The Devil is in the Details: Court Refuses To Compel Arbitration Where Employer Used Conflicting English and Spanish Versions Of An Arbitration Agreement

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Ross Boughton

Executive Summary

California’s Second Appellate District issued employers a reminder regarding the importance of attention to detail when drafting and issuing employment policies.  In Juarez v. Wash Depot Holdings, Inc., 2018 Cal. App. LEXIS 604 (July 3, 2018), California’s Court of Appeal refused to compel arbitration where an employer issued different and conflicting English and Spanish versions of an arbitration agreement.  Applying the age old rule that ambiguous contract language is construed against the drafter, the Court found that the more employee-friendly version (the Spanish version) applied, and upheld the denial of the employer’s motion to compel arbitration.

Case Background

Plaintiff Carols Juarez (“Juarez”) was an employee of Wash Depot Holdings, Inc. (“Wash Depot”), which operates a number of car washes throughout California.  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.  As is common, he brought his lawsuit as a representative action under California’s Private Attorneys General Act (“PAGA”), through which Juarez sought penalties for other purportedly “aggrieved employees.”

At the outset of his employment, 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 intended to be direct translations of one another and, in many respects, the handbooks mirrored each other and contained the same provisions.  Importantly, both handbooks included arbitration agreements and both included a waiver of the employee’s right to bring a representative PAGA action, stating: “[t]here will be no right or authority for any dispute to be brought, heard or arbitrated as a private attorney general action.”

However, as it turned out, the English and the Spanish versions of the handbook differed in at least one significant respect.  In the English version of the handbook, the PAGA waiver was expressly severable if it was found to be unenforceable.  Under the Spanish version, on the other hand, the PAGA waiver was expressly not severable from the remainder of the arbitration agreement.  Under California law, as held in Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), PAGA waivers are unenforceable.  Accordingly, the difference between the two 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 could be enforced.  Under the Spanish version, however, the agreement prohibited severance of the PAGA waiver and, consequently, the PAGA waiver made the entire agreement unenforceable.  Accordingly, the enforceability of the arbitration agreement hinged 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 it and the Spanish version, the English version would govern, indicating “[t]his 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 further 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 dictated that the English version governed.  The Court of Appeal, however, disagreed.  Relying upon the longstanding rule of construction that ambiguous agreements are interpreted against the drafter, the Court upheld the trail court’s ruling that the PAGA waiver could not be severed and that the entire arbitration agreement was unenforceable.

Employers’ Bottom Line

Juarez serves as a reminder that details matter for new hire forms and personnel policies, especially when issuing policies, forms, or agreements in multiple languages.  If an employer opts to issue personnel policies or agreements in multiple languages, it is strongly recommended that the translation is performed by a licensed translator and that the translation is reviewed by an experienced employment lawyer or human resources professional.

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