arbitration agreements

Subscribe to arbitration agreements

The October 13, 2019 deadline for Governor Newsom to take his final actions in the 2019 legislative season has come and gone and as expected, he signed into law a number of employment-related bills. Below is a summary of just a few of those bills that will have a significant impact on employment litigation in California.  To read the full article, please click here.

A.    Assembly Bill 51

AB 51 was introduced by Assemblymember Lorena Gonzales and will severely restrict the use of mandatory arbitration agreements in employment. The Bill adds section 12953 to the California Government Code (“FEHA”) and states that it is an unlawful employment practice for an employer to violate section 432.6 of the California Labor Code.

B.   Senate Bill 707

In Armendariz v. Foundation Health Psychcare Services, Inc. case (2000) 24 Cal. 4th 83, the California Supreme Court concluded, among other things, that “when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.”  In a number of cases after Armendariz, courts have held that an employer’s failure to pay the arbitration costs [and thus delaying or preventing the arbitration of the dispute] constitutes a material breach of the arbitration agreement.

In line with this case law, SB 707, introduced by Senator Wieckowski, provides that a company’s failure to pay the fees of an arbitration service provider in accordance with its obligations contained within an arbitration agreement or through application of state or federal law or the rules of the arbitration provider hinders the efficient resolution of disputes and contravenes public policy.  According to SB 707, a company’s strategic non-payment of fees and costs severely prejudices the ability of employees [or consumers] to vindicate their rights. This practice is particularly problematic and unfair when the party failing or refusing to pay those fees and costs is the party that imposed the obligation to arbitrate disputes.

Therefore, among other things, SB 707 adds section 1281.97 to the California Code of Civil Procedure and provides that in an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration administrator, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration.  As a result, the employee [or consumer] may do either of the following:

  1. Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction; or
  2. Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.

If the employee withdraws the claim from arbitration and proceeds with an action in a court of appropriate jurisdiction, the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration shall be tolled as of the date of the first filing of a claim in any court, arbitration forum, or other dispute resolution forum.  Further, if the employee proceeds with an action in a court, the court shall impose sanctions on the drafting party in accordance with Civil Code section 1281.99, which requires the drafting party to the reasonable expenses, including attorney’s fees and costs, incurred by the employee as a result of the material breach.  The court may also impose additional sanctions against a drafting party including, but not limited to, discovery sanctions and terminating sanctions.
Continue Reading New Laws that Will Significantly Impact the Litigation of Employment Disputes

By:  Kritika Thukral

Background

Mandatory arbitration agreements are a source of contention in employment law. However, since 2000, they are generally permissible in California. In response, the California Legislature has made repeated efforts to ban such agreements over the years. In the past, many such bills have passed both the state assembly and the state senate and have ended up on the Governor’s desk. However, none of the bills have been enacted into law. Nevertheless, Assemblywoman Lorena Gonzalez from San Diego has introduced Assembly Bill 51 (AB 51) in the current legislative session. This bill is nearly identical to the previous vetoed measures to make mandatory arbitration agreements illegal.
Continue Reading AB 51: Another Attempt to Take Down Mandatory Arbitration Agreements in California

On May 21, 2018, the United States Supreme Court issued its much anticipated decision in Epic Systems Corp. v. Lewis.  In a 5-4 decision written by the newest jurist, Justice Gorsuch, the Court declares that employers can require employees to arbitrate their employment disputes individually and waive their rights to resolve those disputes through class or collective actions.

Background.

The case was a consolidation of three cases (Epic Systems Corp. v. Lewis, Ernst & Young LLP v. Morris, and National Labor Relations Board v. Murphy Oil USA, Inc.).  In each case, the employees brought a class action under the federal Fair Labor Standards Act (“FLSA”) and related state law against their employer on behalf of themselves and similarly situated employees for wage and hour violations. However, in each of the cases, the employees had entered into an agreement with their employer providing for individualized arbitration proceedings to resolve employment disputes between the parties. Although the Federal Arbitration Act (“FAA”) generally requires courts to enforce arbitration agreements as written, the employees argued that the FAA’s “savings clause” removes this obligation if an arbitration agreement violates some other federal law and that, by requiring individualized proceedings, the agreements they signed violated the National Labor Relations Act (“NLRA”).
Continue Reading GOOD NEWS EMPLOYERS – The U.S. Supreme Court Says You Can Require Class Action Waivers In Your Arbitration Agreements

The United States Supreme Court decided last week to resolve a split in the lower courts as to whether the National Labor Relations Act (“Act”) preempts class-action waiver clauses in arbitration agreements between employers and their employees.  This is an important development, as the use of such waivers in arbitration agreements (if permissible) can drastically…

Happy New Year!   The new year frequently marks new changes in the law, and this year is no exception.  There are several important changes that went into effect on January 1st.  Here are some of the major changes that went into effect on January 1, 2017:

  • Minimum Wage Change: On January 1

…