In California, Arbitrators, Not Courts, Decide Whether an Arbitration Clause Permits Workers to Bring Class Claims in Arbitration

Increasingly, many workers unrepresented by a Union and not covered by a collective bargaining agreement must sign an “Arbitration Agreement” at the time of hire.  Refusing to sign is not a real option if the worker wants the job.  While arbitration is generally embraced as a way to resolve disputes arising out of Union contracts with employers, agreements to arbitrate work very differently in the non-union setting.  Many of these private arbitration agreements state that workers may not bring claims in arbitration as a group, i.e. on a collective or “class-wide” basis.  Employers claim these agreements are a cost-savings to them, as well as to workers.  However, the purpose of such language has been aimed at diffusing workers’ power through splintering employment disputes into individual claims that are difficult, if not impossible, for many workers to bring on their own.

The California Supreme Court in Sandquist v. Lebo Automotive recently ruled that it was up to an arbitrator, not the courts, to decide whether a California car dealership’s arbitration clause allows employees to arbitrate their claims on a class-wide basis.  At least in this instance, employer intent behind private arbitration agreements to squelch workers’ collective action was reversed.

Sandquist v. Lebo Automotive stemmed from a racial bias class action lawsuit.  Rather than allow the workers to bring the lawsuit as a group in a class action, the judge forced them to instead bring individual arbitration claims based on an arbitration agreement they signed—the workers not only could not pursue their action in court, but they could not pursue their claims on a class-wide basis in arbitration. 

The California Supreme Court reasoned that the question of whether workers may at least move forward with a class action in arbitration, if not in court, should be based on the language in the underlying arbitration agreement.  In this case, the language in the agreement was unclear as to whether class arbitration claims were allowed.  As a result, the Court interpreted the language in favor of the workers as the non-drafters of the agreement, meaning the Court ruled they could bring their claims as a class in arbitration.

In situations where the language in the arbitration agreement is unclear or ambiguous, this decision marks a victory for workers.  If there is any doubt as to whether the agreement allows for class-wide claims in arbitration, this decision requires employers to comply with an arbitrator’s decision if he or she determines that worker claims can proceed in arbitration on a class-wide basis.

While this decision does not alleviate concerns about private arbitration agreements, it takes a step toward leveling the balance of power between workers and their employers.  

Please contact your labor law counsel with any questions regarding class action lawsuits or private arbitration agreements. 

By Caroline Cohen | August 23, 2016

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