A.
Statutory Claims
1.
Federal and state statutory claims prohibiting anti
discriminatory conduct are subject to mandatory arbitration
in lieu of litigation, i.e., FEHA and Title VII, ADA,
ADEA;
2
. Arbitration of statutory claims does not require an
employee to surrender substantive rights afforded by
statute, it only submits their resolution to an arbitral
forum rather than a judicial one;
3.
Based on principles of public policy, statutory rights
are unwaivable if an employee is unable to vindicate
statutory rights;
4.
The arbitration agreement may not limit statutorily
imposed remedies, including punitive damages and attorney
fees authorized by statute (FEHA);
5.
An employer must afford an employee adequate discovery.
Although current arbitration statutes appear to preclude
discovery, the court imposed this condition in order
to enable an employee to vindicate statutory rights;
CCP 1283.05. and Armendariz f.n.10. Judicial review
of discovery is authorized by CCP 1286.2; Armendariz
f.n.11
6.
Arbitrators must issue written awards to recite essential
findings and conclusions on which the award is based;
7.
Employers must pay the costs of arbitration consistent
with those unique to the process.
B.
All Claims in Employment Disputes
1.
Arbitration contracts in employment are subject to judicial
review for unconscionability, substantive and procedural;
Civil Code 1670.5;
2.
The contract must provide for bilateral remedies, i.e,
the employer cannot impose conditions on an employee
inapplicable to itself (limitation on damages, appeal,
trial de novo) or other "one sided" conditions that
disadvantage the employee;
3.
Defective conditions of an arbitration clause cannot
be severed if the central purpose is illegal or unlawful,
but collateral conditions are severable; Civil Code
1670.5. Unconscionable damages limitations and unilateral
arbitration provisions favoring the employer are unlawful.
C.
Neutrality of Arbitrator Armendariz cites Graham v. Scissor
Tail, Inc. (1981) 28 Cal.3d 807 as authority for the
mandate that an arbitrator must be neutral. This requirement
is fortified by disclosure statutes in CCP 1281.9;
D.
Scope of Application
1.
Armendariz does not apply to collective bargaining contracts
between management and labor, but its holding would
include allegations of employment discrimination by
a union member for claims not covered by the collective
bargaining agreement; Wright v. Universal Maritime Service
Corp. (1998) 525 U.S. 70;
2.
Arbitration clauses in consumer contacts are reviewed
in Badie v. Bank of America (1998) 67 Cal.App.4th 779
and Broughton v. Cigna Healthplans (1999) 21 Cal.4th
1066;
3.
NASD arbitration clauses are discussed in: Seus v. John
Nuveen & Co., Inc.(3d Cir. 1998) 146 F.3d 176;
4.
Administrative disposition of discrimination claims
is unaffected by this decision; Armendariz, f.n.6;
5.
The Ninth Circuit opinion in Duffield v. Robertson Stephens
& Co. (9th Cir.1998) 144 F.3d 1182 on the inarbitrability
of statutory claims under the FAA is directly at odds
with Armendariz and specifically rejected by the California
Supreme Court.
E.
What Armendariz does not decide:
1. Armendariz only applies to application of the California
Arbitration Act. Whether the Federal Arbitration Act
(FAA; 9 U.S.C.A. et. seq.; transactions in interstate
commerce) applies to arbitration clauses in employment
contracts is unclear. Although the Ninth Circuit has
so concluded, it is a minority of one. The United States
Supreme Court will determine what constitutes an "employment
contract") next term in Circuit City Stores v. Adams,
120 S.Ct. 2004. Green Tree Financial Services Corp.
v. Randolph 120 S.Ct. 1552 will determine whether the
FAA requires vindication of statutory rights to enforce
a pre dispute employment contract.
2.
The Court did not consider whether the waiver of jury
trial must be explicit and "knowing" as required by
the Ninth Circuit (Armendariz, f.n.7);
F.
Challenging and Defending Arbitration Clauses
1.
The United States Supreme Court will decide the applicability
of the FAA to arbitration clauses in employment contracts
as discussed above;
2.
Armendariz was appealed pursuant to CCP 1294 (a) which
applies if the trial court denies a petition for arbitration.
Any employment contracts currently in existence will
be challenged if the terms contradict guidelines announced
by the California Supreme Court;
3.
Employer and employee can always agree to a post dispute
arbitration in lieu of litigation;
4.
Discovery disputes will arise. Who will bear the costs
and does the CCP apply? Pleadings in arbitration are
"functus officio" (Dodd v. Ford [1984] 153 Cal.App.3d
426) and the parties appear as Claimant and Respondent.
5.
The terms of the arbitration agreement must enable employees
to "vindicate statutory rights". This key phrase would
cabin discovery but may include depositions and request
for production of documents;
6.
Employment agreements which contain arbitration clauses
are inherently "adhesive" in the mind of the Court.
Bilateral remedies, discovery, employer payment of costs,
and an even-handed process of arbitration are key ingredients
in rebutting this argument;
7. The arbitration must qualify as a "true arbitration",
i.e, a neutral arbitrator, power to issue a binding
decision, and, under Armendariz, a written opinion;
8. If the Claimant prevails in arbitration, the arbitrator
must draft an opinion setting forth the basis for the
decision, specifically reserving jurisdiction of submission
of attorney fees/ cost bill.
9.
The Armendariz court notes that the appeal did not address
the sufficiency of a written opinion, only that it should
include a statement of reasons for the decision. This
rule suggests that arbitrators must be knowledgeable
in the law of remedies, legal and equitable relief,
attorney fees, costs, discovery rules and statutory
interpretation;
10.
Challenges to the "arbitrability" of the employment
contract, or any contract requiring arbitration, are
within the province of the trial court, not the arbitrator.
Resolution of this issue by a court is binding on the
arbitrator.
