Previous Arbitration Agreements Are Potentially Unenforceable Against Re-Hired Employees

From JDSupra, Jared Slater discusses a recent case in California in which an employee who was rehired and did not required to re-sign an arbitraiton agreement was not bound by the arbitration agreement she signed during her previous employments. Given the importance of arbitration agreements for avoiding class action lawsuits, companies would be well advised to ensure that all workers sign and re-sign arbitration agreements. Jared writes:

Despite its best efforts, the California Legislature has been unable to substantially curtail the popularity of employment arbitrations in California.  The hostility to employment arbitration remains evident, however, among the California courts.  This is illustrated by the recent decision of the California Court of Appeals in Vazquez v. SaniSure, Inc.

In Vazquez, an employee was initially hired by an employer for almost two years between 2019 and 2021.  During this period of employment, she was required to sign a binding arbitration agreement. The agreement provided that binding arbitration was the sole and exclusive means to resolve all disputes that arose out of, or related in any way, to her employment.  The employee resigned in May 2021 and was re-hired four months later.  However, upon re-hire, she was not required to sign a new arbitration agreement. She then continued her employment until July 2022, when her employment was terminated.

What followed was a scenario all too familiar with California employers: a dispute relating to her employment arose, and she filed a class action and Private Attorneys General Act lawsuit against her former employer. The employer moved to compel arbitration based on the existence of the signed binding arbitration agreement from her first period of employment.  The trial court denied the motion to compel arbitration and the Court of Appeal affirmed the decision.

The appellate court’s decision turned on the fact that the employee’s claims stemmed from her second period of employment and that no arbitration agreement covered such claims.  Citing section 1280(i) of the California Arbitration Act, the Court of Appeal pointed out that arbitration agreements can be extended by implied agreement and that a cause of action that arises after the contract terminates may be subject to arbitration if the arbitration agreement survives termination of the remainder of the contract.  But the employer in Vazquez could not show that an extension to the second period of employment was intended or implied in the arbitration agreement.  Accordingly, the Court of Appeal reasoned that the negotiation of a second employment offer, which did not include an arbitration agreement, supported the employee’s argument that the signed arbitration agreement was only intended to cover those potential disputes pertaining to the first period of employment. Stated another way, the Court of Appeal limited the arbitration agreement to the period of employment in which it was signed because no language in the agreement allowed otherwise.

Besides workers in seasonal industries, re-hires tend to be rare. Even so, the Vazquez decision provides valuable guidance for such instances.  Employers should not expect that policies will carry over from any prior period of employment to the next.  Each time any employee is hired, the hiring process should be repeated in full to avoid potentially costly pitfalls.

Source: Previous Arbitration Agreements Are Potentially Unenforceable Against Re-Hired Employees | Ervin Cohen & Jessup LLP – JDSupra

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