Metropolitan News-Enterprise


Friday, February 28, 2003


Page 3


State Supreme Court Again Limits Employee Arbitration Agreements


By a MetNews Staff Writer


Due process standards adopted by the California Supreme Court for arbitration of employment discrimination claims also apply to nonstatutory wrongful termination allegations, the California Supreme Court ruled yesterday.

In a 4-3 decision, the justices held that Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, is not limited to claims brought under the Fair Employment and Housing Act.

The Armendariz court found provisions in an employment arbitration agreement that limited damages to back pay and limited discovery to be unconscionable, but severable from the rest of the agreement. The court also held that the employee could not be required to pay half the costs of the arbitration.

The high court extended that reasoning yesterday, holding that an employee of an auto dealership, who claims he was fired for blowing the whistle on unlawful conduct at his workplace,  must arbitrate his claim, but is not bound by a provision that allows the employer to seek a second arbitration if the first arbitrator awards more than $50,000.

That provision is “unfairly one-sided and unconscionable,” Justice Carlos Moreno wrote.

The case concerned an Encino Mercedes Benz dealer’s mandatory employment agreement with its former service manager, Alexander Little.

Little claims he was fired after alleging other employees were engaging in warranty fraud. In the process of arbitrating his dispute, he challenged the $50,000 provision of his binding arbitration agreement.

Los Angeles Superior Court Judge S. Patricia Spear ruled that the agreement was so unconscionable under Armendariz that Little could not be compelled to arbitrate at all. The Court of Appeal reversed, holding that Armendariz did not apply to nonstatutory claims.

The Supreme Court’s majority agreed with Little that Armendariz applied, but said the unconscionable provisions were severable, suggesting that Spear erred in questioning other parts of the agreement. Chief Justice Ronald M. George and Justices Kathryn M. Werdegar and Joyce L. Kennard joined in Moreno’s opinion.

Justices Marvin Baxter, Ming Chin and Janice Rogers Brown, while agreeing that the $50,000 provision was illegal, said employers should not always have to pay the full cost of an arbitrator.

Before an employer is required to pay the entire cost, Baxter wrote, an employee should have to demonstrate the arbitrator’s fee “would make arbitration prohibitively expensive as compared to court litigation.”

The case is Little v. Auto Stiegler Inc., 03 S.O.S. 1005.


Copyright 2003, Metropolitan News Company