Many employees are asked to sign an arbitration agreement when they begin a new job. Often, they are so excited about their new position that they glance over the agreement without fully understanding how its provisions may affect their future rights if they are later terminated. In many cases, as an employee moves through her career with a particular employer, she has long forgotten the arbitration agreement until a dispute arises.
Arbitration agreements regularly contain provisions that deal with statutory rights. In contrast to the rights given to you by your contract of employment, statutory rights are conveyed to you by a legislative act. Many of these statutory rights, such as your right to recover overtime or receive minimum wage are unwaivable. Certain arbitration agreements mandate that the employee sign the agreement and contain time barring provisions dealing with unwaivable statutory rights, or the period of time in which an employee can bring a claim against her employer before she is forever prohibited from raising that claim. A tension arises when the employee tries to raise a claim that is unwaivable but is barred because she did not file a timely arbitration matter.
The California Supreme Court recently ruled on a suit involving mandatory employment arbitration agreements that contain these provisions.
In Pearson Dental Supplies, Inc. v. The Superior Court of Los Angeles County No. S167169, Supreme Court of California (April 26, 2010), the plaintiff, Luis Turcois, was employed by Pearson Dental Supplies as a janitor until his termination in 2006. During his employment, he signed a mandatory arbitration agreement that contained a provision dealing with unwaivable statutory rights. Based on this agreement, if Turcois failed to raise his employment claim within a year, he would be prohibited from raising it in any future legal forum.
On January 31, 2006, Pearson terminated Turcois. He later filed an age discrimination complaint with the California Department of Fair Employment and Housing (FEHA) in April 2006 and a civil lawsuit against Pearson in Los Angeles Superior Court in October 2006. Pearson sought arbitration in March 2007. Shortly thereafter, Pearson filed a motion seeking to dismiss Turcois' claims based on the argument that Turcois was time-barred from raising his age discrimination complaint because he had submitted to arbitration more than one year after his termination.
The arbitrator agreed with Pearson and Turcois appealed the arbitration decision. After a series of reversals, the California Supreme Court reviewed the suit.
The Court in Pearson examined two keys issues.
(1) What standard of judicial review applies to an arbitrator's decision on an employee's anti-discrimination claim under FEHA when the employee had to sign a mandatory employment arbitration agreement?
The Court held that an arbitrator's award may be vacated by a court when an employee is prevented from obtaining a hearing on its FEHA claims, or claims based on other unwaivable statutory rights because of an arbitrator's error. The Court reasoned that upholding the arbitrator's decision would have completely extinguished Turcois' rights.
Further, in compliance with its previous opinion in Armendariz v. Foundation Health Psychcare Services, Inc., No. S075942 Supreme Court of California (August 24, 2000), the Court held that an arbitrator must write its arbitration decision with sufficient detail to permit judicial review. Here, the arbitrator did not provide adequate reasoning for his ruling.
(2) Can such a mandatory arbitration agreement restrict an employee from seeking administrative remedies for a violation of an act?
An arbitration agreement can place certain restrictions on when and in what forum an employee can raise a claim against an employer. An arbitration agreement cannot prevent an employee from submitting claims to prosecutorial agencies, such as the U.S. Equal Employment Opportunity Commission, but it can restrict the parties from submitting their claims to an administrative entity, like the California Labor Commissioner.
Employers should be mindful of the Pearson opinion. The California Supreme Court ruled on the type of administrative agency proceedings that can be specifically precluded from arbitration agreements. Employers may want to identify those agencies and consult with counsel as to whether to revise their mandatory arbitration agreements to explicitly include language waiving an employee's right to pursue adjudicatory actions.
