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LAWSUITS NEWS & LEGAL INFORMATION

Sure, Seth Nelson Signed an Arbitration Agreement

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Is that game over FOR HIS CALIFORNIA LABOR LAWSUIT?

Fresno, CAOn January 7, the California Court of Appeal for the Fifth District reversed the decision of the trial court in Nelson v. Golden Queen Mining, LLC. The appellate court’s decision forces Seth Nelson to arbitrate his wage and hour dispute with his former employer. His California labor lawsuit, once again raises the question of whether that giant stack of papers many new hires must sign to seal the deal on a job really constitutes an enforceable contract.

Few, if any, new workers read through the pile and ask questions – much less try to negotiate terms. (Imagine the reaction!) Realistically, that is a privilege afforded only to the highly-paid C-Suite set.

So, how again, does the law protect everyone equally in California?  


What happened?


Seth Nelson was employed by Queen Mining from 2015 to October 2022. As part of Golden Queen’s onboarding and orientation process, he was provided with written information and pamphlets, including a 31-page handbook. He was required to fill out various forms and sign related acknowledgments, including an agreement to arbitrate disputes. There is no dispute about the fact that he signed the arbitration agreement.

 
In 2023, Nelson filed a class-action lawsuit against his former employer alleging multiple California Labor Code violations. These include failure to:
  • pay minimum wages;
  • pay overtime compensation;
  • provide meal periods;
  • authorize and permit rest periods;
  • indemnify employees for expenses incurred in performing their jobs;
  • pay all wages due upon termination, and provide accurate itemized wage statements.
The Complaint also alleges that these failures constituted unlawful business acts and practices in violation of California’s Unfair Competition Law.

Golden Queen moved to enforce the arbitration agreement. The trial court denied the motion, concluding the mining company had failed to demonstrate the existence of an executed arbitration agreement. Golden Queen appealed.


First, what’s wrong with arbitration?


Proponents of arbitration argue that it tends to be cheaper and faster than a labor lawsuit. This is the basic policy that animates the Federal Arbitration Act, which applies here.

Arbitration, however, tends to favor employers because:
  • employees lose the right to sue for violations of many important employment laws;
  • on average, workers win less often and receive much lower damages than they do in court; and
  • employers tend to win cases more often when they appear before the same arbitrator in multiple cases, suggesting that they have a repeat-player advantage over employees.
Whenever possible, many workers prefer to take their chances with courts rather than an arbitration panel.


Contracts 101 – the importance of consent


The Court of Appeals focuses on the language of the agreements that Nelson signed. It is more a contract law analysis than one based on the principles of labor law. But it is possible to reach the same conclusion through either route.

One of the key issues in determining whether a contract is enforceable is consent. There is a lot to unpack in that idea. One of many pieces in the puzzle is that the agreement must be voluntary. If someone holds a gun to your head to force you to sign an agreement, it’s not voluntary. Courts will not enforce it. The same may be true if the threat is economic, rather than physical.

Another piece of the puzzle is that the consent must be “knowing.” If your only language is English and you agree, for some reason, to sign an agreement entirely in Portuguese, your consent is not knowing. The same may be true if an agreement refers to Appendix A, which refers to the third subparagraph of Attachment 92, which sends you to the company’s slow and glitchy website.

The Court of Appeal’s decision focuses entirely on the issue of knowingness. In doing that, it may miss the point.


Unknowing?


Nelson was presented with both a company arbitration agreement and a Company Handbook. The language of one is not identical to the language of the other. He signed the acknowledgment, which stated:
  • “I understand that the guidelines contained in the Handbook are not intended to create any contractual rights or obligations, express or implied” and
  • “My signature also acknowledges and certifies that I understand and voluntarily agree to terms of the Company Arbitration Agreement.”
This is less egregious than the “Appendix A/Attachment 92/glitchy website” example presented above. Nonetheless, the trial court determined that the provisions of the handbook and the arbitration agreement were sufficiently inconsistent and vague that it rendered the arbitration agreement unenforceable. In a word, Nelson’s agreement, as indicated by his signature, was unknowing.

Closely parsing the text of the agreement, the appeals court disagreed, concluding that there was no real conflict between the terms of the handbook and the agreement to arbitrate. Nelson agreed to it; a reasonable person who had read through the documents would not have been confused. He knew what he was doing, and so he should be held to his agreement.

Of course, we are now in the land of Monday morning quarterbacking, but since the issue is going to come up again, it is worth asking whether the Complaint and the court decisions that followed missed the mark.


Really, what choice do I have? I need this job


This is what you hear on the ground. Translated into legalese, it means that the agreement is not voluntary. Workers are not stupid or just too lazy to read through the pile of documents. They have a pretty good appreciation of how much it matters.

The doctrine of “employment-at-will,” which is prevalent in the United States, is based on a rosy fiction. The story that we tell ourselves is that workers and employers have the freedom and opportunity to negotiate the terms of employment. With the push and pull of competing interests, the ultimate agreement must be fair. But the fiction is fantasy because of the disparity in bargaining power between most employees and employers.

California labor law, because it adds an extra layer of legal protection for wage workers who likely have little opportunity to negotiate, is an attempt to rebalance this power dynamic.

The Court of Appeal’s decision in Nelson is disappointing for many observers because it never gets to the issue of whether Nelson’s agreement was voluntary. A more complete analysis could have arrived at the conclusion that, for economic reasons, it was not. This would have led to the same result that an analysis based in the worker-protective spirit of California labor law would have.

READ ABOUT CALIFORNIA LABOR LAW LAWSUITS

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