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Employee Arbitration Agreements and Choice-of-Law Provisions

The Second District Court of Appeals has ruled that a California choice-of-law clause in an arbitration agreement covering "all disputes" arising from the employment relationship does not remove the parties' agreement to arbitrate wage claims. (See, Bravo v. RADC Enterprises, Inc. - filed March 29, 2019, Second District, Div. Eight - 2019 S.O.S. 1555.)

In short, Bravo concerned a choice-of-law clause in an arbitration agreement. The trial court interpreted the clause to mean some but not all individual employment claims must be arbitrated. The Court of Appeal disagreed and concluded all of them must be arbitrated. In dispute was a two-page arbitration agreement covering “all disputes” arising from the employment relationship. On page two, near the end, the agreement added a one-sentence choice-of-law provision: “This Agreement shall be governed by and shall be interpreted in accordance with the laws of the State of California.” After Bravo was fired by RADC, Bravo sued RADC on individual employment claims, as well as on representative claims under the Private Attorneys General Act of 2004 (PAGA). RADC moved to stay Bravo’s PAGA claims and to compel arbitration on his individual claims. The trial court severed and stayed the PAGA claims. The trial court found RADC engaged in interstate commerce and thus the Federal Arbitration Act governed the agreement. But the trial court compelled arbitration for only three of Bravo’s nine individual claims, denying the arbitration motion on the remaining six individual claims. The logic was that, while the Federal Arbitration Act did apply, the choice-of-law sentence meant the parties wanted California law to govern their relationship. California Labor Code section 229 directs courts to disregard agreements to arbitrate wage claims, so the trial court declined to send Bravo’s remaining claims to arbitration. (Lab. Code, § 229.) On appeal, the Second District determined that RADC correctly contended the choice-of-law provision did not mean the parties wanted to oust arbitration from their arbitration agreement, as the main point of their deal was to arbitrate all employment disputes; and applying this California law would contradict the parties’ intent to arbitrate “any and all disputes,” including claims “related to wages . . . .”

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