Employment Law: Arbitration Agreements

By on July 20, 2015 - Comments off

Cruise v. Kroger, (Second District, August 27, 2014) 176 Cal.Rptr.3d 612, 124 Fair Empl.Prac.Cas. (BNA) 376, 14 Cal. Daily Op. Serv. 10,219, 2014 Daily Journal D.A.R. 11,925

A woman who was terminated from her employment as assistant manager of human resources after only seven weeks on the job brought an action against the employer, asserting statutory causes of action pursuant to the Fair Employment and Housing Act (FEHA), for retaliation, sexual harassment, sexual and racial discrimination, failure to investigate and prevent harassment and retaliation, as well as common law claims for wrongful termination.  The defendant filed a motion to compel arbitration, pursuant to a clause in the employment application which required arbitration of employment-related disputes, and incorporated by reference the company’s Mediation & Binding Arbitration Policy. The policy provided that the arbitrator “must be a retired state or federal judge,’ … ‘and neither the American Arbitration Association (‘AAA’) nor the Judicial Arbitration & Mediation Services (‘JAMS’) will be permitted to administer any arbitration held under or pursuant to this Arbitration Policy.’”

The plaintiff opposed the motion, contending that she never signed the arbitration agreement, the clause was vague, and that she was never provided a copy of the arbitration policy, which was a four-page undated document in the defendant’s employee handbook, which she had also never been given. The plaintiff further contended that the policy was procedurally and substantively unconscionable.

The trial court denied the motion, finding that the defendants had to meet their burden to prove the existence of a signed arbitration agreement, and that the arbitration and employment policy’s provisions regarding the eligibility of potential arbitrators raised fundamental unconscionability concerns, in that “institutional arbitrators are less likely to be influenced by a well-paying repeat party, such as Kroger, than are hand-picked individual arbitrators who stand to benefit from Kroger’s frequent patronage” and that “the Policy’s restrictions mandating private, individual arbitrators outside the AAA and JAMS organizational framework, coupled with the arbitration selection ‘process,’ ensure that the arbitrator will be a person selected by Kroger.” The court of appeal reversed, concluding that the arbitration clause in the employment application, standing alone, was sufficient to establish the parties had agreed to arbitrate their employment-related disputes:

Kroger’s inability to establish the precise language of the Arbitration Policy which was in effect at the time of Cruise’s hiring in 2007, does not support the trial court’s conclusion that found Kroger “failed to prove the existence of a written agreement to arbitrate.” The undisputed evidence, specifically, the employment application, is sufficient to establish the existence of a written agreement to arbitrate the employment-related disputes pled herein by Cruise. Therefore, Kroger’s inability to establish the precise terms of the Arbitration Policy does not relieve Cruise of the obligation to arbitrate.

The only impact of Kroger’s inability to establish the contents of the 2007 Arbitration Policy is that Kroger failed to establish the parties agreed to govern their arbitration by procedures different from those prescribed in the CAA (§ 1280 et seq.). Unless the parties otherwise agree, the conduct of an arbitration proceeding is controlled by the CAA. (See, e.g., 1281.6, §§ 1282, 1282.2.) Here, because Kroger failed to establish an agreement to the contrary, the instant arbitration proceeding is to be governed by the procedures set forth in the CAA. Because this arbitration is controlled by California statutory and case law, Cruise’s arguments that Kroger’s Arbitration Policy is procedurally and substantively unconscionable are meritless.

Nothing herein should be construed as enabling an employer to enforce a missing arbitration agreement. We merely hold the language of the arbitration clause in the instant employment application, standing alone, was sufficient to establish an agreement by the parties to arbitrate employment-related disputes. While the parties’ agreement to arbitrate is enforceable, the employer’s inability to establish the contents of its Arbitration Policy precludes the employer from enforcing the provisions of said policy. Instead, the arbitration proceeding is to be conducted in accordance with the procedures set forth in the CAA as well as applicable case law.

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Posted in: Employment Law