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California Supreme Court Continues to Support Arbitration

Tuesday, November, 19, 2013


 

A recent decision by the California Supreme Court has upheld the legitimacy and supremacy of legally agreed-upon arbitration agreements, though it did ultimately require a re-examination and determination that the arbitration agreements in question were legitimate and enforceable.

 

The issue began in 2011 when an employee of a California-based business filed a wage and hour claim against their employer with the Labor Commissioner of California.  The employee and the business later entered into arbitration as per the employee’s employment contract.  At that time, the Supreme Court refused to enforce the arbitration and required the employer to participate in a hearing with the Labor Commissioner first.  If the employer was unhappy with that result, they could enter into arbitration on appeal.

 

However, this decision was appealed and nearly two years later the Supreme Court has reversed itself and agreed that legally entered-into arbitration is enforceable and that forcing the employer to take their dispute to what’s known as a ‘Berman Hearing’ in California was not legal.

 

However, the appeal ruling did specify that before the original arbitration ruling was upheld, the court must determine that the original arbitration agreement was proper and enforceable.  This leaves open the court’s authority to determine the legitimacy of arbitration agreements while removing the court’s ability to unilaterally circumvent arbitration agreements.

 

As with any other clause or agreement, the enforceability of the arbitration agreement often comes down to the language employed.  Arbitration agreements that place the costs of arbitration on the employer and specify a fast and objective hearing by a trained, professional neutral will likely satisfy any court going forward.  The end result here is that the legality and efficacy of arbitration has been upheld and shown to have precedence over arbitrary state requirements.