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In California, raise arbitration issue before administrative hearing on unpaid wages

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in Compensation and Benefits,Human Resources

If you use an arbitration clause in your application or require employees to arbitrate claims, try to get the case moved to arbitration as soon as possible after the employee files a wage claim with the Cali­­for­­nia Department of Indus­­trial Rela­­tions.

A delay may mean closer scrutiny and protracted litigation, even if you finally win the right to arbitrate.

Recent case: When Janet applied for a job in auto finance with a car dealership, she signed an application that included an arbitration clause. The clause required handling all employment-related via arbitration.

Just four months later, Janet was fired for alleged poor work. She filed a complaint over allegedly unpaid commissions with the Department of Industrial Relations.

The dealership answered the complaint, but didn’t raise arbitration right away. In fact, it waited until the morning of the hearing.

The Department of Industrial Rela­­tions went ahead with the hearing and awarded damages of $108,796, including more than $53,000 in commissions, some $5,120 in interest—and almost $50,000 in penalties for delayed payment.

The dealership appealed and the appellate court reversed and ordered arbitration—but only after carefully considering whether Janet was prejudiced by the delay. Had the dealership asked for arbitration earlier, it could have saved itself time and money. (Freemont Auto v. Kim, No. A137266, Court of Appeals of Cali­­for­­nia, 1st District, 2014)

Final note: Let your attorney know right away if you have an arbitration agreement.

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