Vacating Compulsory Employment Arbitration Agreements In California

Mandatory arbitration agreements refer to agreements that an employee must sign as a condition of employment. Employers often include these clauses in their employment contracts to hinder an employee’s ability to pursue claims in court in front of a jury.

While California’s arbitration ban (AB 51) prohibits certain California employers from requiring employees to sign arbitration agreements as a condition of employment, certain employers, like those covered by the Federal Arbitration Act (FAA), are exempt from this prohibition. However, recent decisions indicate that the FAA does not entirely preempt AB51. As such, many employers continue to enforce and attempt to uphold arbitration agreements, despite the employer’s failure to meet the terms of the agreement.

Gallo v. Wood Ranch USA, Inc.

A California court appellate court recently issued an opinion in a case where an employer moved to compel arbitration after a former employer sued the company for compensatory and punitive damages. According to the record, Plaintiff was required to sign an arbitration agreement as a condition of her employment. The relevant agreement stated, in short, that any controversy, dispute, or claim between the employee and employer must be settled by binding arbitration. The agreement also specified that the arbitrator must determine issues based on California or federal law but should look to the California Arbitration Act to conduct the arbitration.

After the parties agreed to an arbitrator, the American Arbitration Association (AAA) sent a notice to the employee and employer informing them of the fee to proceed with arbitration. Plaintiff submitted her payment, but the employer did not pay their portion until after the due date. As a result, Plaintiff moved to vacate the order compelling arbitration based on the employer’s material breach.

California Code of Civil Procedure sections 1281.97, 1281.98 and 1281.99 mandate that employers pay their share of arbitration fees by the due date. The provisions also specify that a failure to do so constitutes a material breach. In these cases, the employee has the option of (1) continuing in arbitration or (2) withdrawing from arbitration and resuming litigation.

Relevant to this case was whether the FAA preempts the provisions, and the court held that they are not because the procedures further rather than frustrate the FAA’s objectives. As such, the court upheld the lower court’s order vacating its order compelling arbitration.

California Employee Rights Attorneys

If you or someone you know has experienced unlawful employment practices, contact the California employment lawyer at The Nourmand Law Firm. The attorneys on our team have extensive experience successfully representing employees who have suffered adverse employment actions by their employer. In addition to California employment law matters, our firm handles employment discrimination claims, sexual harassment in the workplace, wrongful termination, retaliation, class actions, and defamation cases. If you were mistreated at work, contact our firm at 310-553-3600 to learn about your rights and remedies.



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