Labor Employment Law Blog

By Sean Kirby and Rachel Tischler* 

On March 21, 2013, the Second Circuit issued its opinion in Parisi v. Goldman Sachs & Co., Case No. 11-5229, reversing a decision from the Southern District of New York, and holding that arbitration agreements which preclude Title VII class actions are enforceable. In reaching this decision, the Second Circuit affirmed the “liberal federal policy in favor of arbitration” and found that “there is no substantive statutory right to pursue a pattern-or-practice claim” as a class action.

By Eric Raphan, Rebecca Hirschklau and Rachel Tischler*

In February, two New York Federal District Court decisions joined other recent federal cases in enforcing arbitration agreements that preclude employees from bringing their Fair Labor Standards Act (“FLSA”) claims on a collective basis and required the employees to individually pursue their claims in arbitration. See Torres v. United Healthcare Servs., Inc., No. 12 Civ. 923 (DRH)(ARL) (E.D.N.Y. Feb. 1, 2013); Ryan v. JPMorgan Chase & Co., No. 12 CV 4844 (VB) (S.D.N.Y. Feb. 22, 2013). Both of these decisions are discussed below.

By Rebecca Hirschklau and Eric Raphan

On December 4, 2012, Southern District of New York District Judge Barbara S. Jones, granted a motion to compel arbitration on an individual basis in a class and collective action brought pursuant to, among other things, the Fair Labor Standards Act (“FLSA”) in Cohen v. UBS Financial Services, Inc., Docket No. 12 Civ. 2147 (BSJ)(JLC).

By Thomas Kaufman Follow me on Twitter

The battle for how the landmark arbitration decision Concepcion v. AT&T Mobility (“Concepcion”) should be construed in California continues with Monday’s issuance of Franco v. Arekelian Enterprises, Inc. (“Franco II”). Division One of the Second District Court of Appeal (in Los Angeles) has developed a troubling reputation among the class action defense bar because it has issued a series of decisions that stake out pro-plaintiff positions in Labor Code class action cases, including such decisions as Jaimez v. Daiohs USA, Inc., 181 Cal. App. 4th 1286 (2010) (reversing denial of class certification in a wage hour case) and the two depublished Harris v. Superior Court decisions (attempting to establish an exceedingly narrow administrative exemption in California).

By Travis Anderson and Gregg A. Fisch

In Elijahjuan v. Superior Court, Case No. B234794 (2nd Dist, Div. 8, Oct. 17, 2012), the California Court of Appeal held that the specific language of an agreement did not require plaintiffs to arbitrate their claims for misclassification as independent contractors in a wage and hour putative class action, concluding that the arbitration language covered only disputes arising from the “application or interpretation” of the plaintiffs’ work agreements.

By Thomas Kaufman

On August 13, 2012, the California Court of Appeal for the Fourth District (San Diego), published its decision from a few days earlier in Truly Nolen of America v. Superior Court. The case is yet another example where an appellate court considered the impact of the landmark United States Supreme Court decision in Concepcion v. AT&T Mobility on California courts. The Truly Nolen court did not go so far as to say that Concepcion reversed the California Supreme Court's decision in Gentry v. Superior Court, which had effectively required that arbitration agreements provide for class arbitration to be enforceable, but it reinterpreted Gentry to try to make it consistent with Concepcion, and did so in a manner that is likely to make arbitration agreements containing class action waivers enforceable in most cases. Moreover, it did so with creating any sort of circuit split with the execrable Brown v. Ralphs decision, that would be likely to trigger review from the California Supreme Court.

By Thomas Kaufman  (follow me on Twitter)

On June 4, 2012, the California Court of Appeal, Second District, Division Two, issued Iskanian v. CLS Transportation Los Angeles, LLC ("Iskanian"), a sweeping pro-employer decision that endorses every defense-side argument on the proper interpretation of the 2011 U.S. Supreme Court decision in AT&T Mobility LLC v. Concepcion ("Concepcion"). If the holdings of this decision ultimately survive as controlling law in California, then employers will be able to enforce arbitration agreements that require all employment related disputes to be resolved through individual arbitration. Unfortunately, the case creates a clear split of authority with last year's decision in Brown v. Ralphs Grocery Co. ("Brown"), which makes California Supreme Court review likely.

By Thomas Kaufman and Travis Anderson

In Sky Sports, Inc. v. Superior Court, (2nd Dist., Div. 3, Dec. 15, 2011) Case No. B233820, the California Court of Appeal held that a defendant does not waive its right to compel arbitration of a class action by waiting to file a motion to compel arbitration until the class has been certified, where some of the class members, but not the class representative, signed arbitration agreements with defendant.

In the seminal case Armendariz v. Foundation Health Psychcare, the Supreme Court of California established the standard for determining the enforceability of mandatory arbitration agreements for employees. Armendariz generally held that mandatory arbitration agreements were enforceable if they were mutual and did not "serve as a vehicle for the waiver of statutory rights." Armendariz set forth a number of minimum requirements that must be met for a mandatory employment arbitration agreement to be valid, including requiring a neutral arbitrator, providing for sufficient discovery, requiring a written decision adequate enough to allow judicial review, allowing for all remedies available in a judicial action, and not requiring the employee to pay unreasonable costs or fees. In the recent case Wherry v. Award, Inc., the Fourth Appellate District extended the Armendariz standard beyond the employment relationship and applied the same standard to mandatory arbitration agreements for independent contractors.

In Roman v. Superior Court, Case No. B209855, Gabriela Roman, a former employee in Flo-Kem's accounts receivable department, brought suit against Flo-Kem for alleged violations of the Fair Employment and Housing Act, including disability discrimination, as well as a claim for wrongful termination in violation of public policy. Before beginning her employment, Roman had signed a short arbitration agreement that was attached to the last page of her employment application. This arbitration agreement was a single paragraph clause which stated in pertinent part that "I agree, in the event I am hired by the company, that all disputes and claims that might arise out of my employment with the company will be submitted to binding arbitration." The clause also incorporated the rules of the American Arbitration Association ("AAA") in effect at the time. Further, the arbitration clause was the last paragraph of the seven-page employment application and clearly marked with a separate heading. Roman had initialed next to the clause, signifying that she had read it, in addition to signing the application.

On March 10, 2009, the California Second District Court of Appeal in Franco v. Athens Disposal Company, Inc., B203317 held that an arbitration agreement with class action waiver and Private Attorneys General Act (PAGA) waiver is unenforceable.

Although the advantages and disadvantages of arbitration will continue to be debated, the California Supreme Court has now provided parties with an option that makes arbitration more attractive.  Previously, one of the chief disadvantages of arbitration was that there was only restricted appellate review of any factual or legal error the arbitrator may have made.  However, on August 25, 2008, in Cable Connection, Inc., et al. v. DirecTV, Inc., the California Supreme Court held that parties to an arbitration agreement can agree to have an arbitrator's decision reviewed on the merits under California law if the parties provided for such review in advance in their agreement.

On April 1, 2008, in Metters v. Ralphs Grocery Co., the California Appellate Court provided guidance on what constitutes an enforceable arbitration agreement.  Samuel Metters was an employee alleging racial discrimination and harassment against his employer, Ralphs Grocery.  He claimed that a resolution dispute form with a binding arbitration clause was not an enforceable contract, despite his having signed it.  The Court agreed.

Every new hire faces a mountain of paperwork from Human Resources to sign on his/her first day of employment.  A frequent consequence of this "barrage of paperwork" is that one or two documents may be overlooked and not signed by the new hire.  If one of those documents happens to be an arbitration agreement, the California Court of Appeal ruled in Mitri et al. v. Arnel Management Co. et al. that the employer may not rely on handbook language that requires the employee to sign an arbitration agreement upon hire.

On January 19, 2006, the Second Appellate District of the California Court of Appeal decided the case of Gentry v. Superior Court (January 19, 2006). The issue before the Gentry Court was whether a class action waiver in a pre-employment arbitration agreement is enforceable under California law.

On August 4, 2005, in Grafton Partners, et al. v. Superior Court, the California Supreme Court refused to uphold a predispute jury trial waiver. In reaching this decision, the Court expressly overruled Trizec Properties, Inc. v. Superior Court, 229 Cal. App. 3d 1616 (1991) which previously held that predispute jury trial waivers were permissible even in the absence of statutory authorization.

Q. Are Mandatory Employment Arbitration Agreements A Good Idea?

A RECENT COURT OF APPEAL DECISION HIGHLIGHTS THE POTENTIAL BENEFITS OF ARBITRATION

It is no secret that litigation can be time-consuming and expensive. In an effort to contain potential litigation costs, many California employers have entered into arbitration agreements with their employees in which both sides agree that a private arbitrator, rather than a public court, will resolve employment related disputes. Compared to litigation, arbitration is often (but not always) quicker and less expensive. Thus, a well-drafted and legally enforceable arbitration agreement can be a useful, resource saving tool.

In recent years courts have debated the enforceability of class action waivers in arbitration agreements. A class action waiver is a provision in an arbitration agreement that expressly prohibits arbitration on a class-wide basis. Companies have tried to defeat class action lawsuits by compelling arbitration pursuant to arbitration agreements with class action waivers. The viability of this strategy has been tested in California with mixed results. For the last several years, California courts have found various class action waivers unenforceable. More recently, however, other California courts have upheld class action waivers, including a case decided just last month. The issue is now pending before the California Supreme Court.