Good news for employers that use arbitration agreements: California will send such cases to arbitration even if they start as collective actions—if the arbitration agreement is clear, separate from other handbook provisions and not unconscionable.
Recent case: Alex, who worked for Fred Loya Insurance Co. as an appraiser for six months, is one of five employee plaintiffs who filed a class-action lawsuit against the company. The allegations include
(1) unpaid wages,
(2) failure to pay the minimum wage and overtime wages, provide meal and rest periods and furnish accurate wage and hour statements,
(3) Labor Code violations,
(5) unfair competition.
The company asked the court to split the five complaints and send them to arbitration.
It argued that Alex and the others had signed arbitration agreements when they were hired and that those agreements were legal and valid.
An HR representative testified that all new hires were presented with a stand-alone document, separate from other hiring paperwork. It was a six-page document labeled “Mutual agreement to arbitrate claims.” Both the company and the new hire signed the document.
A supervisor testified that he personally went over the document with Alex and allowed him to ask questions before signing. Substantively, the agreement provided for a neutral arbitrator, split legal fees, a low filing fee and other provisions that allowed discovery.
The court said the agreement was a valid, enforceable contract and ordered arbitration. (Bergiadis v. Fred Loya Insurance Agency, No. B294276, Court of Appeal of California, 2nd Appellate District, 2014)
Final note: It is possible to draft an enforceable arbitration agreement that appears fair and equitable to California judges. Get an attorney’s help.
In this case, the agreement was separate from, included fair terms and followed all the latest rules.