A car wash company provided its employees with a handbook setting forth its employment policies. The handbook was written in both English and Spanish, it required arbitration of employment disputes, and it denied an employee’s right to bring an action under the California Private Attorneys General Act (PAGA). The English version stated that the denial of the right to bring a PAGA action was severable if a court found the denial unenforceable. The Spanish version provided that the PAGA denial was not severable.
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A trial court found the arbitration agreement unenforceable, and the employer appealed. The California Court of Appeal denied the employer’s appeal and affirmed the trial court’s order denying a petition to compel arbitration of the employee’s wage and hour lawsuit.
A Nice Clean Job
Carlos Juarez was an hourly employee at Wash Depot Holdings Inc.’s hand car wash in Ventura beginning in April 2012. During his employment, Wash Depot adopted a policy set forth in its employee handbook requiring arbitration of legal claims arising from the employment relationship.
Specifically, on July 13, 2013, Juarez signed two acknowledgments, one in Spanish and one in English, stating that he received the handbook and agreed to its terms. He also signed a separate acknowledgment in Spanish stating that he received a copy of the dispute resolution agreement.
Things Go South
On December 2, 2016, Juarez filed a first amended complaint against Wash Depot alleging 13 claims for various wage and hour violations, including failure to pay earned wages, minimum wages, overtime compensation, rest break compensation, and meal period compensation. He also alleged a representative action under the PAGA.
Wash Depot asked the court to compel arbitration of Juarez’s claims, relying on a section of the employee handbook titled “Dispute Resolution Agreement.” That section provides in part: “Except as it otherwise provides, this Agreement is intended to apply to the resolution of disputes that otherwise would be resolved in a court of law, and therefore this Agreement requires all such disputes to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial.” The paragraph specifically includes the employment relationship and compensation, breaks, and rest period claims, among others, within the arbitration mandate.
Another portion of the dispute resolution agreement states the employee waives the right to bring a representative PAGA action: “There will be no right or authority for any dispute to be brought, heard or arbitrated as a private attorney general action.” The English-language version of the handbook further provides that the PAGA waiver is severable from the arbitration agreement should a court find it unenforceable. In contrast, the Spanish-language version of the handbook provides that the PAGA waiver is not severable from the arbitration agreement.
Another provision of the dispute resolution agreement states, “This Handbook may be translated into languages other than English as a convenience to our employees. Any ambiguity between this Handbook and any translated version will be governed by the English version.” Another paragraph also permits an employee to “opt out” of arbitration by submitting an appropriate form to the employer.
In opposing the motion to compel arbitration, Juarez declared that in July 2013, he executed the acknowledgment documents on the condition of “return[ing] to work.” He also declared that Wash Depot didn’t provide him with either an English-language version or a Spanish-language version of the handbook. He added that he was not informed of or aware of the arbitration policy.
Trial Court Refuses to Compel Arbitration
Following written and oral argument, the trial court denied the motion to compel arbitration. The trial judge stated that the differences in the severability of the PAGA waiver clause in the English-language version and the Spanish-language version of the handbook were “profound” and concerned “a very significant subject.”
The trial court also applied Civil Code Section 1654 to construe the arbitration agreement against the drafter, Wash Depot. Under the circumstances, the language of a contract should be interpreted most strongly against the interests of the party that caused the uncertainty to exist. Interestingly, the trial court made no factual findings concerning Juarez’s claims that he didn’t receive a copy of the handbook in either language. Wash Depot appealed the trial court’s order denying its petition to compel arbitration.
Translation Error or Deception?
The court of appeal held that the trial court properly concluded that the PAGA waiver set forth in the handbook was unenforceable as against public policy. The court acknowledged that the California Supreme Court had previously held that an employee’s right to bring a PAGA action may not be waived: “We conclude that where, as here, an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.” According to the court, a waiver indirectly exempts the employer from responsibility for its own violation of the law.
Moreover, the court of appeal held that the trial court didn’t abuse its discretion by declining to sever the PAGA waiver and enforce the remaining arbitration agreement. “We decline to conclude that [the employee’s] mere opportunity to opt out of the dispute resolution agreement or obtain counsel’s advice on it at the inception of [his] employment and before any dispute arose, without more evidence of [his] knowledge, gave [him] a sufficient understanding of the relevant circumstances and likely consequences of forgoing [his] right to bring a PAGA representative action.”
The court of appeal went so far as to say that “at best, the difference in the severability clauses in the English-language and Spanish-language versions of the handbook is negligent; at worse, it is deceptive.” Under the circumstances, the court held that it must construe the ambiguous language against the interest of the party that drafted it—Wash Depot.
The court of appeal held that in many cases, the disparity between the treatment of PAGA claims may have no consequences. But under the facts in this case, there are consequences. The court held that the arbitration agreement is unenforceable and affirmed the trial court’s order denying Wash Depot’s petition to compel arbitration of Juarez’s wage and hour lawsuit. Carlos Juarez v. Wash Depot Holdings, Inc., et al. (California Court of Appeal, 2nd Appellate District, 7/3/18).
Bottom Line
This case is a sobering reminder for employers that the mere addition of a single word can have a significant impact on the enforceability of company policies and procedures. Additionally, this case illustrates the importance of consistency and accuracy of company policies and agreements, particularly those that are translated into languages other than English.
Although not germane to the Juarez case, it’s a good reminder of a California employer’s obligation regarding the Fair Employment and Housing Act’s (FEHA) regulations stating that if 10 percent or more of the workers in a given location speak a language other than English, the employer must also translate its harassment and discrimination policies into those alternative languages.
Finally, California employers should be reminded that under many circumstances, if a contract has uncertain language, then it will be interpreted most strongly against the party that drafted it—usually the employer.
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Michelle Lee Flores is a contributor to California Employment Law Letter and can be reached at Cozen O’Connor in Los Angeles, mflores@cozen.com.