When an employer determines to implement an arbitration clause program with its employees, one concern is that provisional relief deemed critical to prevent the loss of clients, employees, or devaluing of company trade secrets is unavailable or less effective. However, the California Arbitration Act (where it applies), has a statutory allowance for access to the courts for certain provisional remedies (such as TROs), as an aid to an arbitration proceeding. California Code Civil Procedure (“CC”) section 1281.8. Importantly for employers, the recent appellate court decision Baltazar v. Forever 21, Inc. (2012) 212 Cal.App.4th 221, confirms that invoking section 1281.8 as part of an arbitration clause will not make it unenforceable.
The facts of Baltazar are that employer Forever 21, Inc., expressly incorporated section 1281.8 in its arbitration agreement: “Pursuant to [CCP] section 1281.8 either party hereto may apply to a California court for any provisional remedy, including a temporary restraining order or preliminary injunction.” This provision was tested when a former employee filed a discrimination lawsuit and Forever 21 moved to compel arbitration. The trial court denied the employer’s motion to compel arbitration, finding the agreement “unconscionable,” which was then appealed by Forever 21. On appeal, the employee argued the provision was “unconscionable” because, though it purported to be a provision that was mutually beneficial to the employee and employer, in practice, the provision unfairly benefited the employer who would be more likely to seek provisional remedies in court.
On December 20, 2012, the Court of Appeal reversed, finding the arbitration provision enforceable because (i) “the Agreement does not exempt from arbitration any claims that Forever 21 might want to pursue,” (ii) the provision allowing the parties to obtain provisional remedies is not tied to any type of claim,” (iii) the Agreement was not one-sided because former employees also would benefit from provisional relief because the FEHA and ADA, for instance, expressly allow injunctive or equitable relief, and (iv) section 1281.8 expressly authorizes provisional relief.
Baltazar v. Forever 21, Inc. should provide employers with confidence that they can seek provisional remedies from courts even in the context of having an arbitration program.
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