Reinsurance Focus

Plaintiff filed a class action complaint alleging wage and hour violations. He had signed an arbitration agreement which did not contain a class arbitration waiver. The trial court denied a motion to compel arbitration on the basis that the employer had waived arbitration by failing to properly and timely demand arbitration. The court of appeal reversed, ordering individual arbitration, holding that: 1) the defendant did not waive its right to arbitration even though it waited 14 months to move to compel arbitration; and 2) Section 7 of the National Labor Relations Act did not bar enforcement of the arbitration agreement at issue. The Supreme Court’s decision in AT&T Mobility v. Concepcion prompted the defendant’s delayed motion to compel. Concepcion held that the Federal Arbitration Act preempts California’s Discover Bank rule, which invalidates class arbitration waivers in consumer contracts of adhesion based on a finding of unconscionability. The court of appeal found that prior to Concepcion, the defendant reasonably perceived it would be futile to seek to compel arbitration in light of the Gentry test, which extended the Discover Bank rule to the employment context. The court reasoned that the risk of invalidation “diminished substantially” after Concepcion, but declined to explicitly “decide whether Gentry remains good law after Concepcion.” The employee contended that an order requiring individual arbitration would deprive him of the right to engage in collective legal action as protected by section 7 of the NLRA. This argument was accepted by National Labor Relation Board in D. R. Horton. The court of appeals followed other California court decisions which found Horton inapplicable in California courts. Reyes v. Liberman Broadcasting, Inc., No. B232511 (Cal. Ct. App. August 31, 2012).

This post written by Abigail Kortz.

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