Employer Waived Its Right to Have Arbitrability of an Employment Agreement Determined by the Arbitrator, but Labor Code §206.5 Does Not Prohibit the Arbitration of Claims

Pulli v. Pony International (June 19, 2012) ___ Cal.4th____ is another interpretation of an arbitration agreement in a long line of cases interpreting whether or not an arbitration agreement is enforceable. The fact that this case even exists underscores the fact that the law on the enforceability of arbitration agreements is unnecessarily murky and that employees continue to balk at the inherent unfairness of arbitration agreements, which take away an employee’s right to a jury trial.

In this case, the California Court of Appeals held that, as a procedural matter, a defendant waives its right to have an arbitrator determine the issue of arbitrability where the defendant acted in a manner inconsistent with the right to arbitrate and substantially invoked “the litigation machinery” per Saint Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196 by addressing the employee’s claim on its merit, rather than by simply asking that the matter be sent to arbitration. This ruling makes sense – as the employer was asking the court to rule for two bites of the apple: let the court rule, and if it didn’t like the court’s opinion, then take it to an arbitrator.

Second, the Court of Appeals held that on the merits, an arbitration agreement is not invalidated by Labor Code §206.5‘s prohibition against requiring that an employee sign a release for the payment of wages without paying the wages in question. The Court noted that, as a matter of statuatory interpretation, the goal of Labor Code §206.5 is to prohibit the coercion of settlement of wage claims without the actual payment of the wages, but that Labor Code §206.5 did not bar an employer from requiring (or coercing, really!) the waiver of a jury trial.

Jody I. LeWitter
August 16, 2012