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California court to decide key arbitration case

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in Employment Law,Human Resources

In an important decision on whether employers can limit an employee’s access to an administrative hearing on wage claims, the California Supreme Court has ordered the parties to file supplemental briefs in light of a recent U.S. Supreme Court decision. In American Express Co. v. Italian Colors Restaurant, the U.S. Supreme Court confirmed its long-standing rule that arbitration clauses under the Federal Arbitration Act (FAA) will be enforced.

Recent case: As a condition of employment with a Sonic Drive-In restaurant, Frank signed an agreement requiring all parties to submit to binding arbitration in all employment disputes “which would otherwise require or allow resort to any court or other governmental dispute resolution forum.”

After quitting his job at Sonic, Frank filed an administrative claim for unpaid vacation time and “waiting time” penalties and sought a hearing on the matter before the State Labor Commissioner. Sonic petitioned the trial court to compel arbitration, but the judge refused. Sonic appealed the decision to the Court of Appeal of California, which ordered the matter to be arbitrated.

Frank appealed to the state Supreme Court, which sided with him, holding that an employee who has a wage claim against an employer has the right to an administrative proceeding before he or she can be compelled to use arbitration.

Sonic appealed to the U.S. Supreme Court, which tossed the case back.

It said California should review its decision in light of a recent U.S. Supreme Court decision that held state law and public policy should not be applied in a manner that disfavors arbitration and that the FAA will pre-empt such state law or public policy.  (Sonic-Calabasas v. Moreno, No. S174475, California Supreme Court, 2013)

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