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Union Members’ Labor Claims Not Subject to CBA Arbitration Agreement Because Waiver of Judicial Forum Not Clear and Unmistakable

Vasserman v. Henry Mayo Newhall Memorial Hospital, 2/8/17, 2DCA/4

A more interesting case about arbitration in the employment class action context, this one in the union context. In bringing this class action, plaintiff nurse alleged the usual potpourri of wage and hour claims.  The union contract in question contained provisions concerning meal/rest, overtime, grievance and arbitration.  Plaintiff said that the CBA arbitration agreement didn’t apply to her statutory claims; hospital said it did.  The trial court denied Hospital’s motion to compel arbitration because the waiver of a judicial forum in the CBA was not “clear and unmistakable.” Held: Affirmed.

Under what’s called the Wright/Vasquez standard, a CBA may require arbitration of a statutory claim if the waiver is “explicitly stated,” and it is “clear and unmistakable” that the parties intended to waive a judicial forum for statutory claims.  In a case involving alleged statutory violations, the presumption of arbitrability that typically applies to contractual disputes arising out of a CBA is notapplicable.  A CBA is a contract, and wage/hour claims are less about the contract than they are about what the applicable law requires.  A CBA requirement that statutory claims be arbitrated must be particularly clear.  Citing to US Supreme Court precedent, the court suggested this is required because the “right to a . . . judicial forum is of sufficient importance to be protected against less than-explicit union waiver in a CBA.” 

While it is true that a waiver of a judicial forum should be clear, arbitration agreements are supposed to stand on equal footing with other contracts.  There is a policy in favor of arbitration under both state and federal law.  Requiring something in a contract to be “clear and unmistakable” is not a requirement that applies to other contractual provisions.  This standard smacks of a continuing judicial hostility to arbitration agreements.

Oh well.  The hospital could have done a better job protecting itself. Making labor claims subject to the CBA’s arbitration agreement is a negotiation point; but, assuming the parties agree, including the clear waiver language should be straightforward. The CBA provision in question said that grievances had to be arbitrated and the CBA defines a grievance as “any complaint or dispute arising out of the interpretation or application of a specific Article and Section of this Agreement.”  That provision makes no mention of the California Labor Code or any other statute, it does not discuss individual statutory rights, nor does it mention waiver of a judicial forum.
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The Winter that Never Ends — Assault on Arbitration Agreements Continues

Poublon v. CH Robinson, 2/3/17, 9th Cir.

Another in a seemingly unending, mind-numbing stream of opinions concerning the enforceability of arbitration agreements in the employment class-action context.  Here, every year plaintiff was made to sign an agreement in order to get her bonus; every year the document had an arbitration agreement.  The agreement had provisions waiving PAGA representative claims, allowing the employer (but not employee) to go to court for certain claims (aka a “judicial carve-out”); putting venue in a different state, limiting discovery; making the arbitration confidential, and authorizing attorney’s fees for frivolous claims and bad faith litigation tactics. The trial court denied employer’s motion to enforce the arbitration agreement, citing unconscionability. Held: Reversed

Every couple of days we are told by another appellate court that the Federal Arbitration Act puts arbitration contracts on the same footing as other contracts, that inferences must be drawn in favor of enforceability and the party opposing the agreement carries the burden of proving the agreement is not enforceable.  Sounds and feels like lip-service — Parties and courts continue to put arbitration agreements under an electron microscope, and no other type of contract receives the same degree of scrutiny.  

The court said that adhesion contracts are not necessarily procedurally unconscionable.  That should go without saying.  Today most contracts are form contracts drafted by lawyers and offered on a “take-it-or-leave-it” basis. Attorneys draft and revise contracts because of the unending, often confusing and at times oppressive legal and regulatory requirements and pitfalls, not to mention the need to comply with federal and state laws. It is way more consistent and way more efficient for companies to use form contracts that has been vetted by the legal department.  And it would be impossible for big employers or companies to have a bunch of different contracts for the same product or class of employee — Who is going to draft, review, negotiate and keep track of all the changes?  And if companies can offer their contracts on a take-it-or-leave-it basis then, per the FAA, they can do the same exact thing with arbitration contracts.  Don’t like it, tell Congress.

In reviewing each of the the terms of the agreement that were allegedly substantively unconscionable, the court explained why none of them should prevent enforcement of the arbitration agreement:

  • The employer apparently conceded that the judicial carve-out was unconscionable.  But why concede that!? The fact that there is not 100% mutuality in the arbitration agreement doesn’t “shock the conscience,” and there is no general rule that other contractual terms have to be 100% mutual.  War, murder, torture, lying, fraud etc. “shock the conscience,” and the fact tht a company may have to rush to court to save its IP doesn’t fall in the same category. In any case, 9C simply said this term could be excised from the agreement.
  • The waiver of representative PAGA claims was unenforceable; but that also didn’t make the waiver unconscionable.  It’s a simple solution: The PAGA claim stays in court, and the remaining claims go to arbitration.
  • Per 9C precedent, a forum selection clause also does not render the arbitration agreement unconscionable; in fact, venue selection clauses are, subject to certain limits, enforceable. Moreover, the agreement here allows the arbitrator to order a different venue if it makes sense to do so. (This is the one part of the opinion that causes concern — California employees should not be made to travel to a different state to protect to their rights!)
  • The fact that the arbitrator was given the authority to award attorney’s fees for frivolous claims, counterclaims and bad faith litigation tactics merely echoes Cal. Code Civ. Pro. 128.7, our counterpart to Rule 11.  That term does not rewrite the attorney’s fees statutes related to wage and hour claims, all of which are probably one-way fee shifting statutes.
  • On the issue of limited discovery, the California Supreme Court has already said that limited discovery in arbitration is okay. Limited discovery helps preserve the simplicity, informality and expedition of arbitration.  Moreover, the agreement allows the arbitrator to order more discovery upon a showing of good cause. 
  • The term making the arbitration confidential was also not unconscionable, a conclusion supported by a California Court of Appeal opinion.  And the provision would not prevent the employee from conducting discovery.


Even though this opinion makes one hope there is light at the end of the tunnel, right now it feels that this winter is never going to end!

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FCRA Violation Held to be Willful, Despite Being an Issue of First Impression

Sayed v M-I, LLC, 1/20/17, 9C

Under the Fair Credit Reporting Act (FCRA), an employer may not procure a prospective employee’s consumer report unless a “clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured . . . in a document that consists solely of the disclosure . .  .” 15 U.S.C. § 1681b(b)(2)(A).  Employer’s disclosure form also contained a release of liability.  Employee filed a putative class action against employer for statutory and punitive damages under the FCRA.  The district court dismissed the case with prejudice for employee’s inability to plead willfulness  Held: Reversed

The FCRA provides for actual damages for negligent violations; it provides for statutory damages for willful violations only.  While no appellate case or administrative regulation had spoken on the validity of including a liability waiver in the disclosure, the court found that defendant’s conduct comported with no reasonable interpretation of 15 U.S.C. § 1681b(b)(2)(A), and was objectively unreasonable.  

The Supreme Court has specifically distinguished recklessness from negligence in the FCRA context, noting that a violation is only reckless (and therefore willful) where an employer adopts a reading of the statute that runs a risk of error “substantially greater than the risk associated with a reading that was merely careless.”  Because the statute barred defendant’s reading, whether it actually believed that its interpretation was correct was immaterial.  The court concluded that defendant ran an “unjustifiably high risk of violating the statute,” and that its conduct was willful as a matter of law.
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No Rest for Employers

Augustus v. ABM Security, 12/22/16, Cal SC
The California Supreme Court has upheld the trial court’s $90 million summary judgment in favor of the security guards against their employer, ABM, over its rest break policy.  ABM had an explicit policy that required its security guards to be on-call during their 10-minute rest breaks, and required the security guards to carry pagers or radios in case there was an emergency.  The primary issue before the Court was whether an employer satisfies its obligation to relieve employees from duties and employer control during rest periods when the employer nonetheless requires its employees to remain on-call.  The Court answered, No —  An employee who is on-call during a rest break has not received a proper rest break and is entitled to an additional hour’s wage under Labor Code section 226.7.


Incredibly, this rule applies even if the on-call employee in fact took an uninterrupted rest break and regardless of whether the on-call policy actually interfered with any of the guards’ ability to take their rest breaks.  As the dissent points out, the evidence offered by ABM at the trial level tended to show that the policy did not interfere with the guards ability to take interrupted breaks, and there was no even evidence of guards being called off their breaks.  If that is the case, it is difficult to understand how the majority concluded that the employer’s policy prevented employees from taking short walks or pumping breast milk.  My favorite quote from the case is by the dissent: “In a marked departure from the approach we have taken in prior cases
concerning whether on-call time counts as work, and in sharp contrast to the
DLSE‘s views about what constitutes a duty-free break, the majority in this case
appears to conclude that a requirement to remain reachable by pager, phone, or
other portable communications device, without more, is inherently incompatible
with the requirement to provide a duty-free rest period — even if the pager never
sounds or the phone never rings.”  I added the emphasis.


And so this case has broad application and creates risks far beyond employers who explicitly require their employers to remain on-call during their rest breaks.  The key fact in the case was that guards were required to carry pagers or radios during their rest breaks, and were also required to respond to incidents during their rest breaks.  Many employers have practices that in fact amount to the same thing.  I am sure that future cases will attempt to apply this new rule to employers whose employees are simply required to keep their pagers or radios with them during their rest breaks.