©2024 Seyfarth Shaw LLP www.seyfarth.com 2024 Cal-Peculiarities | 91 “Because a PAGA claim is representative and does not belong to an employee individually, an employer should not be able dictate how and where the representative action proceeds.”96 Agreement to arbitrate claims already accrued. Reflecting the pervasive judicial hostility to arbitration agreements, a California trial court refused to enforce an agreement the parties signed after the relevant claim already had accrued, but the Court of Appeal found that the agreement’s language was “clear, explicit, and unequivocal with regard to the claims subject to it and contains no qualifying language limiting its applicability to claims that had yet to accrue.”97 Employer inaction deemed waiver to right to arbitrate.98 A sales representative filed a Labor Commissioner complaint for unpaid commissions. The employer sought to have the complaint dismissed because the parties had an arbitration agreement, but the Labor Commissioner nonetheless scheduled a hearing. The employer repeatedly moved to dismiss the complaint because of the arbitration agreement, to no avail. When the Labor Commissioner awarded the sales rep $27,412.60 in commissions and interest, the employer took an appeal for a de novo trial and eventually, after the sales rep had retained counsel and engaged in discovery, petitioned to compel arbitration. The trial court denied the petition, finding that the employer’s delay had waived any right to arbitrate. The Court of Appeal affirmed, reasoning that the employer had waived its right to arbitrate by taking steps inconsistent with an intent to invoke arbitration. During the administrative hearing the employer fully participated by presenting documentary evidence, witness testimony, and argument. Only 20 months later did the employer finally petition to compel arbitration, after the benefits of speedy arbitral resolution had been lost. 5.2.6 California public policy precluding enforcement of arbitration agreements Sometimes explicitly, sometimes implicitly, California has disfavored arbitration on the basis that California public policy prefers litigation to arbitration. This policy preference runs counter to the FAA’s decree that courts must not discriminate against arbitration agreements. But California has persisted, notwithstanding numerous slap-downs by the U.S. Supreme Court (see § 5.2.1). Banning formation of mandatory arbitration agreements. As noted above, a 2019 California statute purported to decree that California businesses—as to agreements entered into, modified, or extended as of 2020—could not require any job applicant or employee to waive any right, forum, or procedure for a violation of FEHA or the Labor Code, including any requirement that an individual opt out or take affirmative action to preserve such rights.99 The statute purported to forbid retaliation against anyone for refusing to consent to an agreement to arbitrate and to impose civil and criminal penalties, injunctive relief, and attorney fees. The legislative strategy was to deter employers from forming arbitration agreements by creating the specter of lawsuits under the Labor Code and FEHA and even the possibility of criminal prosecution. This statute prompted immediate constitutional challenge. Employer groups sued the State of California to stall enforcement of the statute on the ground that it is preempted by the FAA. In February 2020 a federal district court granted a preliminary injunction prohibiting California state officials from enforcing certain provisions of the new law—specifically, sections 432.6(a), (b), and (c) of the Labor Code and section 12953 of the Government Code— to the extent that they involve an arbitration agreement covered by the FAA.100 This decision was affirmed by the Ninth Circuit.101 Because of unclear drafting, however, the new law may also call into question the use of traditional settlement and severance agreements. Voiding arbitration agreements where the agreement drafter fails to pay fees. Employers that mandate employment arbitration agreements must, under California law, pay the parties’ arbitration fees. Drafters of arbitration agreements must pay those fees timely or be deemed to waive their right to arbitrate.102 An employer’s
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