Agreement of Alternative Dispute Resolution
On December 27, 2016, the California Court of Appeals published a decision on the enforceability of an Alternative Dispute Resolution Agreement (“Agreement”) in an employee-employer relationship. The case in front of the court was Flores v. Nature's Best Distribution and the issue before the Court was whether or not a former employer could compel arbitration under the Agreement signed by the employee. Ultimately, the Court declared that the defendants failed to prove the plaintiff agreed to submit her claims to final and binding arbitration.
In July 2001, the Plaintiff in this case, Julie Flores began working for Nature's Best Distribution in the shipping/receiving department. According to her complaint, Flores injured her back in February/March 2014 but continued to work until May 2014, when her back injury got worse and she was placed on medical leave. The complaint further alleged that plaintiff's medical leave was extended through August 15, 2014. When plaintiff returned to the doctor, however, she was not cleared of all restrictions and was placed on further leave until August 31, 2014, on which date she would be cleared to perform modified duties from September 1 to 19, 2014. Plaintiff did not receive a doctor's note memorializing the need to further extend her leave, until August 18, 2014, at which time she faxed it to her employer at a fax number, which she previously had used, and received a confirmation that the fax was successfully sent. The employer denied receiving a fax. Plaintiff attempted to deliver the doctor's note in person, but learned that on August 21, 2014, her employment had been terminated for failing to return from medical leave.
In November 2014, Plaintiff filed a lawsuit against Nature's Best Distribution, LLC, Nature's Best, KeHe Distributors, Inc., and KeHe Distributors, LLC (collectively referred to as defendants), alleging several claims under the California Fair Employment and Housing Act. Specifically, Flores claimed disability discrimination, failure to engage in the interactive process, failure to accommodate disability, failure to prevent discrimination or retaliation, and wrongful termination in violation of public policy.
Defendants filed a petition to compel arbitration based on evidence that plaintiff signed an agreement for alternative dispute resolution. In opposition to defendant's petition to compel arbitration, plaintiff argued that: 1) she did not recall signing the Agreement; 2) the Agreement was ambiguous because it did not specify which set of American Arbitration Association (“AAA”) rules applied; and 3) that the Agreement was unconscionable because it was a take-it-or-leave it condition of employment, plaintiff was required to pay unlawful fees, and denied plaintiff's appeal rights. The trial court denied the petition.
California Court of Appeals
The defendants in this case contend the trial court erroneously concluded defendants failed to prove plaintiff agreed to arbitrate her claims and that the arbitration provision contained in the Agreement was unenforceable because it is unconscionable. The California Court of Appeals affirmed the trial court's order and declared that the defendants failed to prove plaintiff agreed to submit her claims to final and binding arbitration.
The Court of Appeals' analysis started and ended with the following: “[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists.” (Rosenthal v. Great Western Fin. Securities Corp.) In this case, the Court of Appeals found that no Agreement was reached on multiple levels. While the Agreement seemingly bore the contested signature of the plaintiff, a signature from a company representative was absent from the Agreement. This would seemingly be sufficient because the employer never signed the Agreement to which it was a party, but the Court went further in its analysis. The Court of Appeals went on to find that the agreement was ambiguous because it failed to: 1) specify which disputes would be subject to arbitration; and 2) which of the multiple sets of AAA rules would apply to arbitration.
In affirming the trial court's order, the Fourth District Court of Appeals found that the Agreement was ambiguous at best and that defendants failed to prove that the parties reached a “final and binding” agreement on arbitration of claims. The Court of Appeals declined to analyze the issue of unconscionability because there was no agreement to begin with.
California Employment Law
Flores v. Nature's Best Distribution illustrates the importance of consulting an attorney when developing or revising employee policies and procedures, to include employee agreements and other obligations on the part of employees or employer. If you have any questions about California employment law, contact Kingsley & Kingsley to speak with one of our experienced labor lawyers.