The arbitration agreement California employers currently deal with should always meet the Fair Employment and Housing Act criteria. This increases the probability that current and future arbitration agreements will be enforced.

About the Arbitration Process

Fair Employment and Housing Act criteria encompass many levels of agreement, including:

  • Employment disputes between an employer and employee must be submitted, via agreement, to arbitration.
  • An agreement for the selection of a neutral arbitrator.
  • An agreement for reasonable access to witnesses and documents.
  • The arbitrator must issue an award based on the findings and conclusions used as a base for the award.
  • The arbitrator is permitted to award in the same manner as though the claim was put before the court, which can include punitive damages.
  • The agreement stipulates that the employer will pay the arbitrator's fee.
  • Both parties agree for the exemption of unemployment insurance benefits, workers' compensation benefits, and any unpaid wages allegedly due.

About the Private Attorney General Act

The Private Attorney General Act (PAGA) allows California workers and private citizens to pursue legal steps that the state would normally take. This means an employee with a grievance involving a violation of California employment law can file a civil claim against their employer.

An example of employees taking advantage of PAGA involves Uber drivers who were required to sign an arbitration agreement prior to their being hired. In this case, the drivers filed suit and are seeking reimbursement for out-of-pocket costs, such as fuel, due to their objection to company policy that states drivers must tell customers that tips are part of the total price of a ride.

There are two requirements for PAGA to be put into play. The California Labor and Workforce Development Agency (LWDA) must be notified by the complainant, and the LWDA must not already be pursuing the case or in the process of issuing citations.

When both requirements are met, the employee has the authority to file suit. If the employee wins the suit, resulting in a monetary payout, the civil penalties are split 75/25 with the LWDA taking the largest portion and the employee the remainder.

Employer violations fall into one-of-three classes:

  • Serious violations
  • Safety and health violations
  • Labor code violations

Are Arbitration Agreements Enforceable in California?

To be enforceable, it must be determined if the arbitration agreement addresses waivable private rights or unwaivable public rights. Public rights include things such as discrimination, wages, and overtime pay, whereas private rights cover areas such as product ownership and confidentiality agreements.

Before a court can rule that an arbitration provision does not have to be enforced due to the provision being unconscionable, there must first be a substantive and procedural analysis.

Procedural unconscionability addresses how the contract was initially negotiated and the circumstances of the parties involved. The two relevant factors that are considered are surprise and oppression. In other words, procedural unconscionability is looked at as a stronger party presenting a weaker party with a contract that is drafted as take it or leave it.

Employment contracts almost always include a "take it or leave it" situation. This means there's a high degree of certainty that the arbitration provision will be deemed procedurally unconscionable. Regarding substantive unconscionability, the focus is on the terms of the arbitration agreement and if the terms are unbalanced and one-sided.

Arbitration of Unwaivable Public Rights

Four elements must be present in an arbitration provision covering unwaivable public rights for the provision to be enforceable. The California Supreme Court put these elements in place.

No Limitation of Remedies

The arbitration provision won't have any limitations in regard to statutes available to an employee.

Adequate Discovery

The arbitration provision shouldn't include any restrictions that inhibit the parties involved from a full range of discovery, such as obtaining documents or taking depositions from the opposing party.

Written Arbitration Award

A written decision by the arbitrator must include the findings and conclusions, which formed the basis for the arbitration award.

Cost of Arbitration

For an arbitration provision to be enforceable, the cost of arbitration must be paid by the employer. No part of the cost will be the responsibility of the employee.

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