California Employer Waived Right to Compel Arbitration

By Joanne Deschenaux September 28, 2018
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An employer that participated in a former employee's wrongful termination lawsuit in court for almost two years before seeking arbitration of the claims waived its right to compel arbitration, a California appellate court ruled. Although the employee had signed an arbitration agreement and the state has a public policy favoring arbitration, the employer's delay in requesting arbitration was unreasonable and so the employer waived its right to have an arbitrator decide the claims, the court said.

Altamed Health Services Corp. hired the plaintiff as a full-time medical assistant in 2006. In 2013, the plaintiff signed a document that provided all workplace disputes would be decided by binding arbitration. Altamed fired the plaintiff in 2014.

In 2015, the plaintiff filed a wrongful termination lawsuit alleging, among other things, that Altamed fired her because of her disabilities. Altamed answered the complaint in 2015 but did not point to the parties' arbitration agreement as a defense against the lawsuit, despite asserting 42 other defenses.

Between September 2015 and February 2017, both parties conducted pretrial work, which included talking to witnesses and answering questions in writing. In addition, Altamed subpoenaed the plaintiff 's medical records from four different medical facilities and demanded an independent medical examination.

The parties participated in a voluntary mediation and a mandatory settlement conference, and the trial was postponed twice at the request of Altamed's counsel. Less than two months before the trial was to begin, however, Altamed changed attorneys and the new attorney filed a petition to compel arbitration.

Altamed argued that it had not waived its right to seek arbitration because it could have conducted the same work and obtained the same information in arbitration. The company also argued that its delay in seeking to arbitrate did not harm the plaintiff nor cause lost evidence.

The plaintiff 's attorney, however, argued that she was harmed because if Altamed had tried to compel arbitration earlier, the matter would have been resolved in less than a year. Instead, the plaintiff spent two years litigating in court.

The trial court denied Altamed's motion to compel arbitration, and Altamed appealed.

Unreasonable Delay

The appellate court first noted that a demand for arbitration must not be unreasonably delayed and that a party that does not demand arbitration within a reasonable time is deemed to have waived the right to arbitration. "A party's unreasonable delay in demanding or seeking arbitration, in and of itself, may constitute a waiver of a right to arbitrate," the court said.

[SHRM members-only HR Q&A: What are the California rules regarding mandatory arbitration agreements]

The court then determined that Altamed's delay was unreasonable. There was no dispute, the court said, that Altamed actively litigated in the trial court for almost two years without mentioning, much less formally raising, the arbitration agreement as a defense. Altamed offered no excuse for the delay.

Furthermore, the lengthy delay "undermined the important public policy in favor of arbitration and impaired plaintiff's ability to take advantage of the benefits and efficiencies of arbitration," the court noted.

Thus, the appellate court affirmed the trial court's order denying Altamed's motion to compel arbitration.

Jimenez v. Altamed Health Services, Calif. Ct. App., No. B285096 (Sept. 24, 2018).

Professional Pointer: If an employer chooses arbitration to settle workplace disputes and requires employees to sign arbitration agreements, then when a lawsuit is filed, the employer should quickly try to have the claims arbitrated instead of litigated. As this case shows, failing to do so could mean the employer's rights under the agreement will be waived.

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.

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