Judge: Armen Tamzarian, Case: 22STCV32773, Date: 2023-02-10 Tentative Ruling

Case Number: 22STCV32773    Hearing Date: February 10, 2023    Dept: 52

Defendants BHFC Operating II, LLC and Jaret (Last Name Unknown)’s Motion to Compel Arbitration

Defendants BHFC Operating II, LLC and Jaret (last name unknown) move to compel arbitration and stay this action by plaintiff Alfred Thomas.  Plaintiff opposes the motion on two grounds.

            First, plaintiff argues the arbitration agreement is illusory because it permits the employer to unilaterally modify it.  The agreement is not illusory.  The Court of Appeal has stated that if an “agreement to arbitrate simply authorized the defendant to make unilateral modifications, it would not be illusory under California law because the implied covenant of good faith and fair dealing would preclude any change that undermined the employee’s rights.”  (Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1474 (Peng).)  “The implied covenant also prevents an employer from modifying an arbitration agreement once a claim has accrued or become known to it.”  (Ibid.)

            The arbitration agreement provides, “Only the CEO may modify this policy in a signed writing and only as is necessary to make this policy enforceable under any federal, state, or local law or other applicable case law effective after this policy’s initial dissemination to its workforce.  Otherwise, no employee can modify this policy in any manner or enter into any agreement that is contrary to this policy.”  (Seddigh Decl., Ex. A, p. 3.) 

            That provision does not make the agreement illusory.  The implied covenant of good faith and fair dealing applies to ensure that the only valid modifications are those “necessary to make this policy enforceable.”  Moreover, as in Peng, the agreement “states that defendant may only modify the agreement, not terminate it.”  (Peng, supra, 219 Cal.App.4th at pp. 1473-1474.)

            Second, plaintiff argues the agreement is invalid under Labor Code section 432.6.  Section 432.6, subdivision (a) provides, “A person shall not, as a condition of employment … require any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act … or this code, including the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity of any alleged violation.” 

The statute, however, further provides, “Nothing in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act (9 U.S.C. Sec. 1 et seq.).”  (Lab. Code, § 432.6, subd. (f).)  The arbitration agreement is otherwise enforceable under the FAA.  Labor Code section 432.6 therefore does not invalidate the parties’ arbitration agreement. 

Disposition

            Defendants BHFC Operating II, LLC and Jaret (last name unknown)’s motion to compel arbitration and stay proceedings is granted.  Plaintiff Alfred Thomas is ordered to arbitrate his claims against defendants.  The court hereby stays the entire action pending resolution of the parties’ arbitration proceeding.