This month's key employment law cases address the enforcement of arbitration agreements.
Diaz v. Sohnen Enters., 34 Cal. App. 5th 126, 245 Cal. Rptr. 3d 827 (2019)
Summary: When employee continues his or her employment after notification that agreement to arbitrate is condition of continued employment, employee has impliedly consented to arbitration.
Facts: Plaintiff, while employed by defendant, filed a complaint alleging workplace discrimination. A few weeks earlier, plaintiff and her co-workers met with defendant’s chief operating officer about a new dispute resolution agreement, which mandated arbitration of disputes arising between defendant and its employees. Plaintiff refused to sign the arbitration agreement despite defendant making clear that it was a condition of continued employment. Thereafter, plaintiff’s attorney sent defendant a letter in which plaintiff rejected the arbitration agreement but indicated her intent to continue her employment, while simultaneously serving defendant with a civil complaint. Defendant sent a demand for arbitration to plaintiff’s counsel and thereafter filed a motion to compel arbitration. The trial court denied the motion, finding that it was a contract of adhesion with no meeting of the minds.
Court’s Decision: The California Court of Appeal reversed. First, defendant met its burden of proving the existence of an agreement to arbitrate. The court rejected plaintiff’s argument that she did not assent to the terms of the arbitration agreement, holding that California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement. Because plaintiff’s employment was at-will, defendant was free to change the terms of her employment provided it gave plaintiff notice of the change. Here, defendant had properly provided such notice. Because plaintiff failed to present a valid defense to the arbitration agreement, the order denying defendant’s motion to compel was improper.
Practical Implications: With recent favorable opinions in both state and federal courts regarding employment arbitration agreements, now is a good time for employers without them to determine whether they should be implemented.
Bravo v. RADC Enters., Inc., 33 Cal. App. 5th 920, 245 Cal. Rptr. 3d 399 (2019)
Summary: Arbitration agreement with choice-of-law clause requiring interpretation in accordance with California law required all claims to be arbitrated despite Labor Code section 229.
Facts: Defendant RADC Enterprises, Inc. owns and operates gas stations in Southern California. It hired plaintiff to manage one of its gas stations. During plaintiff’s employment, the parties signed an arbitration agreement covering all disputes arising from the employment relationship. The arbitration agreement included a one-sentence choice-of-law provision stating that the agreement was governed by and must be interpreted in accordance with the laws of California. After defendant terminated plaintiff’s employment, he filed a lawsuit alleging discrimination under the California Fair Employment and Housing Act (“FEHA”), whistleblower retaliation, common law wrongful termination, and individual as well as representative wage claims under the California Labor Code. Defendant filed a motion to compel arbitration. The trial court granted the motion in part as to the FEHA, whistleblower, and common law claims, but denied the motion with respect to the wage claims. The trial court determined that the California choice of law provision implicated Labor Code section 229, which directs courts to disregard agreements to arbitrate wage claims.
Court’s Decision: The California Court of Appeal reversed, holding that because the entire purpose of the arbitration agreement was to arbitrate all disputes arising from their employment relationship, the parties could not have meant for the choice-of-law provision to preclude arbitration of wage claims. Applying section 229 would contradict the parties’ intent to arbitrate any and all disputes including claims related to wages. In other words, plaintiff’s interpretation of the choice-of-law provision would cause this term in the agreement to conflict with its entire purpose.
Practical Implication: Because choice-of-law provisions in arbitration agreements have the potential for creating confusion in the enforcement of arbitration, they should be reviewed by experienced employment counsel before implementation.