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Total Articles: 39

Pay the Piper – California Employers Pressed to Pay Arbitration Fees or Risk Harsh Consequences

California employers may face harsh consequences for failing to pay arbitration fees on time under a bill (Senate Bill 707) signed by Governor Gavin Newsom on October 13, 2019. The new law go into effect on January 1, 2020.

California AB 51 Bans Mandatory Employment Arbitration Agreements

On October 13, 2019, California Governor Gavin Newsom signed Assembly Bill (AB) 51 into law, banning most employment arbitration agreements in California starting January 1, 2020. This new law is expansive in scope but short on certainty, as it raises several questions and will likely face legal challenges.

New California Law Prohibits Most Mandatory Arbitration Agreements—For Now

Under a new law just signed into effect by the California Governor and set to take effect on January 1, 2020, employers will no longer be able to compel workers into arbitration for state discrimination claims or those brought under the Labor Code.

New California Law Attacks Mandatory Arbitration Again ... But Is It More Bark Than Bite?

California has joined a number of states in passing legislation purporting to prohibit mandatory arbitration agreements for sexual harassment and other claims. Such laws have gained popularity in the wake of the #MeToo movement, but are subject to challenge under Federal Arbitration Act (FAA) preemption principles.

Third Time’s a Charm for AB 51

California employers received some harsh news: starting on January 1, 2020, employers may not require employees to sign mandatory arbitration agreements.

Easily “Shocked”? At Least for Wage Claims, California Supreme Court Lowers Standard for Unconscionability in Arbitration Agreements

In OTO, L.L.C. v. Kho, the California Supreme Court refused to enforce an employee’s arbitration agreement on the basis that it was unconscionable. Unconscionability has long been a common-law defense to contract enforcement. What makes OTO v. Kho problematic for employers is the court’s weakening of the traditional “Does the agreement shock the conscience?” standard. The court in this case invalidated the agreement because arbitration was a less affordable and less accessible dispute resolution mechanism than other potentially applicable state law mechanisms. Specifically, the court found the parties’ arbitration procedure to be less advantageous to the employee in the resolution of his wage claims than the “Berman” procedure, an administrative process through which an employee can receive substantial assistance in taking his wage claims before the state Labor Commissioner.

Lessons in Drafting and Implementing an Enforceable Mandatory Arbitration Agreement

Recently, the California Supreme Court invalidated a mandatory arbitration agreement in OTO, LLC v. Kho (August 29, 2019) finding the agreement was both procedurally and substantively unconscionable. The case involved arbitration of a former employee’s wage claims. Under California law, employees have access to an inexpensive administrative process to pursue wage disputes. The Court previously had ruled that an arbitration agreement is not categorically unconscionable solely because it entails a waiver of that administrative process. An agreement to arbitrate wage claims can be enforceable so long as it provides an accessible and affordable process for resolving those disputes.

California Court Invalidates Arbitration Agreement With PAGA Waiver

In an unpublished decision, the California Court of Appeal, Third Appellate District denied an employer’s motion to compel arbitration of a former employee’s Private Attorneys General Act (PAGA) claims. Instead, the court held that the employer’s employee arbitration agreement contained an improper PAGA waiver that could not be severed and, as a result, invalidated the entire agreement.

California Enforces Arbitration Agreement with Staffing Agency in Favor of Worksite Employer

An employer successfully compelled arbitration under an arbitration agreement that the plaintiff-workers had with their staffing agency, even though the staffing agency was not a defendant in the lawsuit.

California Governor Vetoes Bill Prohibiting Mandatory Arbitration Provisions in Employment Contracts

In a last-minute action on the September 30 legislative deadline, California’s Governor vetoed a bill that, among other things, would have imposed restrictions on the use of arbitration agreements for certain employment claims.

California Transportation Industry Waives Goodbye to Enforcement of Federal Arbitration Act Provisions in Employment Contracts

In a loss for the California transportation industry, the Court of Appeal for California’s Fourth Judicial District recently found in Muro v. Cornerstone Staffing Solutions, Inc., that the Federal Arbitration Act (“FAA”) is unenforceable in employment contracts regarding employees who are engaged in transporting goods in interstate or foreign commerce, regardless of whether the employer itself is in the transportation industry.

The Latest on Arbitration Agreements

The validity of mandatory arbitration agreements continues to be a major focus of litigation and legislation. As employers know, the U.S. Supreme Court currently is reviewing the issue of whether class action waivers violate the NLRA in the consolidated matters Morris v. Ernst & Young, Lewis v. Epic Systems, and Murphy v. NLRB. Briefing is underway in those matters and oral argument is expected this fall.

New California Law Prohibits Choice of Law and Venue in Employment Contracts

On September 25, 2016, Governor Brown signed into law a new California Labor Code provision (Section 925) that is likely to have major repercussions for contracts with employees who live and work primarily in California. The new California Labor Code provision prohibits the use of contract provisions that apply another state’s law or require adjudication of disputes in another state as a condition of the employment of an individual who primarily resides and works in California.

The Early Bird Catches the Worm: Delaying Motion to Compel Arbitration Can Waive Right to Arbitration in California

On June 16, 2016, a California Court of Appeal, in an unpublished decision, issued yet another ruling applying the doctrine of waiver to arbitration agreements in the employment litigation context. In Ogannesian v. ICC Collision Centers, Inc., a defendant waited eight months after responding to a complaint before bringing its motion to compel arbitration. During those eight months, the court-determined trial date had been set and the defendant had participated in the discovery process by serving and responding to written discovery. The court of appeal affirmed the trial court’s decision that the defendant had waived its right to compel arbitration by waiting eight months to file a motion.

California Court of Appeal Rules Arbitration Agreement In Employee Handbook Is Not Enforceable

On August 22, 2016, a California Court of Appeal held that an arbitration agreement in an employee handbook did not create an enforceable agreement to arbitrate. Esparza v. Sand & Sea, Inc. et al., B268420 (Aug. 22, 2016). The employee handbook at issue stated, “[T]his handbook is not intended to be a contract . . . nor is it intended to otherwise create any legally enforceable obligations on the part of the Company or its employees.” Although the employee signed the handbook acknowledgement form, which mentioned the arbitration agreement contained in the handbook, the form did not state that the employee agreed to the arbitration. As such, the appellate court held that the trial court properly denied the employer’s petition to compel arbitration. This case emphasizes the importance of employers having standalone arbitration agreements for employees or removing landmines that may be lurking in their handbooks.

Who Decides Whether Arbitration Will Include Class Claims? California High Court Says Ambiguous Agreements May Be Decided in Favor of Workers

Executive Summary: In a decision that will likely be seen as a win for employees, a sharply divided California Supreme Court ruled that the question of whether a court or an arbitrator decides if an arbitration agreement permits class claims should be determined on a case-by-case basis, specifically focusing on the agreement's terms and resolving any ambiguities in favor of the non-drafting party. Given the high stakes nature of class proceedings and limited review of arbitrators' rulings, we strongly recommend all employers seeking to avoid class arbitration have their agreements reviewed.

California Supreme Court on Arbitration Agreement Silent on Class Action Waivers

Does the court or the arbitrator decide whether the parties to an arbitration agreement intended class arbitration where the agreement does not contain an express class action waiver? The California Supreme Court responded that there is no “one-size-fits-all” answer and the issue is a matter of contract determined by state law contract interpretation principles.

California Supreme Court Upholds Arbitration Agreement Provision Allowing Parties to Seek Provisional Relief in Court

Today, the California Supreme Court issued its opinion in Baltazar v. Forever 21, Inc., rejecting an employee’s argument that her arbitration agreement with her employer was unconscionable and unenforceable simply because it permitted the parties to seek a temporary restraining order or preliminary injunction in court pending completion of an arbitration. The plaintiff argued that this provision unfairly favored the employer because employers are more likely to benefit from such a provision than an employee (because employers more commonly seek restraining orders and/or injunctive relief relating to claims against an employee for misappropriation of trade secrets and similar wrongful business practices).

California Supreme Court Issues Pro-Arbitration Agreement Decision

On March 28, 2016, the Supreme Court of California issued another ruling on the enforceability of arbitration agreements. In Baltazar v. Forever 21, Inc. (S208345), the court considered the enforceability of an arbitration agreement authorizing the parties to seek provisional relief in a judicial action while still compelling the remainder of the dispute to arbitration. According to the court, the clause carving out provisional relief from the arbitration obligation “which does no more than restate existing law . . . does not render the agreement unconscionable.” Moreover, the court reiterated that an arbitration agreement remains enforceable even when it only lists claims that would likely be brought by an employee and does not list claims that might be brought by an employer. The decision provides much needed clarity and flexibility to employers implementing arbitration agreements in California.

California Court Rejects Arbitration Agreement for Unconscionability

On October 27, 2015, the California Court of Appeal, in an unpublished decision, issued yet another ruling applying the unconscionability doctrine to arbitration agreements in the employment context. In Prince v. Pletcher, B260864, a former production company employee alleged that the defendants violated California’s Fair Employment and Housing Act (FEHA) and committed various other wrongs including fraud, misrepresentation, and breach of contract. The defendants moved to compel arbitration and the plaintiff argued that, among other things, the arbitration agreement was both procedurally and substantively unconscionable. The Court of Appeal affirmed the trial court’s denial of the defendants’ motion to compel arbitration.

Arbitration Agreements

Denying an employer’s motion to compel individual arbitration of a wage and hour class action, a California federal court ruled that the employer’s dispute resolution program violated its employees’ right to engage in concerted action under the National Labor Relations Act (“NLRA”). Totten v. Kellogg Brown & Root, LLC. Notably, this ruling departs from the established trend of federal courts declining to follow the precedent set in In re D.R. Horton, Inc. (“Horton I”) and has significant implications for employers contemplating whether to remove a class action involving the enforcement of arbitration agreements to federal court.

High Court Again Finds a California Court Failed to Place Arbitration Agreements on Equal Footing With Other Contracts

On December 14, 2015, in DirecTV, Inc. v. Imburgia, the U.S. Supreme Court reversed a California State Court of Appeal decision that had invalidated an arbitration provision based on language from the agreement rendering the entire arbitration provision unenforceable if the “law of your state” makes class-arbitration waivers unenforceable.

Inaccurate Translation Invalidates Arbitration Agreement

The California Court of Appeal ruled that an automobile dealership that translated a sales contract into Spanish, but neglected to include the arbitration clause in the translated agreement, could not enforce the arbitration agreement. Ramos v. Westlake Services, LLC, A141353. Although the case involved a commercial transaction, it has important implications for employers who use arbitration agreements with employees whose primary language is other than English.

Court Invalidates Class Action Waiver Where Arbitration Agreement Not Governed by FAA

Earlier this week, a California Court of Appeal issued its published opinion in Garrido v. Air Liquide Industrial U.S., holding that a class action waiver in an employment arbitration agreement was unconscionable and unenforceable. You're thinking, "Wait, I thought the California Supreme Court ruled in Iskanian that class action waivers are enforceable." Well, you are right, but this court found a way around Iskanian.

Ninth Circuit Upholds California Rule on Unenforceability of PAGA Representative Action Waivers

The Ninth Circuit issued a surprising decision (disagreeing with the view of many California district courts), holding that the California Supreme Court’s Iskanian v CLS Transportation decision is not preempted by the Federal Arbitration Act (FAA). In Iskanian, the California Supreme Court held that while class action waiver provisions in arbitration agreements are enforceable, a PAGA representative action waiver is not enforceable because employees have an unwaivable statutory right to bring a representative PAGA claim against their employers. The California Supreme Court reasoned that a PAGA plaintiff essentially stands in the shoes of the state in bringing the claim and acts in large part to collect penalties on behalf of the state. In this way, the intent of the statute would be frustrated if employees could be required to waive the right to pursue a representative PAGA action. The Court further held that the FAA does not require that California enforce a PAGA waiver in an arbitration agreement.

California Ban on Waiver of Representative PAGA Claims Not Barred by Federal Arbitration Act, Federal Court Holds

Declining to enforce a representative action waiver contained in an arbitration agreement, the Ninth Circuit Court of Appeals, in San Francisco, has held that the Federal Arbitration Act (“FAA”) does not preempt California’s “Iskanian rule,” which prohibits waiver of representative claims under the state Private Attorneys General Act of 2004 (“PAGA”), Cal. Lab. Code § 2698 et seq. Sakkab v. Luxottica Retail North America, Inc., No. 13-55184 (9th Cir. Sept. 28, 2015).

California Court Holds Arbitrator Decides Class Arbitrability Where Agreement Specifies AAA Rules

An employment arbitration agreement that incorporated the American Arbitration Association’s National Rules for the Resolution of Employment Disputes vested the arbitrator with the power to decide whether the agreement authorized class-wide relief, the California Court of Appeal has ruled. Universal Protection Service LP v. Superior Court, No. C078557 (Cal. Ct. App. Aug. 18, 2015). The Court denied an employer’s petition to set aside the trial court’s order compelling class arbitration and ordered that the arbitrator should determine the class issue.

California Supreme Court: Federal Arbitration Act Preempts Plaintiff’s State Rights

An arbitration clause in a consumer agreement was enforceable, including the class action waiver, despite four supposedly one-sided arbitration provisions in the agreement, the California Supreme Court has held. Sanchez v. Valencia Holding Co., LLC, No. S199119 (Aug. 3, 2015). The much-anticipated decision has significant implications for arbitration agreements between employers and employees.

California Court Finds Arbitration Agreement Did Not Unlawfully Limit Judicial Review

Valdez v. Santa Lucia Preserve Co., No. H040685 (March 23, 2015): In an unpublished opinion, the California Court of Appeal for the Sixth Appellate District overturned a trial court’s ruling denying an employer’s motion to compel arbitration. In applying California’s Armendariz standard, the court disagreed with the trial court’s order and found that the plaintiff’s arguments lacked merit to establish substantive unconscionability. In finding that such substantive unconscionability was not present in the agreements, the court, importantly, did not reach the question of procedural unconscionability (or severance) as an arbitration agreement is unconscionable only if both procedural and substantive unconscionability is found.

California Employer Successful in Arbitration Policy Dispute

Serafin v. Balco Properties Ltd., LLC, No. A141358 (March 16, 2015): The California Court of Appeal for the First Appellate District recently upheld an arbitration award in favor of an employer despite the employee’s arguments that (1) she never entered into a binding agreement to arbitrate her employment-related claims and, in the alternative, that (2) the agreement was unconscionable.

California Court Determines Arbitrator Must Decide Whether Class Claims Are Subject to Arbitration Agreement

When an employee who has signed an arbitration agreement files a lawsuit alleging individual claims along with class action claims, and the trial court has ordered him to take his individual claims to arbitration, what happens to the class claims? A California appellate court recently addressed that question in a case titled Sandquist v. Lebo Automotive, Inc. California Court of Appeal, No. B244412 (June 25, 2014).

Two California Appellate Decisions “Delegate” Authority From Courts to Arbitrators

Two divisions of the California Court of Appeal recently issued two significant decisions on arbitration agreements. Both courts held that a trial court lacks authority to determine the enforceability of an arbitration agreement if the agreement has a provision delegating that authority to an arbitrator.

California Court Gives the Green Light for Arbitration of Wrongful Termination Suit

Sanchez v. CarMax Auto Superstores California, LLC, B244772 (March 4, 2014): The California Court of Appeal recently found that an employer’s arbitration agreement and dispute resolution rules and procedures (DRRP) are not “unduly harsh, oppressive, or one-sided” even though they set limitations on discovery and require the employee to complete an arbitration request form. The three-judge panel rejected the trial court’s decision to deny the employer’s motion for arbitration on the basis that the arbitration agreement and DRRP “are permeated with unconscionability.”

California Court Requires Clear and Unmistakable Waiver to Enforce Arbitration Agreement

Volpei v. County of Ventura, No. B243954 (November 7, 2013): In a recent decision, a California Court of Appeal held that an arbitration provision in a collective bargaining agreement did not waive an employee’s individual right to sue the employer. The court held that the arbitration provision did not include a clear and unmistakable statement that arbitration was the sole remedy for statutory claims, such as claims brought under the California Fair Employment and Housing Act (FEHA).

California Supreme Court Follows Concepcion But Allows Courts to Strike Down Unconscionable Arbitration Agreements

Sonic-Calabasas A, Inc. v. Moreno, No. S174475, (October 17, 2013): As expected following the recent decision by the Supreme Court of the United States interpreting the Federal Arbitration Act (FAA), the California Supreme Court struck down its own rule on arbitration agreements. In Sonic-Calabasas A, Inc. v. Moreno, the state’s highest court categorically prohibited the waiver of a Division of Labor Standards Enforcement (DLSE) Berman hearing in a mandatory pre-dispute arbitration agreement as preempted by the FAA. The court kept alive, however, challenges to such arbitration agreements where the employee can show that such agreements are found to be unconscionable.

California Supreme Court Grants Review in Brown

The impact of the California Court of Appeal’s recent opinion in Brown v. Superior Court, 216 Cal. App. 4th 1302 (Cal. Ct. App. 2013) is on hold, at least for now. Last week, the California Supreme Court indicated it would grant review in the case that has drawn the attention of employment lawyers and those who regularly deal with arbitration disputes. As discussed in a previous post, Brown was California’s latest exception to the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion. Concepcion held that the Federal Arbitration Act (FAA) preempted a state law disfavoring arbitration agreements, even where the state law was desirable for unrelated reasons. Brown—adopting similar reasoning as another California Court of Appeal case—potentially narrowed the scope of Concepcion in California, holding that an arbitration clause waiving the right to bring a representative Private Attorneys General Act (PAGA) claim was unenforceable. Although Concepcion contained no public purpose exception in its ruling, the Brown court held that a class action waiver could not be enforced as to the PAGA claim because it “wholly prevents the exercise of a [state] statutory right intended for a predominantly public purpose.”

California Supreme Court Rules That Arbitration Agreements May Not Preclude Employees’ Right to An Administrative Hearing

In a 4-3 decision, the California Supreme Court ruled that arbitration agreements between employers and employees are not enforceable to the extent that they require employees to arbitrate their wage claims before they have a non-binding administrative hearing before the State Labor Commissioner (known as a “Berman” hearing). The state high court held that any preclusion of an employee’s right to a Berman hearing violates public policy and is, therefore, unconscionable, and that the court’s holding was not preempted by the Federal Arbitration Act (FAA)

The Continuing Saga of Mandatory Employment Arbitration Agreements in California.

On April 26, the California Supreme Court issued a decision providing useful clarification to employers intending to revise or enforce existing mandatory arbitration agreements. In summary, the court ruled that: (1) clear error of law will serve as a basis for vacating an arbitrator’s award where the error deprives an employee of a hearing on the merits of their Fair Employment and Housing Act (FEHA) claims or other unwaivable statutory claims; (2) arbitration agreements may lawfully preclude employees from pursuing administrative adjudication of their state law claims; and (3) in FEHA cases, the Supreme Court’s prior holding in Armendariz v. Foundation Health Psychcare Services, Inc. requires that arbitrators state reasons for their written decisions in sufficient detail to provide a meaningful basis for judicial review – mere written conclusions are not enough.

California Court of Appeal Validates Arbitration Agreement Covering Claims for Unpaid Bonus and Severance.

Does the Federal Arbitration Act preempt claims for unpaid wages under California law?
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