Take away the jury waiver, which California won’t enforce if it was signed before a dispute arose, and an employer that wants to avoid a jury still has Code of Civil Procedure section 638. A judicial reference clause lets the parties send a case to a privately chosen referee whose decision stands as the court’s decision, with the same review a trial court’s ruling would get. Whether that helps depends on the clause’s wording.
Why doesn’t a predispute jury waiver work in California?
Because the Legislature hasn’t authorized one. In Grafton Partners L.P. v. Superior Court (2005) 36 Cal.4th 944, the California Supreme Court reviewed a contract clause calling for a court trial in place of a jury and held, “we conclude section 631 does not authorize predispute waiver of that right.” The court affirmed the Court of Appeal, which had refused to enforce the clause.
The case involved a business’s engagement of an accounting firm, not an employment agreement, but the rule applies to any contract. The court explained that “it is for the Legislature, not this court, to determine whether, and under what circumstances, a predispute waiver of jury trial will be enforceable in this state.” A jury waiver buried in an offer letter or handbook acknowledgment is, under that rule, a clause the employee can ignore.
The same opinion pointed to the alternatives. The court said that “when the Legislature has authorized waiver of the right to trial in a court of law prior to the emergence of a dispute, it has done so explicitly,” naming the arbitration and reference statutes, and it found it “rational for the Legislature to promote the use of arbitration and reference hearings by permitting predispute agreements, while not according the same advantage to jury trial waivers.”
What does section 638 allow?
A referee appointed by agreement or on a party’s motion. Under Code of Civil Procedure section 638, a referee may be appointed on the parties’ filed agreement, “or upon the motion of a party to a written contract or lease that provides that any controversy arising therefrom shall be heard by a referee if the court finds a reference agreement exists between the parties.” The second path is what makes a clause in an employment agreement enforceable after a lawsuit is filed.
The section offers two kinds of reference. A general reference sends the referee “To hear and determine any or all of the issues in an action or proceeding, whether of fact or of law, and to report a statement of decision.” A special reference asks the referee only “To ascertain a fact necessary to enable the court to determine an action or proceeding.”
The difference matters at the end of the case. Under section 644(a), in a consensual general reference, “the decision of the referee or commissioner upon the whole issue must stand as the decision of the court,” and judgment may be entered “in the same manner as if the action had been tried by the court.” In every other reference, subdivision (b) says the referee’s decision “is only advisory,” and the court decides whether to adopt it.
How does a reference compare with arbitration?
It keeps the case inside the court system. The referee’s decision becomes a judgment of the superior court, and under section 645, it “may be excepted to and reviewed in like manner as if made by the court.” That means a party who loses can appeal the way it would from a bench trial, which some employers value when a large claim is at stake and an error by the decision-maker could otherwise be hard to correct.
Arbitration offers more privacy and a different set of procedural rules, and it brings its own body of law on enforceability and costs. A reference offers a decision-maker the parties chose, a schedule that doesn’t depend on a crowded court calendar, and appellate review. Neither one decides the merits. An employer still has to defend the claim on the facts.
| Option | Enforceable if signed before a dispute? | Who decides | Review of the decision |
|---|---|---|---|
| Jury waiver for a court trial | No, under Grafton Partners | Trial judge | Ordinary appeal |
| Judicial reference under section 638 | Yes, if the court finds a reference agreement exists | Privately chosen referee | As if made by the court (section 645) |
| Arbitration agreement | Yes, subject to the arbitration statutes and defenses | Arbitrator | Limited review under the arbitration statutes |
Who picks the referee, and who pays?
The parties, if they can agree. Section 640(a) says the court “shall appoint as referee or referees the person or persons, not exceeding three, agreed upon by the parties.” If they can’t agree, each side submits up to three nominees, and the court appoints from those against whom there’s no legal objection. Taking part in that process doesn’t waive objections.
The grounds for objecting are set by section 641. They include family ties to a party, business relationships with a party, an interest in the outcome, an unqualified opinion on the merits, and “a state of mind in the potential referee evincing enmity against or bias toward either party.” A referee who has done regular work for the company can draw an objection, so an employer should choose a nominee whose independence won’t be questioned.
Fees follow the agreement. Under section 645.1(a), when a referee is appointed under section 638, “the referee’s fees shall be paid as agreed by the parties,” and if the parties don’t agree and ask the court to resolve it, the court may order payment. A reference clause is a contract term, and Civil Code section 1670.5 lets a court refuse to enforce any clause it finds “unconscionable at the time it was made.” An employer that drafts the clause to push referee fees onto a worker is handing the employee an argument against it.
When does a reference make sense for an employer?
When the company wants a trained decision-maker and appellate review, and the clause was built for employment cases. A reference can suit an executive’s contract claim, a dispute over equity or commissions, or a case where the employer expects technical evidence that a jury may struggle with. It’s less useful when the employer’s main goal is confidentiality, which a court proceeding doesn’t provide.
Drafting choices decide most fights over these clauses. A clause that says disputes arising from the employment relationship will be heard by a referee, that it’s a general reference under section 638, how the referee will be chosen, and who pays fees gives the court what it needs to find an agreement exists. A vague clause, or one copied from a commercial lease, invites a fight over scope before the case even starts. Employers that also have an arbitration agreement should check that the two don’t conflict, since an employee will use the conflict to argue neither applies.
A motion under section 638 isn’t the only way to shape who hears a case. The post on peremptory challenges under CCP 170.6 covers removing an assigned judge, which is a separate tool with its own short deadline.
What should an employer do when an employee sues despite a reference clause?
- Preserve the signed agreement containing the reference clause, the onboarding records showing how it was presented and signed, every version of the handbook and policies, and the employee’s personnel file under a litigation hold.
- Calendar the response deadline on the summons, and check whether the employee also signed an arbitration agreement and whether the EPLI policy has notice requirements.
- Identify the witnesses and the decision-makers, and don’t take any action against the employee that could look like retaliation for filing suit.
- Pull the documents the motion depends on, such as the full reference clause, any fee terms, and the complaint’s claims, to compare them with the clause’s scope.
- Talk to a lawyer before answering the complaint, filing any other motion, or proposing a referee to the employee’s lawyer.
Employers in these disputes can find more on judicial reference defense strategy for California employers on the firm’s employment defense page.
Judicial reference questions from California employers
Can we put a jury waiver in our offer letters?
It won’t be enforced if it was signed before the dispute arose. Grafton Partners held that section 631 doesn’t authorize predispute jury waivers, and that only the Legislature can change that. An employer that wants to avoid a jury needs an arbitration agreement or a reference clause that the statutes allow, drafted for the employment setting.
Is a referee’s decision final like an arbitration award?
It’s final in a different way. In a consensual general reference, section 644(a) makes the decision stand as the court’s, and judgment is entered as if the court tried the case. Section 645 then allows review as if the court made the decision, so the losing side can appeal on the record.
Can the court refuse to send the case to a referee?
Yes, if it doesn’t find an agreement. Section 638 requires the court to find “a reference agreement exists between the parties” before appointing a referee on a party’s motion. The employee may argue the clause doesn’t cover the claims, wasn’t agreed to, or is unconscionable. The employer’s records of how the agreement was presented and signed are its first answer.
Do we have to pay the referee’s whole fee?
Not unless the agreement says so. Section 645.1(a) says the fees “shall be paid as agreed by the parties,” and lets the court decide if they can’t agree and ask it to. An employer that pays most or all of the fee in an employment case makes the clause harder to attack as one-sided.
If an employee has sued your company despite a reference clause
If your company’s employment agreement calls for a referee and a former employee has filed suit anyway, the clause’s wording and how it was signed usually decide whether a referee hears the case or it stays on the court’s calendar. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving disputes over enforcing judicial reference agreements. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Code of Civil Procedure sections 638, 640, 641, 644, 645, and 645.1, and Civil Code section 1670.5. The decision is Grafton Partners L.P. v. Superior Court (2005) 36 Cal.4th 944.
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.