Ambiguities in employee arbitration agreements may force employers to litigate putative class action claims in arbitration. The California Supreme Court delivered this cautionary message by its recent holding in Sandquist v. Lebo Automotive, Inc. In Sandquist, the plaintiff, an African-American male, filed a discrimination class action on behalf of “current and former employees of color” following his separation from the company. The company filed a motion to compel individual arbitration, relying on an arbitration clause the plaintiff signed in three separate documents upon commencing his employment. The trial court granted the company’s motion, concluding that the existing case precedent required the court – rather than the arbitrator – to determine whether class arbitration was available. Ultimately, the trial court interpreted the arbitration agreements’ as impliedly prohibiting class arbitration and, on that basis, struck the class allegations.
Upon review, the Court of Appeal reversed the trial court, holding that the arbitrator, not the trial court, must determine whether an arbitration agreement permits class arbitration. The California Supreme Court granted review and, on July 28, 2016, a narrowly divided Court affirmed the Court of Appeal, holding that the question of whether a court or an arbitrator decides if an arbitration agreement permits class claims should be determined on a case-by-case basis, specifically focusing on the agreement’s terms and resolving any ambiguities in favor of the non-drafting party. By its decision, the Court placed itself at odds with numerous federal appellate courts that have held that such questions are for a court, not an arbitrator, to decide.