In the latter half of 2021, the California Court of Appeal issued two published decisions denying employers’ petitions to compel arbitration of employment disputes. These decisions provide important guidance as to what employers must do in order to successfully compel arbitration of lawsuits brought by former employees – including mistakes employers can avoid when attempting to meet their burden of establishing the existence of an agreement to arbitrate, and in ensuring that arbitration agreements provide essential fairness to employees.
In Najarro v. Superior Court (2021) 70 Cal.App.5th 871 (as modified, Oct. 22, 2021), multiple employer defendants moved to compel arbitration of lawsuits filed by eight employees, each of whom had signed different versions of English- and Spanish-language arbitration agreements.
In opposition to the employers’ petitions to compel arbitration, seven of the employees signed English-language declarations in which they contended that they could not read English – yet the employer defendants did not object to the declarations in the trial court on that ground.
Nevertheless, the trial court ordered all 8 employees to arbitrate, on the ground (among others) that a valid “delegation clause” in the agreements required an arbitrator, and not a court, to decide whether the agreements were unenforceable.
The Court of Appeal reached a different conclusion: four of the eight employees could not be compelled to arbitrate at all; the trial court was required to make additional findings as to two others; and the remaining two employees could possibly be compelled to arbitrate, but that an arbitrator would still have to decide whether the agreements they signed were enforceable.
With respect to the four employees who could not be compelled to arbitrate, Martha Serrano contended that she was illiterate; that she was told that her arbitration agreement and other agreements she was instructed to sign were unimportant, that she was pressured to sign the arbitration agreement by being asked, “do you want to work or not?”; and that no one explained what she was signing despite her professed inability to understand.
The employer defendants didn’t submit any evidence disputing this testimony, and the Court of Appeal found that the agreement to arbitrate with Serrano was void, because the employer had procured it by “fraud in the execution.”
María Muñoz, another employee, testified that an employer representative presented her with one version of the agreement, flipped to the signature page, obstructed her view of the document, and instructed her to sign, also without explaining the agreement to her – and this testimony was also undisputed.
The Court of Appeal similarly found the agreement with Muñoz was void for fraud in the execution.
The agreements executed by Emerson Velasco and María Sánchez suffered similar fates, because these employees testified that their experience was similar to that of Ms. Muñoz: they were only presented with arbitration agreements after submitting other documents, not given an opportunity to review them on their own, and told to sign without either a basic explanation of the agreement’s terms or the opportunity to view an unobstructed version of the agreement.
The employer defendants didn't dispute these contentions, either.
With respect to the agreements signed by Yeni Najarro and Soraya Mendívar, the Court sent the matter back to the trial court to determine whether the circumstances surrounding the execution, and the language in the agreements, rendered the agreements unenforceable.
In doing so, the Court noted that the employees were not provided with copies of the applicable arbitration rules when they signed the agreement, and that the trial court was now required to resolve a factual dispute as to whether the agreements were required as a condition of employment or not.
The Court of Appeal also noted that the agreements contained an unenforceable waiver of wage and hour claims brought under the Private Attorneys General Act, and that the agreements were not signed by the employer defendants.
The court ordered the last two employees, Fidel Urias and Paloma Rios, to arbitration, because they failed to establish fraud in the execution: they had signed the agreements presented to them in a language they could understand, but were allegedly told only that the agreements were not important, and were related to health and insurance.
In finding no fraud in the execution, the Court of Appeal noted that it is unreasonable for a person to fail to read an agreement that is presented for signature, and in light of the delegation provision in the agreements that Urias and Rios signed, the Court found that an arbitrator was required to decide whether those agreements were unenforceable.
Given that an arbitrator can conclude that the agreements are unenforceable, however, these employees’ claims would wind up back in court – and as at least four of the eight Najarro employees cannot be required to arbitrate under any circumstances, this small victory in Najarro will be hollow.
Finally, all of the Najarro employees argued on appeal that a discrepancy between the English- and Spanish-language versions carried legal significance, but the Court of Appeal found that the employees had waived this argument by failing to raise it in the trial court.
The facts in Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158 (Nov. 30, 2021) were much simpler, equally unfavorable to the employer.
There, in support of its petition to compel Hope Gamboa to arbitrate her employment claims, Northeast Community Clinic relied on a declaration from its human resources manager, averring that the HR manager had personal knowledge of the facts and that Gamboa had signed an arbitration agreement – but without any additional supporting facts.
In opposition, Gamboa testified that she did not remember signing the agreement and would never have signed it if she had known that she would be giving up the right to file a lawsuit. Gamboa’s counsel also objected to the HR manager’s declaration, contending that the declaration failed to establish the manager’s personal knowledge and failed to properly authenticate the arbitration agreement.
As was true in Najarro, the employer didn’t submit any supplemental declaration in response to the employee's factual contentions – and the trial court held that the clinic failed to meet its burden of establishing an agreement to arbitrate, and sustained Gamboa's objections to the HR manager's declaration. This meant that there was no admissible evidence of an agreement to arbitrate at all!
The Court of Appeal affirmed, noting that Gamboa’s claim that she did not recall signing the agreement was, in and of itself, sufficient to contravene the evidence of an agreement to arbitrate, and that the HR manager's declaration was properly disregarded, because it failed to explain how the manager knew that Gamboa had seen or signed the agreement.
Here are the takeaways for employers:
- When moving to compel arbitration, the employer is best served by relying upon a detailed declaration, signed by a custodian of records who can properly authenticate an employee arbitration agreement as a business record, and who is competent to testify as to the circumstances surrounding the agreement’s execution, including that employees are given the option of signing agreements in their language of choice. (Ideally, the custodian’s declaration should be signed by the same individual who counter-signed the arbitration agreement on the employer’s behalf, thus confirming that the employer also agreed to arbitration.) The custodian of records can also testify that the employee’s signature on the agreement is genuine, based upon a comparison of the employee’s signature on the arbitration agreement with other signed documents in the employee’s personnel file (such as a job application, W-4, and disciplinary or termination notices). Multiple, signed documents in the employee’s personnel file can effectively rebut an employee’s contention that the employee cannot read or understand documents in the signed language.
- While a detailed supporting declaration in support of a petition to compel arbitration may be sufficient to anticipate an employee's factual contentions, it is dangerous to let those factual contentions go unaddressed when replying to the employee's opposition.
- Employers can file written objections to any evidence submitted by employees, if the circumstances warrant. If an employee submits a declaration averring that the employee cannot read English, then the employee’s signed English-language declaration, standing alone, can't be admissible – as the employer defendants in Najarro belatedly argued on appeal. To the extent an employee submits a foreign-language declaration for a court’s consideration, that declaration must be accurately translated into English by a properly qualified individual – much in the same manner that a foreign-language arbitration agreement must be translated for the court before it can be admitted into evidence.
- The terms of arbitration agreements, and the circumstances of their execution, should be reviewed by counsel, to ensure that the agreements provide essential fairness to employees. Fluent counsel should also review translations of all arbitration agreements to make sure that the translations are accurate.
- If an employee arbitration agreement is modified, the failure to distribute that agreement for signature on a company-wide basis, and to obtain signatures by all employees, will mean that multiple versions of an arbitration agreement will be floating around. In that regard, the law does not prohibit an employer from requiring an employee to sign an arbitration agreement as a condition of continued employment. (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1109.)