Earlier Employment Agreement Bars Tilly's Arbitration Motion Based on Subsequent Agreement

On August 6, 2014, the Court of Appeal for the State of California in Santa Ana certified for publication its earlier opinion affirming the ruling of judge Steven Perk of Orange County Superior Court. Reblledo v. Tilly’s Inc., G048624, Aug. 6, 2014. The court held that express terms in an employment arbitration agreement excluding “matters governed by the California Labor Commissioner” from arbitration excludes plaintiff’s statutory wage claims from obligatory arbitration.

Plaintiff Maria Rebolledo worked for Tilly’s, Inc. and World of Jeans & Tops, Inc. on and off from July 2000 until October 2012. During her employment she executed three employment agreements regarding the arbitration of her employment claims, which included language stating that the parties agree to arbitrate any dispute arising out of employment, except workers’ compensation claims, unemployment insurance, and matters governed by the California Labor Commissioner. She left the defendants’ employ in 2001 and was rehired in 2002 when she executed the third employment agreement. The latter language was absent.

In February 2013, Rebolledo filed a lawsuit against the defendants on behalf of herself and a putative class of “similarly situated” persons alleging the following claims: (1) failure to provide meal periods; (2) failure to provide rest periods; (3) failure to pay wages of terminated or resigned employees; (4) knowing and intentional failure to comply with itemized wage statement provisions; (5) violation of the unfair competition law; and (6) enforcement of Private Attorneys General Act of 2004.

The defendants filed a motion with the trial for an order compelling arbitration. The court denied the motion holding the language at issue in the first two arbitration agreements excluded Rebolledo’s claim from the arbitration agreement. In affirming judge Perk’s ruling, the reviewing court interpreted the arbitration agreement by its plain and ordinary meaning. It further held that the arbitration agreement must be construed against the employer as the drafting party. The court held that the plain language of the agreement precluded Rebolledo’s wage claims from the arbitration agreement because the wage claims are within the Labor Commissioner’s jurisdiction.

The court further held that the third agreement did not supersede the first two agreements because by its terms, the first two agreements survived the employment relationship and nothing in the third agreement purported to cancel the prior agreements. Nor did the third agreement modify the first two agreements because it failed to comply with the requirement of the first agreement that any modification be signed by three different executives of the defendants. Further, the first agreement did not grant the employer a unilateral right to modify the earlier agreement.

This case highlights that employers must be mindful of terms in prior agreements when executing new agreements with employees. If the old agreements are not properly cancelled with appropriate cancellation language, the terms of the old agreements can be operative and defeat new agreements. Additionally, employers must take care to use specific language when crafting arbitration agreements, as the court stated in response to Tilly’s argument that the exclusion language should be construed to limit only claims filed with the Labor Commissioner. “If the Employer intended to exclude only statutory wage claims brought in one forum over another it could have narrowly drafted and defined the phrases ‘matters governed’ and ‘matter[s] within the jurisdiction’ to mean ‘claims actually filed with the commissioner’ or ‘claims being litigated in a Berman hearing.’ Alternatively, Employer could have clarified Employee was agreeing to arbitrate ‘statutory wage claims not brought before the Labor Commissioner.’”

At Jafari Law Group, our attorneys can advise you concerning your company’s employment matters, including arbitration agreements and employment handbooks. Contact us today for a free initial consultation.

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