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Home | Weekly E-Alert Articles | California Courts Throw Out Arbitrat . . .

California Courts Throw Out Arbitration Agreements
3/20/2009
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Breaking News: DOL Issues Model COBRA Subsidy Notices

As we reported last month, the new stimulus package includes 65% COBRA subsidies for certain workers laid-off or terminated since September 1, 2008. The U.S. Department of Labor (DOL) has issued model subsidy notices for employers to use when notifying employees.

Next week we'll provide you with you with the highlights of how these notices should be used, and will have fill-in model notices for tailored California employers that our CEA Online subscribers can download. Stay tuned!


California Courts Throw Out Arbitration Agreements

Two decisions delivered this month by California Courts of Appeal serve as a good reminder to review your arbitration agreements and make sure they're up to date with current law. You, like many employers, may require employees to sign agreements to arbitrate employment related claims, rather than go to court. But be careful—if the arbitration agreements contain invalid clauses, they won't keep you out of court.

The first decision, in Franco v. Athens Disposal Company, Inc. involved a truck driver who filed a class action lawsuit against his employer. Franco, the employee, claimed Athens didn't properly pay overtime or provide meal periods. At the start of his employment, however, he had signed an arbitration agreement which stated that he agreed not to participate in any class action or act as a "private attorney general" to represent anyone other than himself. Athens therefore argued that he could not bring a class action.


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The Court disagreed with Athens and reversed the decision of the lower court, and declared the arbitration agreement's class action waiver invalid. The Court also said Franco could not be prohibited from acting as a private attorney general under California's Private Attorneys General Act (PAGA). As a result of this decision, Franco can go forward with his class action lawsuit instead of being required to arbitrate his claims as an individual.

In a similar case, another employer's arbitration agreement was thrown out because of a class action waiver in Sanchez v. Western Pizza. In this case, another Court of Appeals said the class action waiver was invalid because it was against public policy. The Court also said the agreement signed by the employee, a pizza delivery person, was no good because it was oppressive, and did not sufficiently inform employees of what was involved in arbitrating their claims.

We will have the full story on these two cases, and provide practical guidance on how to draft enforceable arbitration agreements, in an upcoming issue of CEA. Don't miss out! Sign up for a free 3-month trial subscription.

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