San Francisco Employment Law Firm Blog

Many employers include a “standard” arbitration provision in their employment contracts or employee handbooks, which provides that any and all disputes arising out of the employer-employee relationship must be referred to mandatory arbitration instead of being litigated in jury trial. Generally, a mandatory arbitration provision is in the employer’s interest. Please read about some of the reasons why employers may prefer arbitration of employment disputes over jury trial.

California law, like federal law, favors enforcement of of valid arbitration agreements. Broughton v. Cigna Healthplans (1999). However, a court may strike down an employer-employee arbitration agreement and find it to be invalid and unenforceable, referring the wrongful termination, discrimination, retaliation, or other employment related dispute for jury trial. One of the most common reasons that courts find certain arbitration agreements to be unenforceable is because these agreements are unconscionable.

The California Supreme Court has a very informative and detailed discussion regarding the enforceability of arbitration agreements in Armendariz v. Foundation Health Psychcare Services, Inc. 24 Cal.4th 83 (2000). In that case, the Court reiterated the holding in Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, noting that an arbitration agreement is lawful if is (1) provides for a neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court; and (5) does not require employees to pay either unreasonable costs or any arbitrator’s fees or expenses as a condition of access to the arbitration forum.

One of the most important provisions under the Bankruptcy Code that affects employment discrimination, retaliation and wrongful termination claims asserted against the employer that files bankruptcy is the “automatic stay” under the Bankruptcy Code section 362. Immediately upon filing by the employer of a bankruptcy petition, the automatic stay takes effect and prevents the plaintiff employee / former employee from proceeding with his employment claim against the debtor. Any action taken by such an employee after filing of the bankruptcy petition contrary to the automatic stay will be void even if the employee is not aware of the employer’s bankruptcy filing. With certain exceptions, the automatic stay applies to all creditors, including plaintiff-employees with discrimination, harassment, and other claims.

If the employer files bankruptcy before the employee files the employment lawsuit, and the statute of limitations on the employment discrimination claim otherwise expires while the automatic stay is in effect, the employee will have until 30 days after the automatic stay is terminated to file the employment discrimination lawsuit, assuming that the claim is not discharged, otherwise extinguished, or resolved in the bankruptcy.

This 30-day period my be extended if the employee was not notified and didn’t have a reason to know that the stay was terminated.

An employer who loses or is about to lose an employment or wrongful termination case will usually argue at trial/arbitration/mediation that the plaintiff employee failed to mitigate his damages. In other words, the employer will try to convince the decision makes that the plaintiff who has been unemployed or underemployed since being terminated, could have and should have found a job long time ago and could have minimized his losses by actually working during the time that he or she was unemployed.

It is therefore very important to know that in employment and wrongful termination cases in California, the burden is on the employer to show that comparable or substantially similar employment was available to the plaintiff employee who was unlawfully terminated and was unemployed for a period of time while his wrongful termination lawsuit was pending. Substantially equivalent employment affords virtually identical promotional opportunities, compensation, job responsibilities, working conditions and status as the position from which plaintiff has been terminated. Sellers v. Delgado College (1990)

This means that the unemployed or underemployment claimant need not go into another line of work, accept a demotion, or take a demeaning position. Ford Motor Co. v. EEOC (1982). Plaintiff may also properly refuse employment that is inconveniently located or unreasonably distant. Cunningham v. Retail Clerks Union (1983) Although, geographical considerations may be less of a factor for executives and professionals whose employer routinely relocate their top employees. In such cases, a wrongfully terminated employee’s failure to accept a job offer solely because it requires moving to a different location may be held to be a failure to mitigate damages. Hopkins v. Price Waterhouse (1990).

Once the employer knows or should know about sexual or other harassment, it has a duty to take immediate and appropriate corrective actions to end it. The employer’s response to harassment complaints against a particular employee or a supervisor must be reasonable calculated to end the harassment. This of course doesn’t mean that an employer has to terminate the alleged harasser’s employment upon receiving a complaint of harassment. A warning, reprimand, mandatory harassment training, suspension or administrative leave are some of the remedies available to an employer which may prevent further harassment and remind the harasser of the consequences of his actions.

However, conducting an investigation of harassment but taking no steps to protect employee from further harassment will not insulate an employer from liability. And if earlier discipline did not end the harassment, a more severe discipline is required. In Intlekofer v. Turnage (9th Cir. 1992) an employer was held liable when harasser, who had been verbally counseled once, repeated his harassing conduct, but employer did not take sufficient additional steps to prevent and/or remedy harassment.

Although the necessary response varies with each case, typically, an employer should:

Binding arbitration is the most common type of resolution procedure or employment disputes between employees and employers in California. Contractual arbitration is a process in which the employee and the employer agree to submit their disputes to binding resolution by one or more impartial third persons.

The common perception is that contractual arbitration is better for employers than employees. The theory is that arbitrators are likely to be conservative professionals who will not be influenced by emotional considerations that could sway a jury. In fact, this perception is particularly strong among employment lawyers in San Francisco and Alameda counties where the juries are notoriously liberal and are likely to award significant verdicts, which makes trials of employment cases in San Francisco and surrounding counties particularly desirable to employees their attorneys. Thus, employment lawyers practicing in the San Francisco area study their clients’ arbitration agreements carefully to attempt to find a way to dismiss agreements to arbitrate as unenforceable due to duress, unconscionability and other reasons, in order to avoid arbitration and have a jury trial.

But the perception that arbitrating an employment dispute is better for employers is not always true. Employers with strong legal defenses may do better before a judge than an arbitrator. Where critical facts to a case are in dispute, especially in discrimination and harassment cases, employers with strong witnesses may do better before a jury than an arbitrator, especially if an employee is a poor witnesses and has been already shown to a jury to exaggerate his claims and to be inconsistent about his complaints of discrimination and/or harassment.