Who Pays for Arbitration Costs In Employment Disputes In California ?
In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 115, the plaintiffs brought a wrongful termination action against their former employer, alleging violation of the California Fair Employment and Housing Act (FEHA) and other causes of action.
The employer moved to compel arbitration under a clause in the employment application form and a separate arbitration agreement subsequently executed by the employees, which provided: '"I agree as a condition of my employment, that in the event my employment is terminated, and I contend that such termination was wrongful or otherwise in violation of the conditions of employment . . .,I and Employer agree to submit any such matter to binding arbitration pursuant to the provisions of . . . Code of Civil Procedure . . . section 1280 et seq."' (Armendariz, 24 Cal. 4th at p. 92)
The clause limited the employee's remedies to "a sum equal to the wages I would have earned from the date of any discharge until the date of the arbitration award." (Ibid.)
The Supreme Court first discussed the arbitrability of statutory antidiscrimination claims, finding that while mandatory employment arbitration agreements encompassing these claims were not prohibited, they were subject to five minimum requirements: "Such an arbitration agreement is lawful if it:
(1) provides for neutral arbitrators;
(2) provides for more than minimal discovery;
(3) requires a written award;
(4) provides for all of the types of relief that would otherwise be available in court;
(5) does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum.'" (Armendariz, 24 Cal. 4th at p. 102.)
The court found the limitation on damages unlawful and against public policy and turned its attention to the payment of costs.
The arbitration agreement did not specifically require the employee to pay part of the arbitration costs, but Code of Civil Procedure section 1284.2, incorporated by reference into the agreement, provides that unless the arbitration agreement provides otherwise, each party to the arbitration must pay his or her pro rata share of arbitration costs.
The court brushed this section aside, characterizing it as a "default provision" and finding an "agreement to arbitrate a statutory claim is implicitly an agreement to abide by the substantive remedial provisions of the statute." (Armendariz, 24 Cal. 4th at p. 112.)
It construed the FEHA as implicitly prohibiting such costs, finding it unthinkable that "the intended beneficiary of such an antidiscrimination statute would be compelled to pay large arbitration costs as a condition of pursuing an antidiscrimination claim." (Ibid.)