Wage Law

Division Five of the Second District Court of Appeal held yesterday that an employee who sues the successor of his former employer can be bound, under principles of equitable estoppel, to an agreement to arbitrate, even though the successor never became a party to that agreement.

In Alliance Title v. Boucher, the plaintiff/employee, Craig Boucher, had signed an employment agreement with Financial Title Company. Later, Financial sold its operations and assets to Alliance Title Company, Inc. Boucher was told he would work for Alliance and that he was required to allow modifications to the agreement by Alliance. When he refused, he was fired. He then sued both Financial and Alliance, who petitioned the court to compel arbitration.

The trial court denied the petition to compel arbitration because Alliance Title was not a party to the agreement. The Court of Appeal reversed, holding that a signatory to an arbitration agreement may be compelled to arbitrate his claims against a nonsignatory when the claims rely on the existence of the contract that contains the covenant to arbitrate.

You can read or download Alliance Title in word format or in pdf.

The case included wage issues, but the reason we mention it here is because the issue of arbitrability is often important in a wage and hour case, whether the case involves overtime pay, reporting time pay, meal period or rest period break violations, underpaid vacation or delays in final payroll upon termination. At times, the issue of whether one can litigate or arbitrate can be more important than the merits of the underlying case.

For example, we recently settled a class action lawsuit for $1.5 million more than the settlement of a companion suit against our defendant's sister company. The sister company was larger, had more employees, more violations, and greater liability. We, however, successfully beat back a motion to compel arbitration, whereas the sister company won its motion to compel arbitration in the companion case.

Why did it matter? It is widely perceived that arbitrators are unwilling to risk future business by rendering large plaintiff's awards. Judges and juries, on the other hand, feel much more free to rule based upon the facts and law applicable to their case, since they have no concern over whether the Littler Mendelsons of the world will ever consider paying them another fat arbitration fee. That difference matters a great deal.