Shortened Limitations Period in Mandatory Arbitration Agreement Upheld
In Pearson Dental Supplies, Inc. v. Sup. Court of Los Angeles (Turcios), 2008 WL 3867617, an employee failed to demand arbitration within one year from his termination as required in a mandatory arbitration agreement and was held to have waived his FEHA age discrimination claim. In Pearson Dental Supplies, Inc., an arbitrator granted summary judgment in favor of the employer finding that the employee had failed to timely submit his FEHA claim to arbitration and thus waived it. The trial court reversed the arbitrator's decision, but the Second Appellate District Court of Appeal upheld the arbitrator's decision, holding that the one-year limitations period did not unreasonably restrict the employee's ability to vindicate his rights under FEHA.
The court rejected the employee’s argument that the arbitrator's application of the one-year limitations period in the arbitration agreement contravened public policy because it shortened the FEHA limitations period. In reaching its decision, the court distinguished several Ninth Circuit decisions finding a one-year limitations period in an arbitration agreement substantively unconscionable by pointing to the fact that in those cases the one-year time limit potentially deprived the plaintiffs of the ability to proceed with a theory of continuing violations. (In Pearson Dental Supplies, Inc., the employee's claims involved a termination, i.e., one discrete act.) The court also highlighted the fact that the plaintiff failed to raise unconscionability of the one-year limitations period with the trial court when the defendant moved to compel the matter to arbitration and, because of that, the court could not review the arbitrator's decision for errors of fact or law, even if the error causes substantial injustice to a party.
While this is a welcome victory for employers and can be said to strengthen an employer's ability to use mandatory arbitration agreements involving individual FEHA claims, the case is somewhat limited to its facts. Employers seeking to utilize arbitration agreements should continue to utilize experienced California employment lawyers when drafting and implementing them. Additionally, it remains to be seen whether this case is taken up to the California Supreme Court for further review.