Ralphs grocery chain cannot compel individual arbitration for a group of deli clerks claiming they were denied meal breaks and overtime and want to pursue the claims as a class action. The 9th U.S. Circuit Court of Appeals Monday found Ralphs mandatory arbitration clause that employees were required to sign was “unconscionable” under California contract law.
“Ralphs’ policy imposes great costs on the employee and precludes the employee from recovering those costs, making many claims impracticable,” wrote Judge Richard Clifton.
New employees were required to sign a “take it or leave” agreement that the store policy set mandatory arbitration of labor disputes. The appeals court said the policy was “unjustifiably one-sided to such an extent it “shocked the conscience.”
Specifically, the selection process for assigning an arbitrator would always produce an arbitrator proposed by the defendant in employee-initiated arbitration and barred institutional arbitration administrators, who have rules and procedures to select neutral arbitrators.
The decision upheld the district court judge’s denial of a motion to compel arbitration.
Zenia Chavarria was a deli clerk with Ralph’s in Southern California. She filed the action on behalf of herself and all similarly situated employees at Ralph’s.
The court found the policy required each side to pay its own attorney fees, and the arbitrator fees must be apportioned at the outset of the arbitration between Ralphs and the employee. It allows Ralphs to unilaterally change the policy without notice to workers’ continued employment indicates acceptance of any changes.
In addition, one of the terms would encourage employees to file lawsuits, knowing they are subject to arbitration.
“We cannot endorse an interpretation that encourages the filing of an unnecessary lawsuit simply to gain some advantage in subsequent arbitration,” wrote Clifton. He was joined by Judges Richard Tallman and Connie Callahan.
Case: Chavarria v. Ralphs Grocery Co., No. 11-56673
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