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Beware one-sided arbitration agreements

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in Employment Law,Human Resources

A California Court of Appeal re­­cently held that an arbitration agreement was unenforceable because it was unconscionably one-sided.

The agreement, which all job applicants were required to sign, was unenforceable because it required arbitration of employment issues such as discrimination and labor standards; however, it allowed the employer to go to court for disputes over trade secrets and unfair competition.

Recent case: Leasa applied for a job as a property manager with Ameri­­can Management Services (AMS). To be considered for the job, she had to sign an eight-page arbitration agreement. After her employment ended, she filed a class-action lawsuit claiming violations of the California Labor Code. She said by misclassifying her as an exempt employee, AMS broke laws regarding minimum and overtime wages, rest and meal breaks and expense reimbursement.

While the case was in discovery, the U.S. Supreme Court decided AT&T Mobility, LLC v. Concepcion (No. 09–893,  2011), and held that the Federal Arbitration Act (FAA) protects an employer’s right to include a class-action waiver in an arbitration agreement even though a state law bars such provisions as unconscionable. Given this decision, AMS filed a petition to compel arbitration, which the trial court granted.

Leasa appealed. The appellate court held that AMS’ arbitration agreement was one-sided because it required employees to arbitrate their claims while allowing AMS to go to court for unfair competition and trade-secret disputes. The agreement also imposed a one-year statute of limitations on employee claims but did not set similar limits on AMS’ claims for unfair competition and trade- secret violations. (Compton v. American Management Services, No. B236669, Court of Appeal of California, 2nd Appellate Dis­­trict, 2013)

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kevorsfso September 16, 2013 at 8:42 am

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