California: Making Arbitration Great Again

California’s resistance to the longstanding federal policy favoring arbitration frequently results in public expressions of frustration by the justices of the U.S. Supreme Court.  In over five years since the Supreme Court’s broad directives in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), recent California decisions, including our recent coverage of the California Supreme Court’s holding in Sandquist v. Lebo, Case No. S220812, 2016 WL 4045008 (Cal. July 28, 2016), suggest that the state’s stubbornness may be waning, at least for the time being.  The following summarizes key decisions that diverge from California’s traditional resistance to arbitration and which every employer should have in their arsenal of tools.

In March, the California Supreme Court in Baltazar v. Forever 21, Inc., 62 Cal. 4th 1237 (2016), issued a unanimous opinion that resolved several arguments frequently raised against enforcement of arbitration agreements.  The plaintiff’s job application included a mandatory arbitration agreement that required the parties to arbitrate all claims arising from her employment.  Following her resignation, the plaintiff sued and sought to invalidate the arbitration provision as unconscionable because: (1) it did not include copy of the arbitration rules; (2) the injunctive relief provision favored the employer; (3) it only called out employee-side claims; and (4) required her to do anything the employer demanded to protect its proprietary and confidential information.  The Supreme Court was not persuaded and upheld the arbitration agreement.

Baltazar provides employers with long sought clarity and needed flexibility in the practical implementation and enforcement of arbitration agreements.  Lower appellate court decisions have followed suit.

In Harris v. Tap Worldwide, LLC, _ Cal. App. 4th _, 2016 WL 3439751 (June 22, 2016), the court reaffirmed that employees may not avoid arbitration agreements by merely claiming not to have read or signed them.  In that dispute, the plaintiff’s at-will employment was conditioned on his assent to all the terms set forth in the employee handbook, including an arbitration provision.  Accordingly, the court concluded that the plaintiff’s commencement of work established his acceptance of that agreement.

Similarly, in Espejo v. Southern California Permanente Medical Group, 246 Cal. App. 4th 1047 (2016), the court held that a party petitioning for arbitration bears only the limited burden of providing prima facie evidence that a valid agreement exists.  As such, the court did not require the employer to submit a declaration to authenticate the plaintiff’s electronic acknowledgement until after the plaintiff had questioned the acknowledgement’s authenticity in his opposition.  Because the employer’s supplemental declaration was filed by all relevant deadlines, that court ruled the declaration was timely and improperly ignored by the trial court.

Finally, in Young v. REMX, Inc., _ Cal. App. 4th _, 2016 WL 4386166 (July 26, 2016),  the court ruled that an arbitration order that dismisses class claims and stays a representative PAGA action pending arbitration of a plaintiff’s individual claims is non-appealable.  The court’s opinion concluded that the “death knell” doctrine traditionally used to justify interlocutory appeals of orders denying class certification was inapplicable to plaintiff’s appeal.  As the court noted, there was no formal judgment binding absent nonparties by virtue of the PAGA claim’s continuation, which—unlike a dismissed class action—offered the plaintiff an adequate incentive to continue litigation through the potential recovery of significant penalties, fees, and costs.  Similarly, the court found that the plaintiff’s appeal was not suitable for writ review because the claims compelled to arbitration were not clearly beyond the scope of the parties’ agreement and the plaintiff offered no evidence that her individual arbitration would be unduly time consuming or expensive.