Arbitration Agreements In Employment Contracts: Cross Your T’s And Dot Your I’s In All Languages

In Juarez v. Wash Depot Holdings, Inc., California’s Second Appellate District Court of Appeal upheld the denial of an employer’s motion to compel arbitration when the arbitration agreement contained in the employee handbook was not the same in the English version as the Spanish version.

Plaintiff Carlos Juarez filed a lawsuit alleging thirteen wage-and-hour claims, including failure to pay all wages, failure to pay minimum wages, failure to pay overtime, and meal- and rest-period violations against his employer, Wash Depot Holdings, Inc., which operates a number of car washes throughout California. Mr. Juarez brought his lawsuit as a representative action under California’s Private Attorneys General Act (“PAGA”), through which he sought penalties for other “aggrieved employees.”

At the time of his hiring, Mr. Juarez signed two separate employee handbook acknowledgements, one indicating that he received an English copy of the handbook and agreed to its terms, and one indicating that he received a Spanish copy of the handbook and agreed to its terms. Presumably, the English and Spanish versions of the handbook were supposed to be identical translations of the other and, in most respects, the handbooks contained the same provisions and information. Both versions of the handbook included an arbitration agreement and both versions included a waiver of the employee’s right to bring a representative PAGA action.

In the English version of the handbook, the PAGA waiver was expressly severable if it was found to be unenforceable. In the Spanish version, however, the PAGA waiver was expressly not severable from the remainder of the arbitration agreement. California law, as held in Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), provides that PAGA waivers are unenforceable. As such, this severability difference between the English and Spanish versions turned out to be critical. Under the English version, the unenforceable PAGA waiver could properly be severed and the remainder of the arbitration agreement would remain valid. Under the Spanish version, however, the agreement prohibited severance of the PAGA waiver and, consequently, the PAGA waiver made the entire arbitration agreement unenforceable. The enforceability of the arbitration agreement therefore rested on which version of the handbook governed.

Wash Depot argued that the English version of the handbook controlled because it explicitly stated that if there was any ambiguity between the English and Spanish versions, the English version would govern. The English version included a clause specifically stating, “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.” Wash Depot also argued that the longstanding rule codified in Cal. Civil Code § 1643 that ambiguous contracts should be interpreted to make them “lawful, operative, definite, reasonable and capable of being carried into effect” applied and therefore the English version controlled.

The Court of Appeal, however, disagreed with Wash Depot. The Court relied on the longstanding rule that ambiguous agreements are interpreted against the drafter. As a result, the Court upheld the trial court’s ruling that the PAGA waiver could not be severed and that the entire arbitration agreement was wholly unenforceable.

Due to the diverse work force in Southern California, more employers are opting to issue policies, forms, or agreements in multiple languages. Juarez is a reminder that the details of these documents are important. It is highly recommended that any translations of employment documents are performed by a licensed translator and that the translation is reviewed by an employment lawyer. The upfront costs of a hiring a translator and attorney will likely be far less than the costs of any potential litigation.

For more information about the case and its implications, please contact Samantha Panosyan in LGC’s San Diego office.