Foiled Again: DR Horton Overturned (But Be Careful How You Phrase Your Arbitration Agreement)

Earlier this week, a three judge panel of the Fifth Circuit Court of Appeals issued its long-awaited decision in DR Horton Inc. v. NLRB. As expected by most labor lawyers, including us, the Fifth Circuit (with one judge dissenting) overruled the National Labor Relations Board’s dramatic extension of the law, that employers could not require employees to enter into agreements to individually arbitrate employment disputes, precluding collective or class action litigation. In DR Horton the NLRB had concluded that such agreements conflicted with employees’ rights to engage in concerted activity under the National Labor Relations Act (the “NLRA”) -- a conclusion that had since been rejected by almost every court to face the issue. The Fifth Circuit’s decision does contain a cautionary note for employers: an arbitration agreement may not appear to bar an employee from filing charges with the NLRB.

DR Horton

DR Horton is a home builder with operations throughout the United States. Beginning in 2006, DR Horton required all its employees to enter into a “Mutual Arbitration Agreement.” The agreement precluded civil litigation between the parties, requiring that all disputes be submitted to arbitration. Most critically, the agreement also barred any form of collective or class action proceeding. In 2008 the underlying plaintiff filed a putative class action lawsuit, contending that he had been misclassified as an exempt managerial employee in violation of the Fair Labor Standards Act. When DR Horton responded by insisting on individual arbitration pursuant to the agreement’s bar of collective actions, the plaintiff filed unfair labor practice charges with the Board.

The Board is charged with enforcing the NLRA, which protects “concerted activity” by employees. The Administrative Law Judge who initially heard the case concluded that DR Horton’s policy was unlawful, because a reasonable employee might read it as preventing an employee from filing charges of unfair labor practices with the Board. The Board went beyond the ALJ’s conclusion, and determined that the arbitration agreement in its entirety violated the NLRA. The Board reasoned that class or collective actions are themselves forms of concerted activity, and an attempt to preclude class litigation is thus a restrain on concerted activity which violates the NLRA.

Enter The FAA

 

However, while the Board is responsible for enforcing the NLRA, it is not charged with enforcing a different federal statute, the Federal Arbitration Act. The FAA declares federal policy favoring the arbitration of disputes, and generally directs that agreements to arbitrate be enforced, unless the agreement may be revoked for the same reasons other contracts may be revoked. As we have reported here, in recent years the US Supreme Court and other federal courts have interpreted the FAA broadly, including expressly upholding waivers of class action litigation in an arbitration agreement. Any doubt that agreements to individually arbitrate claims should be given full effect has been resolved by the US Supreme Court’s latest pronouncement on the subject, American Express v. Italian Colors Restaurant.  There, the Court upheld an arbitration agreement barring class claims, even though it was conceded that costs of litigating any individual claim would be greater than any potential recovery for the individual litigant.

 

Even while the Fifth Circuit considered the direct appeal of DR Horton, that case’s rationale has been considered by numerous courts. Plaintiffs attempting to avoid arbitration of various employment claims asserted the Board’s decision as a defense to the employer’s attempt to compel arbitration. In virtually every case, DR Horton’s rationale was rejected -- including every circuit court to consider the issue, including the Ninth Circuit in Richards v. Ernst & Young.

 

The Fifth Circuit’s decision rejecting the Board’s analysis was thus no surprise. After rejecting or side-stepping a number of challenges to the composition of the Board when it issued DR Horton (including belated complaints about the unconstitutionality of the recess appointed Board members who decided the case) the Fifth Circuit reached the central issue: the Board’s claim that the NLRA provided a basis to avoid the FAA.

 

The Fifth Circuit analyzed two different grounds offered by the Board as to why the NLRA trumps the pro-arbitration policy expressed by the FAA.   The first was the FAA’s “savings clause,” which permits an arbitration agreement to be avoided on the same basis as any other contract could be revoked.   The Fifth Circuit had no difficulty in disposing of this argument because the Board’s rationale, rather than being neutral, uniquely disadvantages arbitration.   The second argument -- that the NLRA expresses a congressional intent to override the FAA -- came up equally short. Simply stated, there is nothing in the text or history of the NLRA to suggest Congress meant to elevate the NLRA over the FAA. DR Horton thus cannot stand.

 

Caution: Access to the Board

 

The Fifth Circuit did uphold the Board in one regard: its determination that the arbitration agreement could be read as barring an employee’s ability to file unfair labor practice charges with the Board. In this regard, it is not just a question whether the arbitration expressly bars access to the Board; rather, it is an unfair labor practice if a reasonable employee could read the arbitration agreement to preclude the filing of charges.

 

Next Steps

 

The Board could, of course, seek further review by the full Fifth Circuit, or try to obtain review by the U.S. Supreme court. Observers are doubtful of the latter course, because of the strong pro-arbitration trend displayed by the current Court. Moreover, the Board may see no particular need to seek review by the Supreme Court, because of its doctrine of “non-acquiesence.” The Board regularly treats circuit court decisions with which it disagrees as non-binding in any other case. Employers have already had a taste of the Board’s approach, as several ALJ’s have expressed their opinion that they are bound by DR Horton, notwithstanding the strong contrary holding by the U.S. Supreme Court upholding bans on class proceedings in the Italian Colors case, which post-dated DR Horton.

 

Employers nonetheless now have more confidence that their mandatory arbitration agreements will ultimately withstand a challenge under the NLRA.   Such agreements should be carefully reviewed to be sure that they cannot be interpreted to bar access to the Board (or, as under Stoel Rives’ routine advice, other administrative agencies such as the EEOC).

Employers who wish to consider implementing a mandatory arbitration program, or revise their existing arbitration program, should contact their Stoel Rives Labor & Employment attorney.

Chasm Continues To Widen, For Now, Between NLRB and Federal Courts On Enforceability Of Class Action Waivers In Employment Agreements

Just last week, in the case GameStop Corp., a National Labor Relations Board (NLRB) administrative law judge applied recent Board precedent and ignored contrary cases from federal courts to find an employer’s arbitration agreement was unenforceable because it waived the right of employees to bring class or collective actions.  While the decision has yet to be approved by the NLRB itself (parties can appeal ALJ decisions to the NLRB), it illustrates the continuing tension in this area between the NLRB (which disfavors class action waivers in employee arbitration agreements) and the federal courts (which favor them). 

As we have reported, U.S. federal courts continue to hold that employees may enter into arbitration agreements in which they waive the right to file class or collective action claims.  The U.S. Supreme Court put its stamp of approval on such waivers in 2011 in the blockbuster case AT&T v. Concepcion, holding that the enforceability of arbitration agreements was governed by the Federal Arbitration Act (FAA), which preempted any state law purporting to regulate arbitration agreements, including arbitration agreements with class action waivers.  Building on a decades-long line of cases steadily increasing support for the concept of arbitration and similar alternative dispute resolution (“ADR”) methods for resolving litigation, Concepcion also held decisively that arbitration agreements could include waivers by the parties of the right to bring lawsuits as class actions.  The U.S. Supreme Court has re-affirmed Concepcion in subsequent decisions.

The NLRB Picks A Fight With the U.S. Supreme Court.  Who Do You Think Will Win?

Concepcion was a consumer class action case involving a class action waiver in a cell phone service agreement between a customer and cell phone provider.  But the Court’s reasoning left little doubt among employment law experts that the decision could apply to employment arbitration agreements as well. One employment expert did take exception to Concepcion, however: namely, the NLRB.  In early 2012, the NLRB issued its controversial opinion in the case D.R. Horton, which held that, despite Concepcion, a class action waiver in an employment agreement was unenforceable because it violated federal labor laws that protect employees’ right to engage in concerted or collective action to advocate for the improvement of working conditions.  While such “concerted action” typically has meant the right to form labor unions, in D.R. Horton, the NLRB held that filing class action discrimination or wage and hour lawsuits was a form of “concerted action” that could not be infringed upon or waived in an arbitration agreement. 

 

D.R. Horton put the NLRB directly at odds with the U.S. Supreme Court and put employers in a difficult spot.  On the one hand, the U.S. Supreme Court approved of the use of class action waivers in arbitration agreements, and many employers were eager to use them in employment agreements to help reduce the exposure to costly class action litigation, especially wage and hour class actions, which have been steadily on the rise over the past decade.  On the other hand, according to the NLRB, such waivers constitute a violation of federal labor law.

 

Right Answer: The U.S. Supreme Court.

 

Many employment law experts believe that D.R. Horton was based on shaky legal reasoning and would likely eventually be overturned by the federal courts.  In fact, lower federal trial courts have almost uniformly ignored D.R. Horton, and relying on Concepcion and related cases have continued to find that employment agreements with class action waivers can be fully enforceable under the FAA.  Employers got an additional boost over the past few weeks, when Ernst & Young’s employee class action arbitration waiver was upheld by both the Second and Ninth Circuits.  See Sutherland v. Ernst & Young LLP, 2013 U.S. App. LEXIS 16513 (2d Cir. N.Y. Aug. 9, 2013) Richards v. Ernst & Young, LLP, 2013 U.S. App. LEXIS 17488 (9th Cir. Cal. Aug. 21, 2013).  Those cases follow another similar decision from the Eighth Circuit in January of this year in Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. Mo. Jan. 7, 2013) (affirming enforceability of class action waiver precluding FLSA collective action lawsuit and finding D.R. Horton “carries little persuasive authority.”)

So while the NLRB may be sticking to its guns for the moment in GameStop Corp., time may be on the side of employers hoping that Concepcion will carry the day.  It is unlikely that the NLRB's GameStop Corp. decision or D.R. Horton will continue to stand for long in light of the overwhelming and growing body of contrary law in the federal courts, which for most purposes trump the NLRB in the federal judicial pecking-order.  (The D.R. Horton decision itself is being reviewed by the Fifth Circuit Court of Appeals, with a decision expected soon.)  While employers should be aware of the continuing tension and flux over the enforceability of class action wavers in employee arbitration agreements, the developing weight of the law continues to shift in favor of enforceability.  Employers who wish to lower the risk of exposure to very costly and time-consuming class action litigation, particularly wage and hour collective or class actions, may wish to consider using arbitration agreements with appropriate class action waivers.

Oregon Court of Appeals Upholds Enforceability of Employer Arbitration Agreement

In the recent case Hatkoff v. Portland Adventist Medical Center, the Oregon Court of Appeals affirmed enforcement of a company arbitration provision in an employee handbook requiring that a former employee bring his employment discrimination claims in binding arbitration. The Court’s opinion offers a straight-forward application of the law regarding the enforceability of arbitration agreements, and the outcome is probably not surprising.  Nevertheless, it contains a helpful and well-reasoned survey of the current state of Oregon law in this area, and provides another helpful case for Oregon employers interested in resolving employment disputes using arbitration or similar alternative dispute resolution (“ADR”) procedures. 

Arbitration Agreements Are Upheld Where They Are Not “Unconscionable”

Arbitration is a form of private ADR in which the parties agree to waive the right to go to court and instead adjudicate disputes privately before an arbitrator. In the employment context, arbitration can be a cost-effective and quicker alternative to litigation.  While the details of arbitration agreements can vary greatly, they may frequently be confidential (lawsuits are public proceedings), provide more limited procedures (especially with respect to discovery), require trial before a neutral arbitrator (not a jury), and provide a limited right to appeal. In general, Oregon courts, like most courts, uphold such employment arbitration agreements as long as they are not “unconscionable,” either procedurally (with respect to how the agreement was formed) or substantively (with respect to its terms).

The Oregon Court of Appeals applied this analysis to find Portland Adventist’s “Grievance and Arbitration Procedure” in an employee handbook was not unconscionable. It found the agreement was not substantively unconscionable, because while it did waive the right to a jury trial (like all arbitration agreements), it did not unreasonably limit the employee's rights or remedies that would be available in court. Interestingly, the Court specifically held that the fact the agreement required that employees file a complaint within 90 days of the complained-of employment action was not substantively unconscionable, even though the applicable statute of limitations was one year. The Court also went on to find the agreement was not procedurally unconscionable: the employee, a sales and marketing professional, signed multiple acknowledgments that he received the employee handbook containing the arbitration agreement and was aware of what he had signed.

Law On Arbitration Continues To Develop

Despite the fact that many cases come out similarly to Hatkoff and the law on arbitration agreements is generally favorable for employers, the enforceability of such agreements is routinely litigated in employment cases. For that reason, and also because the unconscionability analysis is very fact-specific and the outcome can be very different in each case, arbitration continues to be a “hot” and fluid area of employment law both in Oregon and around the country. 

Sometimes that fluidity leads to conflicts in the law, such as between courts and legislatures.  For example, since 2008 Oregon has had a statute, ORS 36.620(5), that prohibits employee arbitration agreements under certain circumstances where the agreement does not contain “magic words” provided in the statute, and where the employee does not have at least 72 hours advance written notice before starting work (the legislature lowered the advance notice requirement to 72 hours in 2011; it originally required 14 days). However, that Oregon statute itself may be unenforceable, because it may be preempted by a federal statute, the Federal Arbitration Act (“FAA”), that strongly endorses the use of arbitration and contains no such limitation.  Several federal district courts in Oregon have found that ORS 36.620(5) is preempted by the FAA, and have enforced arbitration agreements that did not provide the advance notice required by that statute, although no Oregon state appellate court has yet considered the issue (the agreement in Hatkoff preceded the Oregon statute, so it was not a factor in the analysis in that case).

Other potential conflicts exist not between state and federal law, but between different parts of federal law.  As we have blogged about previously , just such a conflict has been brewing between the U.S. Supreme Court and the National Labor Relations Board (“NLRB”) over whether arbitration agreements can include waivers of class action claims—the Supreme Court says they can; the NLRB says they violate federal labor laws allowing employees to engage in “concerted activity” relating to working conditions. We are waiting to see how the federal appellate courts resolve that conflict.

Ultimately, Hatkoff will likely stand, not as a departure from existing law, but instead as the latest in a series of federal and state cases over the past few years that are broadly supportive of employer efforts to utilize arbitration and ADR to resolve employment disputes.  But, as we've said, this continues to be an evolving area of employment law, so employers will need to stay tuned to new developments.

In the meantime, here are a few things employers should keep in mind when crafting arbitration agreements to maximize the chance they will be enforceable:

  • Make sure your arbitration agreement, whether a stand-alone agreement or part of a handbook, is clear, understandable, and well publicized.  Include the "magic words" in ORS 36.620 to make it expressly clear to employees that arbitration involves waiving some legal rights, especially the right to a jury trial.  Employees should sign acknowledgments that they have received and understand the agreement.  
  • If you have employees who don't speak English as a first language, have a translated version of the agreement to ensure it is understood.
  • Give new employees the 72 hour advance written notice required by ORS 36.620 wherever possible.  While some courts have found that statute is preempted and unenforceable, there's no guarantee every court will.
  • Under ORS 36.620, current employees can only sign arbitration agreements at the time of "bona fide" promotion or advancement.  Again, courts may find this requirement is also preempted and unenforceable, but if you can comply with it, all the better.  
  • Arbitrators are paid by the parties, unlike judges.  While in theory the parties can split the cost, the agreement should not impose costs on employees unreasonably in excess of what they would pay to file a lawsuit in court.  Many employers agree to pay a large portion, or even all, of the arbitration fees.
  • Specify the rules and procedures that will apply.  The American Arbitration Association's ("AAA") specific rules for employment arbitration are one option; other state or local arbitration forums are other (and sometimes cheaper) options.

Above all, work with your employment counsel in the crafting and implementation of the agreement.  Many enforceability pitfalls can be easily avoided with careful planning, but the devil can be in the details.  That is especially true for any state-specific rules or "gotchas," as arbitration agreements may be perfectly enforceable in some states but not in others.

NLRB Finds Employee Arbitration Agreement Waiving Class Claims Violates Federal Labor Law

In DR Horton, a decision issued on January 3 and applicable to most private sector employers, whether unionized or not, the National Labor Relations Board (NLRB) held that federal labor law prevents employers from requiring their employees, as a condition of employment, to agree to broad waivers that would deny their right to pursue employment-related class actions both in court and in arbitration, leaving them no forum for pursuing class or collective claims.  As a result, an important tool for managing the risk of employment-related litigation has been taken away (for now). 

The facts of the case are straightforward.  DR Horton, like many employers, required its employees to sign an arbitration agreement as a condition of employment.  The agreement required employees to arbitrate all claims arising out of their employment, and precluded arbitrators from issuing class or group relief.  As a result, employees were prevented from bringing class or collective actions in any forum.  Relying on this agreement, DR Horton refused to arbitrate a class action alleging that it had misclassified certain employees as exempt from the protections of the Fair Labor Standards Act (FLSA).

 

Not so fast, according to the NLRB.  Tracing federal labor law back to its origins, the NLRB found that the filing of a class action “to redress workplace wrongs or improve working conditions” is activity at “the core” of what Congress intended to protect when it enacted the National Labor Relations Act in 1935.  This intent, the NLRB reasoned, is reflected in Section 7 of the Act, which gives employees the right to engage in “concerted activities” for the purposes of “mutual aid or protection.”  Relying on Section 7, the NLRB found that Employers cannot compel their employees, as a condition of employment, to entirely waive the right to bring class or collective actions.

 

The NLRB’s ruling in DR Horton clashes with the U.S. Supreme Court’s recent decision in AT&T Mobility v. Concepcion, which held that arbitration clauses that waive the right to bring class claims entirely (in the commercial contract context) may be lawful and enforceable.  But unless and until the courts intervene to resolve this tension, requiring your employees to completely waive the right to bring employment-related class or collective actions - a common feature of arbitration agreements - is probably no longer permissible under federal labor law.

 

If You're Interested In Learning More, Sign Up For Our Webinar

Stoel Rives is hosting a webinar on January 11, 2012, to address employee arbitration agreements generally and the DR Horton decision in particular.  Click here if you're interested in learning more or attending.

The First Monday in October: Supreme Court Roundup

The first Monday in October traditionally marks the beginning of the United States Supreme Court's yearly term - and it provides an excellent opportunity to look at the cases the Court will be hearing this year.  In an earlier post, the World of Work brought you detailed discussion of the Court's only Title VII case this term:  Lewis v. City of Chicago.  Here's a sampling of other labor and employment-related cases to watch for throughout the term:

This morning, in Mohawk Industries, Inc. v. Carpenter, the Court will consider whether an employer's attorney's investigation of an internal complaint is protected by the attorney-client privilege.  The internal complaint alleged that the company was conspiring to hire individuals who were not authorized to work in the United States.  The case involves a former employee's claim for witness tampering; a separate lawsuit involving the alleged conspiracy is proceeding on a separate track.

On October 7, the Court will hear a case involving the Railway Labor Act.  The issue in Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers is whether the Seventh Circuit Court of Appeals had the power to overturn, on due process grounds, an arbitration award in the railroad's favor.  

On October 14, in Perdue v. Kenny A., the Court will consider whether attorney fee awards under 42 USC 1988 can be enhanced when the lawyer does a particularly good job.  Section 1988 is a common basis for fees in employment-related lawsuits.

On December 9, the Court will hear Stolt-Nielsen SA v. AnimalFeeds International.  This case asks the Court to decide whether an employee bringing a claim under an arbitration agreement may sue, not only on his own behalf, but on behalf of a class of similarly situated employees.  In this case, the arbitration agreement did not specifically allow class claims, but the arbitrators allowed those claims anyway.

Finally, on a date to be announced, the Court will hear Granite Rock Co. v. International Brotherhood of Teamsters.  This case again involves questions about arbitration.  Here, the issue is whether an arbitrator (not a court) may decide whether a valid collective bargaining agreement exists.

2009 Mid-Term Federal Legislative Update

We expected many changes in federal labor and employment law in 2009 - for the first time in years, Democrats control the White House and both houses of Congress and have the political ability to make significant reforms.  However, not much has happened in 2009: we have only significant labor and employment bill signed into law.  To be fair, President Obama and the Congress have had other things to worry about:  a war or two, a lousy economy, health care and selecting a new White House dog to name a few.

But, the 2009-2010 legislative session is still not over, and Congress may yet pass some of the many labor and employment-related bills still pending.  Employers may want to take note, as some of these may become law before the end of the session in 2010.  Click on "continue reading" for a complete list.

Click on the bill number to read the full text of each bill. 

Passed: 

  • S. 181:  The Lilly Ledbetter Fair Pay Act.  President Obama’s first (and so far only) signed employment legislation, this became law on January 29, 2009.  It amends Title VII to state that the 180-day statute of limitations for filing an equal-pay lawsuit regarding pay discrimination resets with each new discriminatory paycheck.

Still Pending (as of September 23, 2009):

Executive Orders:  President Obama has also issued four labor-related executive orders.  Click on the title of each to read the order:

Online Game Educates on EFCA, Tattooing

We have a favorite new website here at the Stoel Rives World of Employment:  Card Checked:  The Game (sorry, failblog.org).  Card Checked is an online game where you can play a "young and talented tattoo artist living in America where the Employee Free Choice Act (EFCA) has become the law of the land."  As a player, you can dodge union organizers, withstand intimidation from pro-union coworkers, and experience the anguish and horror when union thugs threaten your pet cat, Min Min.  (Notably, the game includes links to documentation showing that all of these examples of union organizing tactics are real, even down to threatening pets.)

Card Checked is hosted by the Americans for Tax Reform, a conservative group, and its affiliate, the Alliance for Worker Freedom.  While we're not endorsing the politics of these groups, their Card Checked site is creative and informative, and presents accurate information on how union organizing will likely be conducted if EFCA's card check and mandatory aribitration provisions become law.  For more on EFCA, click here for the Stoel Rives World of Employment's EFCA coverage

U.S. Supreme Court to Hear Six L&E Cases This Term

The U.S. Supreme Court opened its 2008-2009 term on October 6 with six labor and employment law cases on its docket.  (For docket information and questions presented, click on the name of the case). 

  • Locke v. Karass:  may a public employee union may charge nonmembers for representational costs for litigation expenses incurred by the international union on behalf of other bargaining units?
  • Kennedy v. Plan Administrator for DuPont Savings & Investment Plan:  is a qualified domestic relations order (QDRO) is the only valid way under ERISA for a divorcing spouse to waive his or her right to the other spouse's pension benefits?
  • Crawford v. Metro. Gov't of Nashville & Davidson County:  Is an employee who cooperates with an employer-initiated investigation into alleged unlawful discrimination protected by Title VII's anti-retaliation provisions? 
  • Ysursa v. Pocatello Education Ass'n:  does an Idaho law that prohibits local government employers from allowing employee payroll deductions for political activities violate the First Amendment free speech rights of unions and their members?
  • 14 Penn Plaza LLC v. Pyett:  do employees covered by a collective bargaining agreement which providies that statutory employment discrimination claims must be pursued through the contractual grievance and arbitration procedures have a right for a court to decide their discrimination claims?
  • AT&T Corp. v. Hulteen:  must an employer give full service credit for purposes of calculating retirement benefits for pregnancy leaves taken before the Pregnancy Discrimination Act of 1978 if the plan gave full credit for other types of temporary disability leaves? 

Some of these cases (such as the Penn Plaza and Crawford cases) have the potential to make significant changes in existing law.  Stay tuned to the Stoel Rives World of Employment for developments as they occur!

Oregon: Arbitration Agreements Need Not Contain Express Waiver of Jury Trial

Late last month, the Oregon Court of Appeals held that an arbitration agreement between an employer and an employee need not contain an express waiver of the employee's right to a jury trial to be enforceable.  The opinion can be read here:  Hays Group, Inc. v. Biege

In Hays Group, a trial court denied an employer's motion to compel arbitration of an employee's wage and age discrimination claims on the basis that the arbitration agreement did not contain an express waiver of the right to a jury trial, just a statement that claims would be “settled by final and binding arbitration.”  The Court of Appeals reasoned that the employee did knowingly waive his right to a jury trial, given that “[c]laims cannot be settled by ‘final’ and ‘binding’ arbitration except by a waiver of the right to a jury trial.”

This decision gives Oregon employers some added leeway in drafting arbitration agreements.  The best practice remains to include an express waiver of the right to a jury trial  - there is no harm in including one, and it helps cut off any employee's arguments that he or she did not understand the scope of the agreement. 

Oregon employers should also be aware that, pursuant to a new statute effective January 1, 2008, all employee arbitration agreements  must be presented in a "written employment offer" that must be "received" by the employee at least two weeks before the first day of the employee's employment.  Arbitration agreements may be presented to current employees, but will not be enforced unless entered into at the time of a "bona fide advancement" (such as a promotion).

California Court Upholds One Year Statute of Limitation to Arbitrate FEHA Claim

If you've followed the development of California law on the enforceability of arbitration agreements in the last few years, you know it's complex.  And last week, it just got a little more so, although in a way that might be good for employers.  In Pearson Dental v. Superior Court, the California Court of Appeal (Second District) enforced an arbitration agreement requiring the employee to bring any claims within one year, despite the "hybrid" two year statute of limitations in California's Fair Employment and Housing Act (FEHA).   

The employee sued the employer for violation of FEHA alleging age discrimination and other claims.  The employer successfully moved to compel arbitration, and the arbitrator granted the employer's motion for summary judgment on the grounds that arbitration was not requested within one year as required by the arbitration agreement. The trial court vacated the arbitration award, but the Court of Appeal reversed, holding that the one-year statute of limitations did not "unreasonably restrict plaintiff's ability to vindicate his rights under the FEHA."  The court noted that the FEHA does not have a "true" two-year statute of limitations, but rather a "hybrid" period, in which the employee must file an administrative complaint within the first year.  Thus, the arbitration agreement's one-year limitations period was comparable to the FEHA's one-year administrative complaint deadline. 

Does this mean that California courts will be more likely to enforce arbitration agreements?  Don't count on it.  The court did not spend significant time analyzing the agreement for evidence of either substantive and procedural unconscionability - which are the bases on which many California courts have invalidated arbitration agreements.  Nevertheless, the case does give employers some comfort in knowing that a shorter limitations period sometimes may be enforceable.  If you want to read up on the complex history of employment arbitration agreements in California, here's what the Attorney General has to say on the topic