Parties Could Have Specifically Incorporated Arbitration Limitations In California Labor Code Instead Of Generally Choosing California Law -- In Theory.
California Labor Code §229 provides, in part, that actions to collect due and unpaid wages may be maintained without regard to the existence of any private agreement to arbitrate. And parties to an employment contract could, if they wished, incorporate that limitation on arbitration directly into their contract. But that's not what happened in Nixon v. AmeriHome Mortgage Co., LLC, B302754 (2/7 8/16/21) (Perluss, Feuer, Ibarra), a case in which a loan review analyst sued for unpaid overtime and unfair business practices.
Instead, in Nixon, the contract had a California choice-of-law provision, but did not specifically incorporate the limitations on arbitration found in §229. Because the employer's business involved interstate commerce, the arbitration provision was governed by the Federal Arbitration Act, requiring the court to enforce the arbitration provision according to its terms. And the arbitration provision did not specifically incorporate the §229 arbitration limitation, so the parties must arbitrate.
COMMENT. Justice Perluss notes that, notwithstanding the general principle of preemption, "the parties could provide in their arbitration agreement that a dispute regarding unpaid wages—the subject of section 229—is not arbitrable." True 'nuff, but why would an employer who has drafted an employment agreement with an arbitration provision be motivated to do that? Which brings up our next point: employees with individually negotiated contracts and legal representation at the time they enter into their employment contract tend to do better in arbitration than employees with "take it or leave it" contracts they did not negotiate. Parties with bargaining power need to pay attention to choice-of-law and incorporation by reference issues in employment negotiations.
Comments