State of Employment Arbitrations: 2023 Edition | By: Jared W. Slater
With a new law and several new rulings affecting employment arbitrations in California, employers must be ever mindful of the evolving difficulties in successfully compelling employment disputes to arbitration. Presented below are some of the most noteworthy cases affecting employment arbitrations that happened this year:
Miller v. Amazon.com: Certain Amazon Drivers Held Exempt from Federal Arbitration Act
Amazon.com appealed a federal district court’s order denying Amazon’s motion to compel arbitration. The question before the 9th Circuit Court of Appeals was whether Amazon’s Flex delivery drivers making “last-leg deliveries of goods shipped from other states or countries to consumers,” were a “class of workers engaged in … interstate commerce.” The 9th Circuit found that this category of workers are engaged in interstate commerce despite not crossing state lines, affirming the lower court’s denial of the motion to compel, and allowing the class action to continue in the district court instead of in private arbitration. In denying Amazon’s appeal, the 9th Circuit relied on the California Supreme Court’s decision in Rittman v. Amazon.com, Inc. as a binding precedent, even though the class of drivers in Rittman were distinct from those in Miller. In both cases, the court determined that Amazon’s delivery drivers are exempt from arbitration under Section 1 of the Federal Arbitration Act. Amazon has since petitioned the United States Supreme Court to review the 9th Circuit’s ruling.
Alberto v. Cambrian Homecare: Inconsistent Alternative Dispute Resolution Provisions in Arbitration and Confidentiality Agreements Held Against Employer
In yet another case that revolved around the unconscionability of an employer’s arbitration agreement, the California Court of Appeals agreed with a trial court’s ruling that the substantive unconscionability of the arbitration agreement had to be weighed in conjunction with reading the confidentiality agreement, which was also issued at the time of hire, and also contained alternative dispute resolution provisions. The issue, however, was that the confidentiality agreement’s alternative dispute resolution provision was impermissibly broad and could not be severed. As such, the trial court required, and the Court of Appeal agreed, that both the arbitration agreement and confidentiality agreement had to be read together, because both agreements were executed on the same day, both were separate aspects of a single transaction of the former employee’s hiring, and both ultimately governed the same issue of how to resolve disputes arising from the employee’s former employment. Failing to read the two agreements together artificially segmented the parties’ contractual relationship and failed to account for the overall dispute resolution upon which the parties agreed. Because of the substantive unconscionability contained in the confidentiality agreement, the arbitration agreement was held to be unenforceable.
Ortiz v. Nellson Nutraceutical: Lack of Countersignature by Employer Renders Arbitration Agreement Unenforceable
In this unpublished appellate decision, the question before the court was whether the lack of a countersignature by the employer rendered the arbitration agreement unenforceable. The Court of Appeal identified several passages in the six-page arbitration agreement that made it clear that mutual agreement and consent of the parties was necessary for the arbitration agreement to be enforced. Moreover, at the end of the agreement, there existed signature blocs for both the employee as well as the employer. However, the employer did not sign the agreement. Analyzing the issue through a contract formation lens, the Court of Appeal found that there was a lack of mutual consent by the parties, as evidenced by the lack of a countersignature. As such, the employer’s motion to compel arbitration was denied.
Theobald v. Santa Monica Seafood Co.: Employee Required to Arbitrate Despite Not Signing Revised Handbook Policy
In a rare win for an employer, the Court of Appeal reversed a trial court’s ruling denying a motion to compel arbitration. At issue in this case was whether a revised handbook issued to an employee who did not sign any acknowledgment to abide by the new handbook policies rescinded the employee’s prior agreement to arbitrate as contained in a previous handbook iteration which he did sign. The employee relied on the fact that, by its terms, the revised handbook “supersede[d]” prior “policies, procedures, rules, regulations, commitments, and practices of the Company.” The appellate court declined to extend this language to the prior mutual agreement to arbitrate. Relying on Asmus v. Pacific Bell, the court affirmed the existing tenet that “when an employer adopts new policies, an employee’s continued employment under the new policies constitutes acceptance of the modification.” Thus, the court concluded that the employee’s assent to arbitration was express (under the prior handbook agreement) and implied when he continued to work for his employer for over a decade after the handbook was modified.
Cvejic v. Skyview Capital: Court of Appeal Reiterates Strict Arbitration Fee Requirements under Code of Civil Procedure § 1281.98
As many employers have learned, the California Arbitration Act was recently amended to require employers to pay all arbitration costs and fees within 30 days of the invoice due date (unless otherwise provided by contract between the employer and employee), or risk being in material breach of the arbitration agreement. Worse, the consequences of such a material breach could result in the employee being permitted to withdraw from the arbitration and continue the case in Superior Court and also seek a variety of remedial sanctions against the employer. In Cvejic, the court demonstrated its willingness to limit the power of an arbitrator over their own proceedings. Specifically, in finding against the employer who failed to pay the arbitration fees within the initial 30-day deadline, the court held that an arbitrator cannot cure a missed or late arbitration fee payment, such as by unilaterally extending the fee deadline.
Doe v. Superior Court of the City and County of San Francisco: Arbitration Check “In the Mail” Does Not Satisfy the 30-Day Payment Deadline
In another arbitration fee payment case, the Court of Appeal again sided with an employee over an employer’s alleged late payment of arbitration fees. The Court of Appeal was tasked with settling a dispute over perceived ambiguity in the statute as to when the arbitration fees are deemed to be “paid within 30 days after the due date.” The Court of Appeals conceded that the statutory language is not clear and so first looked to the plain meaning of the statute, then to the legislative history to determine the Legislature’s intent, and finally to select case law. Upon review of these sources, the Court of Appeal strictly construed the statute; “paid within 30 days after the due date” means that the payment must be received by the arbitrator within 30 days of the invoice being issued. The court once again rejected the employer’s argument that there was no prejudice to employee despite the technical violation.
In re Uber Technologies Wage and Hour Cases: Public Agencies Cannot be Compelled to Arbitration by Private Employers
In August 2020, the California Attorney General and California Labor Commissioner filed a host of actions against Uber and Lyft, alleging that drivers for these ride-sharing companies were misclassified as independent contractors. Despite the changes following the passage of Proposition 22, the Attorney General and Labor Commissioner proceeded with the actions and sought various forms of relief, including injunctive relief, civil penalties, and unpaid wages for drivers. Uber and Lyft filed motions to compel arbitration based on existing agreements with their respective drivers. The trial court denied the motions to compel arbitration, primarily because neither the Attorney General nor the Labor Commissioner were a party to the arbitration agreements. Uber and Lyft appealed this decision, arguing that the arbitration agreements should still apply due to federal preemption or equitable estoppel. Affirming the trial court, the Court of Appeal disagreed, referencing the United States Supreme Court decision in Waffle House, which established that public agencies bringing enforcement actions as authorized by statute are not bound by arbitration agreements between private parties.
Houston ANUSA, LLC v. Shattenkirk: Texas Scrutinizes E-Signatures on Arbitration Agreements
While not a California case, we highlight Shattenkirk for its potential to be a template in future California decisions regarding e-signatures in arbitration agreements. In Shattenkirk, the employee denied electronically signing an arbitration agreement during his on-boarding process. In moving to compel arbitration, the employer produced the human resource manager’s affidavit as sufficient evidence of the employee signing the agreement. The affidavit provided relevant information including that the employee was required to input a unique password to login to its website and that the onboarding paperwork was sent to the employee’s email address. Even so, the declaration was insufficient to conclusively establish the efficacy of the security procedures used to obtain the employee’s purported electronic signature. Moreover, the affidavit did not present evidence establishing that such procedures prevented unauthorized access or demonstrated that users were required to complete all steps before completing the onboarding process. Notwithstanding the sufficiency of the affidavit, the Court of Appeals further determined that both Texas law and the Federal Arbitration Act required an evidentiary hearing at the trial court level on the issue of whether the employee electronically executed the arbitration agreement; affidavits alone were not sufficient. Accordingly, the Court of Appeals reversed and remanded that issue to the trial court for an evidentiary hearing.
While e-signatures are unquestionably more convenient, California employers should take note of the potential difficulties in proving that an employee actually signed the arbitration agreement. When possible, it is preferable to obtain handwritten signatures to avoid doubt over their authenticity.
This publication is published by the law firm of Ervin Cohen & Jessup LLP. The publication is intended to present an overview of current legal trends; no article should be construed as representing advice on specific, individual legal matters. Articles may be reprinted with permission and acknowledgment. ECJ is a registered service mark of Ervin Cohen & Jessup LLP. All rights reserved.