The Court of Appeal in Universal Protection Service LP v. Superior Court (opinion here) decided that the parties' arbitration agreement incorporating these rules meant that the arbitrator, rather than the court, had the power to decide whether class-wide arbitration was available.
UP employees sued the company based on wage-hour claims and termination-based claims in a purported class action. The employees sought to arbitrate the class action. UP sought to compel individual claims to arbitration. The trial court ordered the entire claim, class and all to arbitration and stayed the lawsuit, thereby leaving the decision on whether the class was arbitrable to the arbitrator. UP sought relief from the Court of Appeal via writ of mandate. UP wanted the appellate court to rule that only individual claims were arbitrable.
Here's what the arbitration clause said:
“I further expressly acknowledge and agree that, to the fullest extent allowed by law, any controversy, claim or dispute between me and the Company . . . relating to or arising out of my employment or the cessation of that employment will be submitted to final and binding arbitration before a neutral arbitrator . . . for determination in accordance with the American Arbitration Association’s [AAA] National Rules for the Resolution of Employment Disputes as the exclusive remedy for such controversy, claim or dispute.”Given that incorporation of AAA rules, the Court of Appeal noted that the AAA employment dispute rules authorize the arbitrator to rule on the scope of the arbitration agreement:
Paragraph No. 6(a) of those rules provides: “The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement.”
The Court also noted that the AAA rules include supplemental rules governing purported classwide claims.
“Upon appointment, the arbitrator shall determine as a threshold matter, in a reasoned, partial final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class (the ‘Clause Construction Award’). The arbitrator shall stay all proceedings following the issuance of the Clause Construction Award for a period of at least 30 days to permit any party to move a court of competent jurisdiction to confirm or to vacate the Clause Construction Award.”
Having found these provisions were included in the parties' agreement to arbitrate, the Court decided that the Arbitrator had the power to rule on whether the arbitration would include class-based claims.
Employers of course may mandate individual employees to arbitrate their individual claims (excluding PAGA claims). Employers also may exclude class-based claims from arbitration. Employers may do so expressly, which is legal.
The parties to an arbitration agreement may agree to have courts rule on arbitrability of class claims or may agree on having an arbitrator do so. This decision simply says that incorporating the AAA employment rules means that the parties elected the arbitrator as the decider of this critical issue. Not that there's anything wrong with that.
