On May 29, 2009, the California court of appeal held that an admittedly valid employment arbitration agreement would control the disposition of a former employee’s administrative wage claim against his former employer. Sonic-Calabasas A, Inc. v. Moreno, Case No. B204902.

The employee was subject to an arbitration agreement requiring certain claims, including claims for unpaid vacation, be submitted to arbitration. The former employee nonetheless filed an administrative charge with the Labor Commissioner seeking recovery for unpaid vacation. The employer sought to dismiss the administrative proceeding and compel arbitration. The trial court refused to enforce the arbitration agreement, but the court of appeal reversed.

The court of appeal held that the arbitration agreement was enforceable under the Federal Arbitration Act (FAA) because it did not pose a significant obstacle to the vindication of the employee’s statutory rights. In reaching its decision, the court relied on recent authority from the United States Supreme Court. In Preston v. Ferrer, 128 S. Ct. 978 (2008), the Supreme Court held that the Labor Commissioner’s original and exclusive jurisdiction was divested by the FAA with regard to a contract dispute arising under the Talent Agencies Act. Although not entirely on point, the court of appeal found the Preston decision to be persuasive, emphasizing its reasoning that the arbitration clause was binding since it only decided the forum of adjudication without relinquishing any substantive rights. So too in this case, the arbitration provision did not negate any substantive rights, but only required the employee to bring his vacation claim in arbitration rather than before the Labor Commissioner.

This blog entry was authored by Jim Hart.