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.