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Taco Bell Arbitration Clause Unenforceable

Saturday, December, 24, 2016


A California appeals court recently ruled the arbitration clause in the job application potential employees of fast food restaurant Taco Bell fill out has been ruled unenforceable because it is not clear if it applies to franchisees. The ruling further demonstrates the tendency for the courts to consider arbitration a creature of contract law subject to ordinary rules of contract interpretation. Had the arbitration clause used the individual franchise name rather than a vague term, the franchisee might have been successful.

The ruling came from a lawsuit filed by Jesus Mendoza. Mendoza sued Century Fast Foods Inc. for allegedly failing to provide meal breaks and rest breaks as required by law in the state. Mendoza also accused the company for not paying for all of his hours worked, which deprived him of overtime pay.

According to the employment application filled out by employees when they apply for work, Taco Bell and its “related companies” require disputes between the company and employees be arbitrated. Mendoza and Century Foods presented rulings from courts analyzing whether or not “related companies” includes franchisees. The judge in the case ruled the term ambiguous.

According to contract law principles, ambiguous terms are resolved against the pact’s drafter. Because there was ambiguity in the job application, the burden was on Century Foods to demonstrate that Mendoza understood he was required to arbitration any disputes that arose as a result of his employment. Since Century did not meet that burden, the judge was unwilling to compel arbitration in the case.