Arbitration Clause Struck Down With Massachusetts Choice of Law Language in California Disability Discrimination Case

A former attorney, fired from her job at a large law firm in California due to her disability got court approval to finally take her case to court, and overturn the law firm’s arbitration clause. The employer could not compel arbitration because its letter agreement with the employee contained a Massachusetts choice of law provision and Massachusetts’ law required a clear waiver of statutory discrimination rights that was lacking in the agreement, the California Court of Appeal ruled in Harris v. Bingham McCutchen LLP.

Hartwell Harris filed her lawsuit against her former employer, Bingham McCutchen LLP in the fall of 2011. The employee asserted six violations of the Fair Employment and Housing Act (FEHA) along with other claims, alleging that her former employer failed to accommodate her disability and fired her upon requesting the accommodations. After Harris filed her lawsuit in court, the employer moved to compel arbitration, which essentially takes the case out of court. The letter agreement between the firm and the attorney contained a requirement to arbitrate all legal disputes concerning employment and termination. What’s unusual about this agreement is that it also contained a choice-of-law provision applying Massachusetts’ law to the employment relationship in California.

The employer argued that the choice of law provision does not apply to whether or not the case should be arbitrated. The employee argued that the choice of law provision should apply to arbitrability according to Warfield v. Beth Israel Deaconess Medical Center, Inc., which required arbitration agreements to explicitly state that particular discrimination claims must be arbitrated.

Both the trial court and the Court of Appeal agreed with the employee and concluded that the arbitration agreement could not be enforced. The Court pointed out that the employer “cannot have it both ways” by demanding that the arbitration clause that they drafted for their employees be interpreted only for the firm’s benefit, while denying its employees of the same choice-of-law provision that provided protections against waiver of statutory employment discrimination rights.

The Court relied on Warfield, a Massachusetts Supreme Court case, on contractual provisions seeking to force arbitration of discrimination claims in overturning the arbitration clause. According to Warfield, arbitration clauses must “at minimum, state clearly and specifically that such claims are covered by the contract’s arbitration clause.” Here, the employer’s arbitration clause akin to the one in Warfield contained only broad language stating that “[a]ny claim, controversy or dispute arising out of or in connection with this Agreement or its negotiations shall be settled by arbitration,” the Court noted. The employee’s disability discrimination claims under the FEHA was also similar to the sort of statutory rights contemplated by the Massachusetts’ court’s ruling in Warfield, and because the law firm’s arbitration clause did not state that disability discrimination claims were covered, it was inapplicable as to the plaintiff’s suit, the Court of Appeal concluded.

The employee’s attorney, Tammara Freeze, stated in a press release “that even a big and experienced law firm, like Bingham McCutchen, is not immune from drafting errors in its own arbitration contract.” The firm deflected the criticism, noting that the Massachusetts Supreme Court ruling that the Court of Appeal had relied upon was issued in 2009, while the plaintiff had signed her employment agreement in 2007.

The Harris ruling eventually turned out well for the employee. Now Harris can proceed with her lawsuit in court. But she is only able to do so after almost two years since she was fired and after more than a year since she first filed her lawsuit. If not for the arbitration clause Harris had signed, she could have gone straight to court and proceeded with her case. Most employees sign onto arbitration clauses when they begin their employment when they are presented with a bunch of paperwork to fill out. When starting a new job, this paperwork may not be something that many employees closely read. A word to the wary is to ensure that as exciting as you may be to start a new job to pay attention to what you are signing as a new employee. Otherwise, you may be signing away your right to go to court to vindicate potential employment claims if your employment relationship ends up in a dispute.