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What Employers Should Know about Arbitrating Employment Disputes. . . .
by: Tim Blaine and Tomas Riordan
With the rising costs of litigation, arbitration has become a preferred tool for resolving disputes quickly and efficiently. In fact, many employers incorporate provisions in their employee contracts requiring that any dispute(s) relating to the contract be resolved by way of arbitration. In the event that an employee refuses to comply with such an arbitration provision, employers may file a motion to compel arbitration. As a general rule, a court receiving a motion to compel must order arbitration of the dispute. C.C.P. Section 1281.2. If only it were that simple! The following are some guidelines for employers regarding filing a motion to compel arbitration under California law.
Agreeing to Arbitrate
Employers can only bring a motion to compel arbitration if there is clear contractual language establishing mutual obligations of the parties to participate and be bound by the results of a fair and neutral arbitration process. Arbitration provisions should stand out boldly, and not be hidden by other language in the contract. Baker v. Osborne Development, 159 Cal.App.4th 884 (2008). When drafting the agreement to arbitrate, it is crucial that employers carefully prepare the precise text such that when the time comes to execute, the meaning of the agreement is obvious. It is also important for employers to explain to the employee that by signing the agreement, the employee is agreeing to give up his/her right to a jury trial. Additionally, the employee should be given a copy of the executed arbitration agreement, along with any referenced attachments that might more fully explain the specific details of the arbitration procedure to be used. A binding arbitration provision may encompass a wide range of disputes, even those beyond the scope of the contract itself. For example, even statutory causes of action under California's Fair Employment and Housing Act (FEHA), may be made expressly arbitrable by contract. However, the potential range of disputes may not favor one side over the other.
Invoking Arbitration
When an arbitrable dispute arises and an employer wishes to invoke the arbitration agreement, the employer should avoid unnecessary delay in taking steps to carry out the agreement. Additionally, the employer should not undertake civil discovery because doing so might result in waiving his right to compel arbitration. Where an employee has brought an arbitrable dispute to the employer's attention but has not yet filed a civil legal action, the employer should first pursue any preliminary non-judicial procedures, such as mediation, specified in the contract. The employee should then be invited, in writing, to enter into the contractual arbitration process.
Compelling Arbitration
If an employee refuses to accept an invitation to arbitrate the dispute(s), the employer may ask the court to compel the employee to participate in arbitration as well as ask the court to put a hold on further litigation proceedings related the dispute(s) in question. Employers should petition to compel arbitration before answering the employee's complaint because the petition postpones the time to file an answer. C.C.P. Section 1281.7. In the absence of a waiver, the court MUST grant the petition to compel arbitration if the dispute is one that is covered by a valid arbitration agreement. Buckhorn v. St. Jude Heritage Medical Group, 121 Cal.App.4th 1401 (2004) (finding that the party opposing arbitration has the burden of showing that an arbitration clause cannot be interpreted to require arbitration of the dispute). Any doubts as to whether an arbitration agreement was made will be resolved in favor of enforcing arbitration. Coast Plaza Doctors Hosp. v. Blue Cross of Cal., 83 Cal.App.4th 677 (2000). When a motion to compel arbitration is granted, the court should also order stayed all further judicial proceedings in that action, unless they are clearly outside the scope of the arbitration provision. C.C.P. Section 1281.4.
Waiver
An employee may avoid arbitration where the employer's delay in invoking arbitration has created an unfair prejudice such that the employer has effectively waived his right to compel arbitration. Davis v. Continental Airlines, Inc., 59 Cal.App.4th 205 (1997). However, the California Supreme Court has consistently held that waiver of arbitration will not be imposed lightly. St. Agnes Medical Center v. PacifiCare of California, 31 Cal. 4th 1187 (2003). In order to create a valid waiver the employer's conduct must "substantially undermine the strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution." Id. Merely responding to the complaint, by itself, does not result in waiver. For example, an employer is generally permitted to preliminarily demur to the allegations of the complaint without being deemed to have waived its right to compel arbitration after the demurrer is ruled upon. The fact that the employer may incur some litigation costs is not, by itself, sufficiently prejudicial to invoke waiver against the employer. Alternatively, where the employer has commenced use of judicial discovery procedures, the employer has created enough prejudice such that he has waived his right to compel arbitration. In Sobremonte v. Superior Court, the employer took advantage of depositions and other discovery devices during the almost year delay before filing a petition to compel arbitration. Sobremonte v. Superior Court, 61 Cal.App.4th 980, 996-997 (1998). The court held that the employer's conduct effectively waived his right to compel arbitration. Id.
For more information on motions to compel arbitration and other arbitration issues, Employers are encouraged to consult legal counsel.
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