Arbitration Agreements

In a recent case, the California Court of Appeal has ruled against an employee’s attempt to invalidate a pre-dispute arbitration agreement that prohibits an arbitrator from hearing claims of multiple employees in a single proceeding.

An employee who filed a class action lawsuit alleging his employer had misclassified managers as exempt from overtime, failed to opt out of his employer’s arbitration agreement when it was given to him. The employer obtained a court order requiring that the matter be remanded to arbitration. The employee appealed, arguing that the class action waiver was not enforceable.

The court found that employees have 30 days to review the agreement and exercise a right to opt out. They found that accepting an arbitration agreement is not a condition of employment and the information contained in the agreement accurately described the advantages and disadvantages of an arbitration agreement. Therefore, the court concluded that an employee could make an informed decision whether to agree to arbitration of employment disputes or opt out.

The court’s decision in Gentry v. Superior Court, (2nd Dist., 2006), requires any employee who accepts, or fails to opt out of the arbitration agreement to submit any covered dispute to an individual arbitration proceeding.

Under California law an arbitration agreement covering wrongful termination or employment discrimination claims under FEHA must:

1. Provide a neutral arbitrator who sets forth a written arbitration decision
   
2. Provide time and access for adequate discovery
   
3. Not limit the employee’s potential damages to less than what could be awarded in court
   
4. Not generally require the employee to pay any type of expense he/she would not be required to pay if he/she were free to bring the action in court
5. Not be overly harsh or one-sided.

Employers should consult with their legal counsel to determine if an arbitration agreement is right for their organization based upon this latest ruling.

Michaelee Stack, Director of Human Resource Consulting, monitors employer labor law compliance for Orion Risk Management clients. She can meet with your organization and provide you with a comprehensive Human Resources compliance assessment. Clients of Orion Risk Management will receive their assessment at no charge. Please call 949-608-4917 to schedule your free Human Resources assessment.