Recent Arbitration Decisions: Wins for Employees and Employers

A Win for Employees:

In Sprunk v. Prisma LLC, 14 Cal. App. 5th 785 (2017), the court confirmed that an employer’s right to compel arbitration against its employees is not absolute. In a detailed decision from the Second Appellate District Court of Appeal, the court found that an employer had waived the right to compel arbitration. The employer in that case filed a motion to compel arbitration against the individual named plaintiff. Fearing that the trial court would order the parties to arbitrate on a class basis, the employer withdrew its motion to compel.  The parties then proceeded to litigate the case for nearly three years. The court granted the employee’s motion for class certification, and soon thereafter the employer made a new motion to compel arbitration against all of the class members who had signed arbitration agreements. The trial judge denied the employer’s motion, finding that it had waived its right to compel arbitration based upon its delay in seeking arbitration of the employee’s individual claims and that the delay was both unreasonable and prejudicial.

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Arbitration Agreements Cannot Ban Injunctive Relief in California

Many California laws provide for injunctive relief, such as a court order prohibiting the defendant from continuing to engage in the acts of practices that gave rise to the lawsuit.  One example is the unfair competition law, Business & Professions Code § 17200 et seq, which is referred to as the UCL.  In the employment law context, workers sometimes bring claims under the UCL in part because it has a longer statute of limitations (4 years) than many wage and hour laws.

The UCL provides that an injured person can seek an order preventing future conduct:

Any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction.  The court may make such orders or judgments…as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.  (Bus. & Prof Code, § 17203.)

Injunctive relief is both critical and powerful.  In some cases it prevents defendants from getting away with a slap on the wrist.  It also allows courts to stop defendants from engaging in illegal conduct now and into the future.

In recent years, however, many companies have implemented arbitration agreements that bar anyone who sues them from seeking injunctive relief.  Some of these agreements go so far as to prevent people from seeking injunctive relief in any forum, including court.  The California Supreme Court recently reviewed such agreements, and held that provisions in arbitration agreements that waive the right to seek public injunctive relief in any forum are contrary to public policy and unenforceable.  This ruling should allow workers who are forced into arbitration to at least be able to pursue their claims for injunctive relief. Continue reading “Arbitration Agreements Cannot Ban Injunctive Relief in California”


PAGA and Arbitration: The Growing Conflict between State and Federal Court

In earlier posts, we have explored the question of whether arbitration agreements that are broad enough to include claims under California’s Private Attorneys General Act (Labor Code section 2698), or PAGA, should be enforced.  As of March 2017 there is a growing split between state and federal courts on this issue.  As a result, which court a case winds up in may very well determine how the court rules on this critical question. Continue reading “PAGA and Arbitration: The Growing Conflict between State and Federal Court”


No Arbitration of PAGA Claims

PAGA continues to be an important tool for workers in California seeking to enforce their rights under the Labor Code.  Employers continue to try to force PAGA claims into arbitration, where they think that they have a decisive advantage.  Yet courts continue to block these efforts.  As a result, PAGA claims remain in court where they belong.

The latest case to hold that PAGA claims cannot be arbitrated is Hernandez v. Ross Stores, Inc. (2d DCA Pub. Order 1/3/17) E064026.  There, the plaintiff, a warehouse worker, sought to bring a PAGA-only action against the discount store giant for failure to pay wages, failure to properly itemize hours, and failure to pay overtime.  Ross attempted to compel Hernandez to arbitrate her individual claims, arguing that its arbitration agreement stated that it applied to “any disputes arising out of or relating to the employment relationship” between Ross and an employee.  Ross contended, based upon this language, that before Hernandez could bring a PAGA action, she had to arbitrate the “dispute” over whether she was an aggrieved employee.

Not surprisingly, this too-clever-by-half argument failed.  Both the trial court and Division Two of the Second District Court of Appeal held that Hernandez could not be compelled to arbitrate her PAGA claims.  The trial court grounded its analysis in the seminal case of Iskanian v. CLS Transportation (2014) 59 Cal.4th 348, which held that PAGA actions-whether seeking penalties for one employee or for a group of them-are fundamentally law enforcement actions designed to protect the public.  In PAGA cases, there are therefore no individual claims to arbitrate. Continue reading “No Arbitration of PAGA Claims”


Morris v. Ernst & Young -The Ninth Circuit Follows D.R. Horton

In an important decision for workers seeking to join together to enforce their employment rights, the Ninth Circuit Court of Appeals ruled in Morris v. Ernst & Young ( that employers can not impose concerted action waivers in mandatory arbitration agreements. The Ninth Circuit held that employers violate Sections 7 and 8 of the National Labor Relations Act […]


The Arbitration Struggle Continues: One (more) Courageous Judge Stands Up For Workers

The Chinese philosopher Laozi is reputed to have said that a journey of a thousand miles begins with a single step.  A corollary is that a long journey only continues if people are courageous enough to continue it, despite the daunting odds they may face.Gear-and-Gavel_dark-blue

A California federal judge recently joined the group of jurists who have been courageous enough to push back against the efforts to force workers and consumers out of court and into binding arbitration.  The ills and abuses associated with employment arbitration are well documented, and will not be revisited here.  (The New York Times ran an excellent series about those ills and abuses in 2015, which revealed that Chief Justice John Roberts of the United States Supreme Court was among the attorneys who came up with the legal strategy of forcing people into arbitration.)  But it is encouraging that the struggle over arbitration is far from over, and there are some glimmers of hope for workers.

In Totten v. Kellogg Brown & Root, U.S. District Judge Dolly M. Gee denied defendant KBR’s motion to compel individual arbitration in a wage and hour class action.  Judge Gee did so despite the fact that the plaintiff had signed an agreement to arbitrate his grievances in an individual manner.  Judge Gee based her order on the D.R. Horton, Inc. case, a decision of the National Labor Relations Board.  In D.R. Horton, the Board found that class actions are protected concerted activity under the National Labor Relations Act (NLRA).  As such, private agreements that ban such class actions are unenforceable. Continue reading “The Arbitration Struggle Continues: One (more) Courageous Judge Stands Up For Workers”


When Are Union Members Required To Arbitrate Their Wage and Hour Claims? Only when the CBA Clearly and Unmistakably Waives Their Right to a Judicial Forum

An issue that sometimes arises for union members who are subject to a collective bargaining agreement (CBA) is whether they must use the grievance and arbitration mechanism provided for in the CBA for any wage and hour claims (failure to pay overtime, failure to provide meal and rest breaks, etc.), or whether Gear-and-Gavel_dark-bluethey can sue in court.   Federal and state authorities establish that the primary test for resolving this question is whether the CBA clearly and unmistakably provides that union members must arbitrate their statutory claims.  Under the primary test, broad and vague language is not enough.  The CBA must explicitly state that it requires individuals to arbitrate their statutory claims.  Federal and state authorities also establish an alternative test.  Under the alternative test, a general arbitration clause coupled with an explicit incorporation of statutory requirements elsewhere in the CBA may result in a requirement that the employees arbitrate their statutory claims.  These tests are both explored in more detail below. Continue reading “When Are Union Members Required To Arbitrate Their Wage and Hour Claims? Only when the CBA Clearly and Unmistakably Waives Their Right to a Judicial Forum”


An Epic Dissent:  Justice Werdegar Nails it in Iskanian

The majority opinion in Iskanian has been discussed at length, both here and in every other employment blog that touches on California law.  What has been overlooked, however, is the incredibly eloquent and persuasive dissenting (and concurring in part) opinion written by Justice Kathryn Werdegar.Gear-and-Gavel_dark-blue

The fundamental points made by Justice Werdegar are that (1) class actions are a form of collective action; (2) Congress has made it clear for eighty years that contracts that strip employees of the right to engage in collective action are illegal; and (3) therefore class action waivers are illegal and unenforceable.

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Ninth Circuit Clarifies Some Issues and Ducks Others Regarding Arbitration Agreements

The Court of Appeal for the Ninth Circuit recently issued a pair of decisions that help to clarify the law surrounding arbitration agreements: Davis v. Nordstrom (holding that no particular form of notice is required to modify existing arbitration agreements) and Johnmohammadi v. Bloomingdale’s (opportunity to opt out Gear-and-Gavel_dark-blueof arbitration agreements with class action waiver defeats argument that federal labor laws bar such waivers).

In Davis v. Nordstrom, Inc. (9th Cir.2014) 2014 DJDAR 8019 the court clarified the law with respect to whether and how an employer can modify an existing arbitration agreement so as to prohibit class actions.  The plaintiff in Davis had received an employee handbook that required arbitration but permitted class actions.  In 2011, Nordstrom revised the arbitration agreement to bar class actions.

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The Wolf Guarding the Henhouse: Should Arbitrators Decide Whether To Enforce Arbitration Agreements?

When an employee files a lawsuit in court, and the employer tries to compel the employee to proceed in arbitration based on an arbitration agreement, who gets to decide whether the arbitration agreement is enforceable?  Is it the judge who is presiding over the employee’s case?  Or is it an arbitrator?  For more than five Gear-and-Gavel_dark-blueyears, the rule in California-which we think is fair-has been that the judge decides.  However, the recent decision of Tiri v. Lucky Chances, Inc. (May 15, 2014) 2014 DJDAR 6103 introduces confusion into this previously settled question. Continue reading “The Wolf Guarding the Henhouse: Should Arbitrators Decide Whether To Enforce Arbitration Agreements?”