In Roman v. Superior Court, Case No. B209855, Gabriela Roman, a former employee in Flo-Kem's accounts receivable department, brought suit against Flo-Kem for alleged violations of the Fair Employment and Housing Act, including disability discrimination, as well as a claim for wrongful termination in violation of public policy. Before beginning her employment, Roman had signed a short arbitration agreement that was attached to the last page of her employment application. This arbitration agreement was a single paragraph clause which stated in pertinent part that "I agree, in the event I am hired by the company, that all disputes and claims that might arise out of my employment with the company will be submitted to binding arbitration." The clause also incorporated the rules of the American Arbitration Association ("AAA") in effect at the time. Further, the arbitration clause was the last paragraph of the seven-page employment application and clearly marked with a separate heading. Roman had initialed next to the clause, signifying that she had read it, in addition to signing the application.
Litigation commenced and Flo-Kem responded to Roman's Complaint and served written discovery. It then responded to Roman's written discovery with objections and moved to compel responses to the discovery it had served, as well as taking Roman's deposition. Approximately two months after Roman filed her Complaint, Flo-Kem moved to compel arbitration based on the clause in Roman's employment application. The trial court granted Flo-Kem's motion.
On appeal, Roman argued that the arbitration clause was unenforceable. She claimed that the arbitration clause was part of the "take it or leave it" conditions of the employment application. While the Court acknowledged that many employees are without other employment options, it noted that the arbitration clause had been clearly marked and was not hidden in any way.
The Court also found that the "I agree" language of the arbitration clause did not mean that the agreement only applied to Roman. In stating that "all disputes and claims" were covered, the arbitration clause applied to both parties. Reading the arbitration clause as a whole indicated its intent to be binding on Roman and Flo-Kem.
Roman also contended that the arbitration clause was unenforceable because it did not meet the minimum arbitration safeguards set forth in Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83. Roman claimed that the arbitration clause violated Armendariz by (1) limiting her discovery, (2) abridging her right to seek relief from the Department of Fair Employment and Housing, and (3) forcing her to split the arbitration costs with Flo-Kem. Her first argument was that the arbitration clause limited her right to discovery because it allowed the arbitrator to determine what discovery was sufficient for arbitration. However, the Court pointed out that arbitration does not need to provide for all discovery available in a civil court and that Armendariz approved of arbitrator determined discovery. In addition, Roman claimed that because the arbitration clause covered all disputes, it precluded her legal right to file an administrative claim with the Department of Fair Employment and Housing. The Court ruled that it interpreted the arbitration clause as having no such restriction.
Finally, Armendariz requires the employer to pay for the costs of arbitration. Armendariz, 24 Cal.4th at 110-111. Here, the arbitration clause incorporated the 1997 rules of the AAA, which stated that the employee and employer would split arbitration costs. The Court decided to sever this portion of the arbitration clause, so as to leave the agreement enforceable and further the public policy promoting arbitration.
The Court also found that while Flo-Kem had responded to Roman's Complaint and conducted some discovery, that it had not waived its right to seek arbitration. The Court listed six factors in determining whether the right to seek arbitration was waived: (1) whether a party's actions were inconsistent with the right to arbitrate, (2) whether the parties were substantially involved in the preparation of the lawsuit, (3) whether a party delayed in seeking arbitration, (4) whether the party seeking arbitration had filed a counterclaim without asking to stay the court proceedings, (5) whether important intervening steps not available in arbitration had taken place, and (6) whether the delay in seeking arbitration affected, misled, or prejudiced the opposing party.
Flo-Kem's discovery responses had consisted only of objections rather than substantive answers. No formal hearings had taken place. Thus, the Court ruled that even though some initial litigation had taken place, Roman would not be prejudiced by arbitration. The mere fact that a party participated in litigation and the party opposing arbitration incurred expenses and costs was not enough to waive one's right to arbitration.
This case is instructive in showing employers that the phrase "I agree" alone does not make an arbitration agreement unenforceable. Also, participating in litigation does not automatically waive an employer's right to seek arbitration. However, it is advisable for an employer seeking arbitration to do so early to avoid waiving this right.