CA Appeals Court Arbitration Waiver Ruling

November 25, 2015 by

arbitration waiverMario Garrido signed and arbitration waiver when he was hired as a truck driver for American Air Liquide, Inc. in Santa Fe Springs, California. The arbitration waiver required him to resolve any disputes with his employer via arbitration and included a provision prohibiting class arbitration.

After Garrido lost his job, however, he filed a class action complaint against Air Liquide, alleging that he and his co-workers were subjected to a variety of unfair labor practices. Air Liquide responded by filing a motion to compel arbitration, but the trial court denied the motion, holding that Garrido had a right to file a class action claim. Air Liquide appealed.

On October 26, 2015, a California Court of Appeal upheld the decision, siding with Garrido. The ruling, Garrido v. Air Liquide Industrial U.S. LP, established several important precedents for cases involving arbitration waivers in the following areas:

To Whom Does the Federal Arbitration Act Apply?

The arbitration agreement that Garrido signed when he began working for Air Liquide stated that it was governed by the Federal Arbitration Act (FAA). Garrido argued that this provision was invalid because the FAA itself states that it does not apply to transportation workers. Air Liquide argued that Garrido should not be considered a transportation worker because Air Liquide is not in the transportation industry.

The Court of Appeal agreed with Garrido and held that as a truck driver, he was excluded from the FAA. The ruling states that a truck driver is a transportation worker, regardless of who owns the goods that the driver transports.

Can the CAA Apply Automatically?

The California Arbitration Act (CAA) was not mentioned in the arbitration waiver. Garrido argued that, in light of this, it could not apply to his case, but the court disagreed. The ruling holds that the CAA can be enforced even when it has not been explicitly mentioned in an arbitration agreement.

Garrido argued that because Air Liquide’s motion to compel arbitration dealt with the FAA, and not the CAA, Air Liquide lost its right to compel arbitration under state law. The court disagreed with this, as well, pointing out that Air Liquide had never argued that the CAA would not apply.

Can the State Refuse to Enforce a Class Arbitration Waiver in a Non-FAA Case?

Garrido argued that, even though the arbitration agreement contained a class waiver, his class action suit should nonetheless be allowed to proceed. While the California Supreme Court recently held the FAA prevents the state from striking down class waivers for public policy reasons, that decision did not address whether it would be appropriate in a CAA case.

The Court of Appeal used the four-factor test applied in Gentry v. Superior Court, which is based on:

  • The size of potential individual recovery,
  • The potential for retaliation against class members,
  • Whether absent members of the class may be unaware of their rights, and
  • Obstacles to the use of individual arbitration.

After applying the test, the Court of Appeal agreed with the trial court that a class proceeding would be more effective than individual arbitration. [Read more…]

Filed Under: Binding Arbitration, Blog, California Employment Law Tagged With: , , , , , , , , ,

Will Mandatory Arbitration Agreements Become a Thing of the Past in California?

October 6, 2015 by

binding arbitration, arbitrationIn a previous blog post, we discussed a decision by the Ninth Circuit regarding mandatory arbitration agreements for employees. A major change to this area of law may be on the way in the state of California, if Assembly Bill 425 is signed into law. This bill would altogether prohibit employers from requiring their employees to sign arbitration agreements as a condition of their employment.

AB 425 was passed by the California Assembly and Senate in August 2015. If it is signed into law by Governor Jerry Brown, it will take effect on January 1, 2016. The bill would become Section 925 of the California Labor Code.

What Does the Bill Require?

AB 465, if enacted, will prohibit any employer from requiring an employee, as a condition of employment, to agree to the waiver of “any legal right, penalty, forum, or procedure for any employment law violations.” It also prohibits employers from threatening, retaliating against, or discriminating against employees for refusing to sign such waivers. In addition, it stipulates that if a waiver of this type will be unenforceable if it is required from an employee (or a potential employee) as a condition of employment or continued employment.

You may be wondering how, under those regulations, an employee’s agreement to arbitrate would be legally valid. The statute stipulates that any waiver of employment rights (such as an agreement to arbitrate) must be “knowing and voluntary and in writing, and expressly not made as a condition of employment.” If the employer seeks to enforce the waiver, then the employer would have the burden of proof to show that the waiver was knowing and voluntary.

There are several other important aspects of AB 465:

  • If the bill is enacted, it will apply only to waivers that were signed on or after January 1, 2016 – so you do not have to worry that this legislation will render any current contracts invalid.
  • It authorizes reasonable attorney’s fees to the prevailing claimant.
  • It exempts organizations that are considered self-regulatory under the Securities Exchange Act of 1934, and it does not apply to regulations adopted under that Act pertaining to any requirement of a self-regulatory organization that a person arbitrate disputes between an employer and an employee.
  • It does not apply to employees who were individually represented by legal counsel when negotiating the terms of an agreement to “waive any right, penalty, remedy, forum or procedure for a violation of this code.”

Binding Arbitration and Preparing for the Future

If AB 465 is passed into law, it will have major ramifications for employers who require their employees to sign arbitration agreements. If you are an employer in California, and you would like your employees to commit to arbitration, it may be in your best interests to begin thinking now about how you will revise your policies if the bill is enacted. [Read more…]

Filed Under: Binding Arbitration, California Employment Law Tagged With: , , , ,

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