Former Employee Not Required to Arbitrate Post-Employment Claims

An employee who had signed an arbitration agreement and was later fired was not required to arbitrate his claims that his employer told prospective employers not to hire him, a California appeals court held. The claims arose after the worker's employment ended, so they were independent from his employment, the court said.

When the employer, a distributor of electronic components, hired the plaintiff as a commissioned sales manager, the plaintiff signed an agreement to arbitrate any dispute arising from or related to his employment. Three months later, the employer fired him. The plaintiff alleged that the company failed to pay him the commissions he was due and then told prospective employers not to hire him after he was fired.

He filed a complaint against his former employer asserting several causes of action that allegedly arose during his employment, including failure to pay wages, breach of contract and fraud. He also asserted two claims that allegedly arose after his employment: intentional and negligent interference with prospective economic relations.

The employer filed a motion to compel arbitration, and the trial court granted the motion on all the claims except for the plaintiff's two post-employment claims. The employer appealed.

Parties Must Agree to Arbitration

Although the law favors arbitration over litigation, a party cannot be forced to arbitrate a dispute that he or she has not agreed to resolve by arbitration.

Generally, the court said, allegedly illegal acts that are independent of the employment relationship are outside of the scope of an arbitration agreement. However, if the illegal acts—which are known as torts—are rooted in the contractual relationship between the employer and employee, then post-employment claims may be within the scope of the arbitration clause.

Where a former employee's tort claim is based on alleged post-employment conduct that is independent of the employment contract, that claim is not rooted in the employment relationship, and an employer's broadly worded arbitration agreement does not apply, the court said.

The torts of intentional or negligent interference with prospective economic relations each have five elements:

• An economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff.
• The defendant's knowledge of the relationship.
• An intentional or negligent wrongful act on the part of the defendant designed to disrupt the relationship, such as fraud or misrepresentation.
• Actual disruption of the relationship.
• Economic harm to the plaintiff caused by the acts of the defendant.

In tortious interference claims, the plaintiff must prove the defendant's conduct was independently wrongful by some legal measure other than the fact of the interference itself, the court explained.

In this case, the plaintiff was alleging that the employer committed independently wrongful acts designed to interfere with his economic relations with prospective new third-party employers. Therefore, the conduct alleged by the plaintiff was independent of his employment relationship with the employer, the court said.

Further, the court added, it was not reasonable to conclude that when the plaintiff agreed to arbitrate disputes arising out of the employment context, he also intended to arbitrate independently wrongful conduct by the employer that was alleged to have occurred after the plaintiff had left his employment.

The appeals court therefore concluded that the plaintiff's claims of intentional and negligent interference with prospective economic relations were not within the scope of the parties' arbitration agreement. The court affirmed the trial court's ruling denying the employer's motion to compel arbitration as to those two claims.

Bryant v. Advanced M.P. Technology, Calif. Ct. App., No. G059215 (Feb. 22, 2021).

Professional Pointer: While contractual language such as "arising out of" and "related to" employment define a broad scope of claims that may be subject to arbitration, this case shows that the scope is not unlimited.

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