Arbitration/Enforceability/Employment: Requiring Employee To Agree To Arbitration Provision Is Not By Itself Wrongfully Coercive, Despite Loss Of Right To A Jury

 

Labor Code Section 206.5 Prohibits Employer From Obtaining Release of Claim For Wages Under Specified Circumstances, But Does Not Preclude Employee From Waiving Right to Jury By Agreeing To Arbitrate

     The scenario is familiar: Employee (Pulli) sues employer (Pony International, LLC), for wrongful termination and other claims. Because employee signed an arbitration provision, employer moves to compel arbitration. The twist: Does Labor Code section 206.5 void the employment agreement and the arbitration provision by precluding employer from requiring employee to give up a right to a jury trial as a condition for future employment and future wages? Yes, concluded the trial court, denying the motion to compel arbitration. Employer appealed. Pulli v. Pony International, LLC , Case No. D059137 (4^th Dist. Div. 1 June 19, 2012) (Aaron, J., author) (certified for publication).

     No, concluded the Court of Appeal.

     Labor Code section 206.5 provides in part:

“(a) An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. . . . ”

     After reviewing the plain language of the statute, related code sections, the purpose of section 206.5, and legislative history, the Court concluded, “section 206.5 merely prohibits an employer from requiring an employee to execute a release of a claim for wages due, and places no limitations on the enforceability of arbitration provisions.”

     Furthermore, the language of the statute was interpreted narrowly, so an invalid release of a wage claim only renders the release itself “null and void” – it does not “render unenforceable the arbitration provision. . . “

     Thus, the Court of Appeal concluded the arbitration provision was valid and enforceable. The agreement did not require the employee to release a claim for wages due, but even if it had done so, such a release would not have invalidated the arbitration clause. The Court of Appeal reversed the order denying the motion to compel arbitration.