Category: arbitration

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Prospective Release Of Claims Did Not Violate Civil Code section 1668

Age discrimination and harassment are illegal.

Prospective Release Of Claims Did Not Violate Civil Code section 1668 (A Statute Providing That A Contract Releasing A Party From Future Violations Of Law Is Invalid As Against Public Policy)

Castelo v. Xceed Financial Credit Union, 2023 WL 3515225 (2023)

Xceed Financial Credit Union employed Elizabeth Castelo as its Controller and Vice President of Accounting. In November, Xceed informed Castelo her employment would be terminated effective December 31st. On November 19, the parties entered into a Separation and General Release Agreement, in which, among other things, Xceed agreed to pay Castelo a severance payment in consideration for a full release of all claims, including a release of age discrimination claims. The Agreement also provided that, as of Castelo’s separation date, she would have to sign Exhibit “A” to the Agreement reaffirming her commitment to abide by the terms of this Agreement and effectuating a full release of claims through her December 31st separation date. The releases extended to all known and unknown claims arising directly or indirectly from Castelo’s employment. Xceed intended that Castelo would sign the reaffirmation on the date of her separation (December 31st). However, Castelo signed it on the same date she signed the main Separation Agreement, on November 19th.  Xceed did nothing to correct that error. Castelo remained employed by Xceed until December 31. In January, Xceed paid Castelo, and Castelo accepted the settlement payment. Castelo made no attempt to revoke the Separation Agreement or Reaffirmation at any time before or after receiving payment.

In August, Castelo filed a lawsuit alleging age discrimination and wrongful termination in violation of Fair Employment and Housing Act (FEHA). The parties stipulated to arbitration. Xceed filed a motion for summary judgment based on the releases in the Separation Agreement and the Reaffirmation, and the arbitrator granted the motion. Castelo moved to vacate the arbitration award, arguing that the arbitrator exceeded his powers by enforcing a release made unlawful by Civil Code section 1668, which prohibits pre-dispute releases of liability in some circumstances. The trial court denied the motion to vacate and entered judgment confirming the arbitration award. The Court of Appeal affirmed:
The arbitrator correctly ruled the release did not violate Civil Code section 1668. Castelo signed the separation agreement after she was informed of the decision to terminate her but before her last day on the job. At the time she signed, she already believed that the decision to terminate her was based on age discrimination and that she had a valid claim for wrongful termination. The alleged violation of FEHA had already occurred, even though the claim had not yet fully accrued. Accordingly, the release did not violate section 1668 because it was not a release of liability for future unknown claims.

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Employee’s PAGA Claims Not Arbitrable If Arbitration Agreement Specifically Excluded

Arbitration in Employment contracts.

Employee’s Individual, Nonrepresentative PAGA Claims Not Arbitrable Because The Parties’ Arbitration Agreement Specifically Excluded PAGA Claims From Arbitration

Duran v. EmployBridge Holding Company, 2023 WL 3717207 (2023)

Griselda Duran was employed defendant EmployBridge, LLC. As part of her employment application, plaintiff electronically signed an arbitration agreement. The arbitration agreement (1) states it is governed by the Federal Arbitration Act; and (2) contains a broad agreement to arbitrate claims:

In the event there is any dispute between [Duran] and the Company relating to or arising out of the employment or the termination of [Duran], which [Duran] and the Company are unable to resolve informally through direct discussion, regardless of the kind or type of dispute, [Duran] and the Company agree to submit all such claims or disputes to be resolved by final and binding arbitration, instead of going to court, in accordance with the procedural rules of the Federal Arbitration Act.

Except as prohibited under applicable law, [Duran] and the Company expressly intend and agree that: (1) class action, collective action, and representative action procedures shall not be asserted nor will they apply, in any arbitration proceeding pursuant to this Agreement; (2) neither [Duran] nor the Company will assert any class action, collective action, or representative action claims against each other in arbitration, in any court, or otherwise; and (3) [Duran] and the Company shall only submit their own respective, individual claims in arbitration and will not seek to represent the interests of any other person.

Should any term or provision, or portion of this Agreement, be declared void or unenforceable or deemed in contravention of law, it shall be severed and/or modified by the court, and the remainder of this Agreement shall be fully enforceable.

Duran sued EmployBridge to recover civil penalties under PAGA for Labor Code violations suffered by her and other employees. EmployBridge moved to compel arbitration of Duran’s claims on an individual, nonrepresentative basis. The trial court denied the motion because the arbitration agreement specifically excluded PAGA claims from arbitration.

EmployBridge appealed arguing that the arbitration agreement’s exclusion of PAGA claims from arbitration did not actually mean that all PAGA claims were excluded from arbitration; rather, EmployBridge argued that individual PAGA claims had to be arbitrated. The Court of Appeal affirmed the denial of the motion to compel arbitration:

This appeal challenges the denial of a motion to compel arbitration of claims to recover civil penalties under the Labor Code Private Attorneys General Act of 2004. The denial of the motion was based on the trial court’s determination that the agreement to arbitrate specifically excluded PAGA claims. We conclude the trial court correctly interpreted the agreement’s carve-out provision stating that “claims under PAGA … are not arbitrable under this Agreement.” This provision is not ambiguous. It is not objectively reasonable to interpret the phrase “claims under PAGA” to include some PAGA claims while excluding others. Thus, the carve-out provision excludes all the PAGA claims from the agreement to arbitrate.