Does the Arbitration Clause in Your Employment Agreement Adequately Protect Against Class Discrimination Claims?

In Sandquist v. Lebo Automotive, the California Supreme Court was asked to determine whether a trial court had properly decided to strike all class arbitration claims brought by a salesperson on behalf of a class of car salespersons. The car dealership argued that the trial had properly interpreted the salesperson's employment arbitration agreement to prevent the arbitration of any class claims. The California Supreme Court deferred that argument, but ultimately overturned the trial court decision on the basis that the trial court never had authority to even make a decision regarding the class claims. The trial court was bound by whomever the arbitration agreement appointed to make such decisions. In other words, if the arbitration agreement directs a specific person to interpret the arbitration agreement and any disputes arising from the arbitration agreement, the trial court must abide by the agreement.

The Court explained that the parties had entered into three arbitration agreements and each of them mandated that all disputes between the parties be "submitted to and determined exclusively by binding arbitration." The Court emphasized that the agreements specifically identified claims which were excluded from claims to be adjudicated by the arbitrator, but failed to exclude class arbitration claims. Most importantly, the Court construed any ambiguity in the arbitration agreement against the drafter, the car dealership, which sought to interpret the arbitration agreement in a manner to allow the trial court to decide class arbitration claims.

In sum, given this holding, parties to arbitration agreements should immediately review their agreements to determine whether the agreements properly identify who will interpret the permissibility of class arbitration or class waiver provisions in the agreements. For example, Lebo Automotive argued that the arbitrator should not be the party to interpret such provisions as they may have "background incentives in the form of potential higher fees that would cause them to favor contract interpretations allowing for class arbitration, and therefore cannot be entrusted with the decision." Parties who wish to prevent arbitrators from making these decisions should revise their current arbitration agreements to eliminate any ambiguities!

If you have any dealership or employment related matter that renders it necessary for you to consider consulting with an attorney, please contact Shulman Bastian Friedman & Bui LLP at 949-340-3400 or at and ask to speak with one of our attorneys with experience in handling dealership and employment legal matters.

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