On September 8, 2023, the California Court of Appeal, in a case entitled Doe v. Superior Court of San Francisco (No. A167105) issued another decision constraining an employer’s ability to enforce binding arbitration agreements against employees. The decision compliments a July 2023 Court of Appeal opinion, Cvejic v. Skyview Capital, LLC (2023) 92 Cal.App.5th 1073. Both opinions address the requirements of California Code of Civil Procedure, Section 1281.98(a)(1) which provides that the employer seeking to enforce a binding arbitration agreement must demonstrate that it “paid” all fees unique to arbitration within 30-days after the due date; otherwise, the employer is considered to be in material breach of the arbitration agreement and waives its right to compel arbitration. In Doe, the Court addressed the meaning of “paid” under Section 1281.98(a)(1), finding that the employer’s failure to deliver the necessary funds to the arbitrator by or before the 30th day after the issuance of the arbitration invoice, violated the statute even though the employer proved (via a postmark) that it mailed a check for all fees before the deadline. In other words, the Court rejected the proverbial “the check is in the mail” excuse even though the excuse was actually proven true!
Similarly, in the Cvejic opinion, the Court of Appeal rejected the employer’s tardy payment of fees even though the arbitrator had extended the payment deadline. The Court held that employer’s obligations to meet the arbitration deposit payment deadline under Section 1281.98(a)(1) is jurisdictional and cannot be waived or extended except by mutual agreement of the parties.
The implications of these recent California Court of Appeal decisions applying and interpreting the 30-day arbitration deposit payment deadline under Section 1281.98(a)(1) reflect the overarching obstacles and limitations on enforcement of binding arbitration agreements against California employees. These and other appellate opinions and California Labor Code statutory nuances highlight the importance for employers to consult with competent employment counsel before trying to implement binding arbitration agreements in your workforce.
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On August 21, 2023, the California Supreme Court issued its opinion in Raines v. U.S. Healthworks Medical Group (2023) 15 Cal.5th 268. This is a significant decision with potentially wide-ranging implications for both California employers and agents/vendors of California employers. In short, the Court clarified the definition of “employer” as used in the California Fair Employment and Housing Act (FEHA) (Gov. Code,1 § 12900 et seq.) to apply to a vendor which performed pre-employment medical screening tests on applicants for the prospective employer which had extended conditional offers of employment which were later retracted due to the applicants’ medical screening results. The Court held as follows: “We conclude that an employer’s business entity agents can be held directly liable under the FEHA for employment discrimination in appropriate circumstances when the business-entity agent has at least five employees and carries out FEHA-regulated activities on behalf of an employer.”
We will continue to monitor the potential impact of this decision on an array of frequent services provider agents and vendors of employers such as recruiting, staffing, and background/criminal investigation agencies, among other possible industries.
Scherer Smith & Kenny LLP remains available to guide you through these and other nuances in California’s dynamic and ever-changing employment law arena. For additional information, please contact Denis Kenny at [email protected], Ryan Stahl at [email protected], John Lough, Jr. at [email protected], or Jaclyn Tran at [email protected].
-Written by Denis Kenny