Court of Appeal Holds Arbitration Agreement Was Illusory and Unenforceable
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- Published on Wednesday, 02 May 2012 17:54
In a recent case, Peleg v. Neiman Marcus Group, Inc., the Court of Appeal, 2nd District, held that an arbitration agreement entered into by Amir Peleg, and his employer, Neiman Marcus Group, was illusory and therefore unenforceable. Peleg, is a gay Jewish male of Israeli national origin. He worked at a Neiman Marcus store in Beverly Hills and allegedly performed his duties in an exemplary manner. In 2008, Neiman Marcus discharged Peleg, allegedly because of his national origin, religion, and sexual orientation in violation of the Fair Employment and Housing Act (FEHA). He was also allegedly harassed and subjected to retaliation for the same reasons. Peleg exhausted his administrative remedies under the FEHA and received a right-to-sue letter. He then filed a lawsuit and Neiman Marcus sought to enforce an arbitration agreement (Agreement) that the parties had signed. However, the Agreement contained a modification provision stating that Neiman Marcus could amend, modify, or revoke the arbitration contract on 30 days‘ written notice and at the end of the 30-day period, a contract change would apply to any claim that had not been filed with the American Arbitration Association (AAA).
Peleg argued that the employer‘s unilateral right to make changes rendered the Agreement illusory. The 2nd District agreed, concluding that “an arbitration contract containing a modification provision is illusory if an amendment, modification, or revocation — a contract change — applies to claims that have accrued or are known to the employer...Were it otherwise, the employer could amend the contract in anticipation of a specific claim, altering the arbitration process to the employee‘s detriment and making it more likely the employer would prevail.” Read More.
Legislation Introduced to Ban Employment Related Predispute Arbitration Agreements
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- Published on Wednesday, 21 March 2012 01:23
Rep. Robert Andrews (D-NJ) has introduced legislation that would ban employment related predispute arbitration agreements. Specifically, the proposed legislation provides that “notwithstanding any other provision of this title, no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of an employment dispute. The term `employment dispute' means a dispute between an employer and employee arising out of the relationship of employer and employee.” The legislation would not apply to any arbitration provision in a collective bargaining agreement, although such agreements cannot “have the effect of waiving the right of an employee to seek judicial enforcement of a right arising under a provision of the Constitution of the United States, a State constitution, or a Federal or State statute, or public policy arising therefore.” Read More.
NLRB Holds Class Action Waiver in Mandatory Arbitration Agreement Violates the NLRA
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- Published on Tuesday, 10 January 2012 19:03
In an unfortunate case for employers, the National Labor Relations Board (NLRB) has ruled that an employer violates Section 8(a)(1) of the National Labor Relations Act (NLRA) by requiring employees, as a condition of their employment, to sign a mandatory arbitration agreement precluding the employee from filing a class claim that addresses issues such as wages disputes, in any forum, arbitral or judicial. In the 2-0 decision, the NLRB found that the agreement contained a class action waiver which the Board held unlawfully restricted an employee’s Section 7 right to engage in concerted action, even though pursuant to the Federal Arbitration Act (FAA), employment-related arbitration agreements are enforceable if properly constructed. The mandatory arbitration agreement in question was implemented by D. R. Horton, Inc., a home builder with operations in more than 20 states. In January 2006, the company required each new and current employee to execute a “Mutual Arbitration Agreement” (MAA) as a condition of employment. The MAA provided in relevant part: “That all disputes and claims relating to the employee’s employment with [the Company]…will be determined exclusively by final and binding arbitration; that the arbitrator “may hear only Employee’s individual claims,” “will not have the authority to consolidate the claims of other employees,” and “does not have authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding”; and that the signatory employee waives “the right to file a lawsuit or other civil proceeding relating to Employee’s employment with the Company” and “the right to resolve employment-related disputes in a proceeding before a judge or jury.” Michael Cuda was employed by the company as a superintendent. As a condition of his continued employment, he signed the MAA. Subsequently, Mr. Cuda became part of a class of employees alleging that they had been improperly classified as exempt, and were thus owed overtime. His attorney gave notice of their intent, pursuant to the MAA, to initiate arbitration on behalf of the class. The company’s counsel replied that they failed to provide effective notice of the intent to arbitrate, because the MAA barred arbitration of class claims. The NLRB disagreed, holding the arbitration agreement as drafted was unenforceable. Read More.
Court Finds Pre-Employment Arbitration Agreement is Unconscionable
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- Published on Thursday, 05 January 2012 04:11
In a recent case, the Third District Court of Appeal held that a clause in an application for employment with AccentCare, Inc. (AccentCare), which required that only the applicant agree that, if hired, any disputes that could not be resolved informally would be submitted to binding arbitration, was both procedurally and substantively unenforceable as unconscionable. The plaintiffs in the case were employed by AccentCare as on-call staffing coordinators. Part of their job duties included ensuring that all cases remained staffed during off hours. Thus, they were required to respond to an off-hour call within 20 minutes. Plaintiffs filed a complaint for damages, injunctive, and declaratory relief, alleging they were not paid for all of the overtime and time they spent handling off-hour calls. AccentCare brought a motion to compel arbitration of the claims asserted by four of the plaintiffs who had signed an arbitration agreement, and to stay the proceedings asserted by all plaintiffs pending completion of the arbitration. The trial court denied the motion, holding that the agreements were procedurally and substantively unconscionable. On appeal, the court affirmed noting that “in addition to the procedural unconscionability of the pre-employment agreement to give up the right to trial, the agreement at issue was procedurally unconscionable because its language implied there was no opportunity to negotiate, because the rules of any arbitration were not spelled out in the agreement or attached thereto, and because plaintiffs did not understand they were waiving their right to a trial, nor was that fact explained to them.” Read More.
Senator Reintroduces Arbitration Bill
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- Published on Tuesday, 21 June 2011 18:41
U.S. Senator Jeff Sessions (R-AL), a senior member of the Senate Judiciary Committee, has reintroduced the Fair Arbitration Act (S. 1186), a bill which would add certain due process rights to pre-dispute arbitration agreements. For example, the agreement must clearly state whether it is binding or not, provide that the parties have the right to their own counsel (at their own expense) and allow for each party to conduct discovery, present evidence and cross-examine witnesses. In introducing the legislation, Sessions made the following comment: "Arbitration is a quick and cost-effective means of resolving disputes, but the process could be further improved to address some recent cases where individuals claimed that arbitrations were not conducted under fair conditions. My legislation would establish reforms to make absolutely certain that arbitration is as fair as possible for all parties involved." Read more...
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