Sparks v. Vista Del Mar Child and Family Services: Court Refuses To Enforce Arbitration Clause Contained In Employee Handbook


by Sayema Hameed

If an employer includes an arbitration clause in a written employee handbook, provides the handbook to an employee, and obtains a written acknowledgment of receipt of the handbook from the employee, is that enough to enable the employer to compel arbitration of the employee’s wrongful termination claims?  In a recent case, the California Court of Appeal has said “NO.”

Hoover v. American Income Life Insurance Company: California Court Rules That Labor Code Wage Claims Are Not Subject To Arbitration


by Sayema Hameed

In the “fluid and volatile” world of employee arbitration agreements, the California Court of Appeal has issued yet another opinion.  In the wage-and-hour case Hoover v. American Income Life Insurance Company (Fourth District, Div. Tow, Case No. E052864, filed 5/16/12, pub. ordered 6/13/12), the Court ruled that the plaintiff’s statutory wage claims under the California Labor Code and Business and Professions Code were not subject to arbitration.  In addition, the defendant’s 15-month delay in seeking arbitration constituted a waiver of the right to compel arbitration.

Iskanian v. CLS Transportation Los Angeles, LLC: California Court Applies Concepcion To Uphold Class Action Waiver In Employee Arbitration Agreement


by Sayema Hameed

In the ever changing legal landscape of employee arbitration agreements, there has been a lot of tension between federal law and California law concerning the enforcement of such agreements.

California case law previously prohibited class action waivers in arbitration agreements when included in consumer contracts of adhesion (known as the “Discover Bank Rule” from Discover Bank v. Superior Court (Boehr) (2005) 36 Cal. 4th 148, 153). Then in April 2011, the United States Supreme Court decided AT&T Mobility LLC v. Concepcion (2011) ___ U.S. ___ [131 S.Ct. 1740] (“Concepcion“), holding that the Federal Arbitration Act preempts the Discover Bank Rule and upholding the enforceability of class action waivers in arbitration agreements.

But even after Concepcion, the question remained whether another California Supreme Court case, Gentry v. Superior Court (2007) 42 Cal. 4th 443 (“Gentry“), survived Concepcion. Gentry specifically concerned class action waivers of unwaivable statutory rights (Labor Code claims including overtime) in employee arbitration agreements. Gentry held that a class action waiver in an employee arbitration agreement should not be enforced if “class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration.”  Because the U.S. Supreme Court in Concepcion did not specifically address Gentry , there was a question whether Gentry still applied to the analysis of class action waivers in employee arbitration agreements in California.

Now the California Court of Appeal has answered the question as follows: “Now, we find that the Concepcion decision conclusively invalidates the Gentry test.”  In a new decision, Iskanian v. CLS Transportation Los Angeles, LLC (Second District, Div. Two, Case No. B235158; filed 6/4/12), the Court of Appeal has found that Concepcion invalidates Gentry and that a class action waiver in an employee arbitration agreement is enforceable under the Federal Arbitration Act.

Samaniego v. Empire Today LLC: California Court of Appeal Finds Contractor Arbitration Agreement Unconscionable


by Sayema Hameed

The California Court of Appeal has issued a new decision holding an employee arbitration agreement to be unenforceable: Samaniego v. Empire Today LLC (First District, Div. Three, Case No. A132297; filed 4/5/12; publication ordered 5/7/12).

In Samaniego, carpet installers filed a class action against Empire Today, LLC (“Empire”), a national carpet and flooring business, alleging that Empire misclassified them as independent contractors.  The complaint alleged numerous California Labor Code violations.  Empire appealed from the superior court’s refusal to compel contractual arbitration of the carpet installers’ claims.  The superior court found the arbitration agreement unconscionable under California law.

The Court of Appeal affirmed and held that the employee arbitration agreement was unconscionable and unenforceable under the California Supreme Court case Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83.  The Court of Appeal further held that this issue was governed by California law and that the recent U.S. Supreme Court decision in AT&T Mobility LLC v. Concepcion (2011) ___ U.S. ___ [131 S.Ct. 1740, 179 L.Ed.2d 742] did not change the Court’s analysis.

Mayers v. Volt Management Corp.: California Court Finds Employee Arbitration Agreement Unenforceable


by Sayema Hameed

The California Court of Appeal has issued a decision holding that an employee arbitration agreement is unenforceable.  In Mayers v. Volt Management Corp. (filed February 2, 2012, publication ordered February 27, 2012, Fourth District, Div. Three, Case No. G045036), the plaintiff filed a lawsuit against his former employer alleging various claims under the California Fair Employment and Housing Act (Gov. Code, § 12940 et seq.) (“FEHA”).  The defendant employer filed a motion to compel arbitration based on the plaintiff’s agreement to submit employment-related claims to final and binding arbitration, as evidenced by his signed employment application, employment agreement, and acknowledgment of receipt of employee handbook.  The trial court denied the motion to compel arbitration. The Court of Appeal affirmed the trial court’s decision.

The arbitration provisions in the employment application, employment agreement, and employee handbook each required that the plaintiff submit employment-related claims to arbitration pursuant to the “applicable rules of the American Arbitration Association in the state” where plaintiff was employed.  However, Plaintiff was not provided with a copy of the controlling American Arbitration Association (“AAA”) rules or advised as to how he could find them.

The arbitration provisions also failed to identify which set of AAA rules would apply.  They further stated that the “arbitrator shall be entitled to award reasonable attorney’s fees and costs to the prevailing party.”  That language exposed the plaintiff to a greater risk of liability for attorney fees than he would have been if he pursued his FEHA claims in court.  The Court of Appeal, therefore, concluded that the above provisions were unconscionable and unenforceable, and plaintiff could not be compelled to arbitrate his claims against the defendant.