California Labor &
Employment Law Blog

Mar. 20 2009

Another Employment Arbitration Agreement Found Unenforceable

Topics: Arbitration Agreements, Court Decisions

Earlier this week, another California Court of Appeal ruled that an employment arbitration agreement was unconscionable and unenforceable based in part on the agreement's inclusion of a class action waiver. In Sanchez v. Western Pizza Enterprises, Inc., the plaintiff worked as a delivery driver for a pizza restaurant. The plaintiff alleged that the employer violated California law by failing to reimburse the plaintiff and other employees for all mileage expenses. Plaintiff filed a putative class action and the employer moved to compel arbitration based on a signed employment arbitration agreement between the employer and the plaintiff. The trial court denied the motion to compel arbitration, finding that the agreement was unconscionable and unenforceable. The employer appealed, but the appellate court agreed with the trial court's ruling. The court first held that the determination of the enforceability of the arbitration agreement was an issue for the court, not the arbitrator, to decide. The court distinguished a number of cases holding that this is an issue for an arbitrator to decide, finding that in those cases the arbitration agreement expressly provided for arbitrator determination of issues of enforceability. The court found that the arbitration agreement before it did not clearly provide for arbitrator determination of this issue.

Further analyzing the arbitration agreement before it, the court held that the agreement's inclusion of a class action waiver was unenforceable under the four-factor test set forth by the California Supreme Court in Gentry v. Superior Court, 42 Cal.4th 443 (2007). The court also found the agreement procedurally unconscionable, notwithstanding the fact that the agreement on its face made clear that execution of the agreement was "not a mandatory condition of employment." Finally, the court found that the agreement was substantively unconscionable in that the arbitrator selection process was not sufficiently mutual. The decision is here.

The Sanchez case is another reminder that employment arbitrationagreements remain a subject of much litigation and close judicial scrutiny inCalifornia. In addition,litigation over expense reimbursement policies is increasing in popularity. Employersshould review their policies related to these subjects.

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For over 20 years, CDF has distinguished itself as one of the top employment, labor and immigration firms in California, representing employers in single-plaintiff and class action lawsuits and advising employers on related legal compliance and risk avoidance. We cover the state, with five locations from Sacramento to San Diego.

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About the Editor

Robin Largent has a regular presence in California state and federal courts and has been lead defense counsel and appellate counsel for large and small California employers in litigation (and arbitration) ranging from individual discrimination and harassment claims to complex wage and hour representative and class actions. She also leads the firm’s appellate practice, having substantial experience and success handling appeals, writ petitions, and amicus briefs in both state and federal court on issues such as class certification (particularly in the wage and hour arena), manageability and due process concerns associated with class action trials, exempt/non-exempt misclassification issues, meal and rest break compliance, trade secret/unfair competition matters, and the scope of federal court jurisdiction under the Class Action Fairness Act.
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