In California, there are various ways that employers can lose their right to arbitrate employee claims even if the employee signed an agreement to arbitrate such claims. A new case, Suarez v. Superior Court, (Suarez), out of the Fourth Appellate District discusses one of them.

In Suarez, Onecimo Sierra Suarez sued his employer for alleged wage and hour violations. The employer successfully moved to stay the court action and proceed to arbitration as provided in the employment agreement that the employer drafted. When the employer waited more than 30 days to pay its share of the arbitrator’s initial filing fee, Suarez unsuccessfully moved to vacate the arbitration stay. He then petitioned for a writ from the appellate relief directing the trial court to find that the employer has waived its right to arbitration pursuant to Code of Civil Procedure sections 1281.97 et seq.1. The Fourth Appellate District agreed with the employee Onecimo and granted the petition.

The Appellate Court reasoned a material breach waives the contractual right to arbitration and the consumer or employee is permitted to litigate the dispute in court if he or she so chooses and, further by law, when the employer waits more than 30 days to pay its portion of the arbitrator’s invoice, the employer waives the contractual right to arbitrate. Thus, the Appellate Court directed the trial court to lift the stay to permit the employee to proceed to a jury trial.

Employers need to have arbitration agreements in their employment agreements. However, they must also adhere to the applicable laws concerning payment of the arbitrator. If they don’t, the arbitration agreement may be rendered unenforceable.

Therefore,

1. All California employers should have arbitration agreements in their employment agreements and have them reviewed on a yearly basis by their business attorney. California’s employee friendly laws, and its anathema to consumer and employment arbitration, are frequently pitted against the Federal Arbitration Act that favors arbitration of disputes. This results in laws and frequent Court cases that provide further requirements to be added to the ever-growing list of requirements to assure a consumer or employment arbitration is enforceable in California; and
2. Don’t be late paying your arbitration fees!

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.