if the parties stipulate “in a writing signed by the parties outside of the presence of the court or orally before the court.” The version operative January 1, 2025, says a writing is signed by a party if it is signed by “An attorney who represents the party,” or, where an insurer is defending and indemnifying the party, by an agent the insurer authorized in writing, subject to a policy-limits exception.

Attorney signatures make late-evening deals easier to close, but they come with a warning. Section 664.6(d) subjects an attorney who signs “without the party’s express authorization” to professional discipline, absent good cause. The cleaner practice is still to have an authorized company officer sign alongside counsel, and to have the employee sign too. The parties can also ask the court to retain jurisdiction to enforce the settlement “until performance in full of the terms of the settlement,” which the statute allows when they stipulate to it.

One more rule applies to every lawyer at the table, including the employee’s. Evidence Code section 1129 requires lawyers to give their clients a printed disclosure about mediation confidentiality and get a signed acknowledgment, “Except in the case of a class or representative action.” The statute adds that a lawyer’s failure to comply “is not a basis to set aside an agreement prepared in the course of, or pursuant to, a mediation.”

What settlement terms does California restrict?

Two kinds: gag clauses on the facts of certain workplace claims, and no-rehire clauses.

Code of Civil Procedure section 1001 prohibits a settlement provision that restricts “the disclosure of factual information related to a claim filed in a civil action or a complaint filed in an administrative action” involving sexual harassment, sexual assault, or workplace harassment, discrimination, or retaliation under the Fair Employment and Housing Act. Two carve-outs matter at mediation. The claimant may ask for a provision that shields the claimant’s identity, and the statute “does not prohibit the entry or enforcement of a provision in any agreement that precludes the disclosure of the amount paid in settlement of a claim.” The amount can stay confidential. The facts generally can’t.

Section 1002.5 bars a provision in “An agreement to settle an employment dispute” that keeps the employee from future employment with the employer or its affiliates. The parties may still agree to end a current employment relationship. A no-rehire clause is allowed only if the employer “has made and documented a good faith determination, before the aggrieved person filed the claim that the aggrieved person engaged in sexual harassment, sexual assault, or any criminal conduct.” Many standard release templates still carry a no-rehire paragraph, and it should come out unless that exception applies. The rules for agreements signed before any claim is filed are different, and the firm’s guide to severance agreements and releases covers them.

How should the company prepare for mediation?

With real settlement authority and a defensible exposure number.

The person attending for the company should have real settlement authority, or be able to reach someone who does on short notice. If an employment practices liability (EPLI) carrier is involved, its adjuster needs the same preparation, because many policies require the carrier’s consent before any settlement. The mediation brief should give the mediator a defensible exposure number, built from the payroll data and the claims actually pleaded, not from the demand letter. Mediators push both sides, and a company that can show its math tends to move less.

A PAGA claim adds a step. A settlement of a PAGA action needs court approval and notice to the Labor and Workforce Development Agency, so the term sheet should say so and allocate the risk if the court rejects it. The firm’s post on PAGA settlement approval explains that process. For a case still at the demand stage, the response to an employee demand letter often sets up whether early mediation makes sense.

Steps to take before an employment mediation

1. Keep the litigation hold in place on the personnel file, payroll and timekeeping data, emails and texts, and the policies the claims challenge, because a mediation that fails sends the case straight back to discovery.
2. Calendar the mediation date and any court or arbitration deadlines it doesn’t pause, and confirm the employment practices liability (EPLI) carrier has notice and will attend or give consent.
3. Identify who will attend for the company and who holds settlement authority, and make sure no one takes any action against a current employee-plaintiff that could look like retaliation.
4. Pull the documents the exposure analysis depends on, such as wage statements, time records, the termination file, and any internal complaint the employee made.
5. Talk to a lawyer before the mediation about the brief, the opening number, and the term sheet template, and before signing anything when the session ends.

Mediation is the point where most of the money in an employment case actually gets decided. Experienced employer-side employment litigation in California treats the term sheet as a contract to be drafted in advance, because a lost settlement usually costs more than the one the parties agreed to.

FAQ

Can the employee use what the company said at mediation as evidence?

Generally, no. Evidence Code section 1119 makes statements and admissions made for, during, or under a mediation inadmissible and not discoverable in later civil proceedings. The protection covers what was said, not the underlying facts. A payroll record or email that exists apart from the mediation stays discoverable under section 1120, even if a party showed it to the mediator.

Can the settlement amount stay confidential in a harassment case?

Yes. Code of Civil Procedure section 1001 bars provisions that restrict disclosure of factual information about covered workplace harassment and discrimination claims (including retaliation for opposing them), but it expressly allows a provision that keeps the settlement amount confidential. The claimant may also request a provision shielding the claimant’s identity. Confidentiality clauses carried over from older templates should be checked against the current statute before signing.

Is a handwritten term sheet enough to settle the case?

It can be, if it is signed and says it is enforceable or binding, or words to that effect. Without that language, Fair v. Bakhtiari holds the document stays inadmissible under the mediation confidentiality statutes, which leaves the employer unable to prove the deal. A term sheet should also cite Code of Civil Procedure section 664.6 so either side can move to enforce it.

Can our lawyer sign the settlement for the company?

Since January 1, 2025, Code of Civil Procedure section 664.6 treats a writing as signed by a party if the party’s attorney signs it. The attorney needs the client’s express authorization, and an attorney who signs without it faces possible discipline. Many employers still have an officer sign as well, which removes any later question about authority.

If your company is heading to mediation

If your company has a mediation scheduled in an employment lawsuit, the exposure analysis and the term sheet usually matter more than the opening statement. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving mediation and settlement of employment disputes. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.

Sources

The statutes are Evidence Code sections 1119, 1120, 1123, and 1129, and Code of Civil Procedure sections 664.6, 1001, and 1002.5. The decisions are Fair v. Bakhtiari (2006) 40 Cal.4th 189 and Cassel v. Superior Court (2011) 51 Cal.4th 113.

This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.