In the case of Western Bagel Co., Inc. v Superior Court, decided July 17th, the employer’s translation from English to Spanish of a mandatory arbitration clause was at issue. The Spanish version suggested non-binding arbitration; the English said binding arbitration. The last thing most employers want is to go through non-binding arbitration and then have to start again in Court from the beginning. So, Western Bagel sought to have the Court of Appeal decide out-of-the-box whether arbitration was binding or not.

The employee was Spanish speaking and could read and write only basic English, but was able to file in state court a class action complaint against his employer, claiming meal and rest break violations. The employer moved to compel arbitration based on the employee’s signed arbitration agreement. The problem was that while other provisions specifically called for binding arbitration, a catch-all clause in the Spanish translation of the arbitration agreement mentioned “nonbinding” arbitration, while the English version called for “binding” arbitration.

The very first paragraph of the Agreement (and in other places) stated that the employee and employer agreed to have their disputes resolved through binding arbitration, but this one severability provision in paragraph 10 of the Spanish version stated: “If any provision of this Agreement, … is found to be unenforceable, whether in whole or in part, this finding will not affect the validity of the rest of this Agreement and the Agreement will be carried out to the fullest possible extent to ensure that the resolution of all disputes between the parties as described herein are resolved via neutral, non-binding arbitration.” So, there you have an ambiguity that the employee sought to hold against the employer so that the employee could litigate the class action in the preferred forum of the state court.

Western Bagel said that the Spanish translation was wrong in that there was a typographical error made by the outside translation company that translated the agreement from English to Spanish. The employer pointed to the other clauses in the agreement that either stated explicitly or strongly supported a conclusion that the employee agreed to binding arbitration.

The trial court relied upon the Federal Arbitration Act (“FAA”) and held that the inconsistency between the Spanish and English clauses at issue created an ambiguity about the parties’ agreement to binding or nonbinding arbitration. As the employer drafted the arbitration agreement (both English and Spanish), the court held the ambiguity against the employer and ordered the employer and employee to arbitrate the dispute in a nonbinding arbitration (i.e. neither party would be bound to the arbitration decision).

The employer appealed and the Court of Appeal held that a FAA provision calling for any ambiguities in an agreement about the scope of an arbitration must be resolved in favor of arbitration, a fundamental attribute of which is that the arbitration is normally binding. The Court of Appeal thus required the employee and employer to go to binding arbitration.

The lesson: the employer spent from July 1, 2019 until last week litigating (and expending the fees/costs) because of this typo.

For any questions, feel free to contact Dawn: dcoulson@eppscoulson.com

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