PROPERLY DRAFTED PRE-DISPUTE ARBITRATION AGREEMENT PRECLUDES LABOR COMMISSIONER HEARING

Topics: Arbitration Agreements, Court Decisions

Late last week, the Second District Court of Appeal published its decision in Sonic-Calabasas A, Inc. v. Moreno, holdingthata properly drafted arbitration agreement can be used by the employer to force an employee who filed a wage claim under section 98.2 of the California Labor Code to proceed with the claim under the terms and conditions of the arbitration agreement in the arbitral forum. First, the Court of Appeal looked at section 229 of the California Labor Code and held that because the arbitration agreement was drafted under the provisions of the Federal Arbitration Act, the FAA superseded section 229 of the California Labor Code and therefore that statute was not a bar to arbitration. Second, the Court analyzed the arbitration agreement under the Armenderiz and Gentry standards. The Court of Appeal found that these prior California Supreme Court decisions did not preclude mandatory arbitration of the wage claim.

The lesson of this decision is that employers can successfully avoid having to litigate wage claims before the California Labor Commissioner with a properly worded mandatory arbitration agreement drafted under the FAA.