California Labor Law Arbitration Agreements

The FAA generally makes arbitration agreements “valid, irrevocable and enforceable” and has been expressly designed to reflect a national policy in favour of arbitration. Under the FAA, a state cannot enact or enforce laws that disrupt, restrict, treat unequally or discriminate remedies. In Ingle v. Circuit City Stores, Inc., a May 2003 decision, the Tribunal distinguished its previous decisions in Ahmed and Najd on the basis that the applicant in Ingle did not have a useful opportunity to rule on the arbitration agreement or on a power to negotiate the terms of the agreement. These facts justified the relevance of the procedure. The Court then considered whether the agreement was also “unilateral” in establishing material predictability. On the basis of various conditions contained in the agreement, such as a provision prohibiting arbitrators from hearing claims as class actions and a provision allowing only the employer to amend or terminate the agreement, the court found that the agreement was in fact materially unacceptable and, on that basis, found that the whole agreement was not applicable. It remains to be seen whether the California AB-51 will ultimately be maintained, but for now there are still binding arbitration agreements that will be covered by the FAA in California to see one more day. Employers who have questions about arbitration agreements should consult the experience of work and work counsellors.

An employment arbitration agreement is a contract between an employer and a worker in which disputes between the two are brought before a private arbitrator and not before a California court. Such agreements are usually within the framework of a broader agreement and are rarely their own document. Arbitration agreements can be short and hidden in a larger document. The ninth circuit has recently been active in the arbitrationsarena. It is interesting to note that several court decisions relate to arbitration agreements used by Circuit City Stores. Nevertheless, several states have tried to limit the use of arbitration agreements. The #MeToo movement has inspired a number of states to legislate to prohibit companies from requiring arbitration of sexual harassment claims and similar claims, including Maryland, New York, Vermont and Washington. Each has faced a similar preventive task or will likely face a similar pre-emption challenge. For example, in March 2002, circuit City Stores, Inc. v.

Ahmed said the company could impose arbitration as part of its agreement because the agreement was not procedurally unacceptable. A “reasonable opportunity” was offered to the employee to opt out of the arbitration program and the terms of the agreement were clearly stated in written documents and a presentation of the videotape.

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