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California Supreme Court Upholds Employee’s Right to Pursue Arbitration Claim, But Offers An Option for Employers To Avoid Administrative Proceedings at the DFEH
Even thought a judge has a very limited power to overturn an arbitration award, if the arbitrator makes a clear error of law and thereby deprives a person of a statutory claim, the court may vacate the award. This is the essence of the decision of the California Supreme Court in Pearson Dental Supplies, Inc. v. Superior Court. The case involved an employee’s claim of discrimination. Pursuant to the employee’s agreement with his employer, any such claims had to be submitted to arbitration within one year. The plaintiff, Pearson, instead initiated a lawsuit within the one-year period. The court eventually refereed the case to arbitration, but the employer successfully argued to the arbitrator that by the time the case got to him, the one year period had expired and, therefore, the claim was barred. Not so. According to section 1281.12, the commencement of the lawsuit tolled the applicable time limitation. The state supreme court ruled that the arbitrator’s failure to recognize this issue was a clear error of law, thus justifying the trial court’s decision to vacate the arbitration award. In addition, the court noted in dicta that it would be possible for an arbitration agreement to preclude the submission of an administrative claim to the Department of Fair Employment and housing, although such a clause could not prohibit the DFEH from acting on its own to investigate and prosecute a claim in its own name. The employee contended that the entire arbitration agreement was void because it included this clause; the court rejected that argument.
A copy of the court's opinion in the Pearson Dental Supplies case it attached for your convenience.
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