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Federal False Claims Not Subject to Employer’s Arbitration Agreement

What happens when an employee (in this case, not California-based) complains about violations of the False Claims Act in aerospace contracts and is then placed on leave for a year, on return given minimal responsibilities, harassed, denied transfer, and then reassigned to a less advantageous job on return? Another employee is also retaliated against by being passed over for a promotion and given limited assignment, then laid off for no apparent reason under cover of “Reduction in Force”.

In one of the most employee-friendly (and that’s the only folks we represent throughout California) decisions in a long time, a District Court has held that an employee would not be required to arbitrate his Federal False Claims Act retaliation claim, 31 United States Code Section 3730(h). The United States of America, ex rel Matt Paige and James Gammon Vs BAE System Technology Solutions & Services, Inc., No 13-2237 (6th Cir Eastern District Michigan). This was because the employer’s arbitration agreement limited the covered disputes to “….any dispute arising from the Agreement.”  Here, the court found that suing for retaliation under the Federal False Claim Act was not an act arising from employment and thus beyond the scope of the agreement. Here’s the court’s logic:

1. The FCA retaliation claim is completely separate from the contract and involves a claim that would exist regardless of the employment agreement.

2.  The Employment Agreement does not mention the FCA, retaliation or statutory claims.

3. This particular employment agreement is narrower than most since it does not include “related” claims or those that arise out of the relationship of the party.

4. To expand the agreement to arbitrate beyond the specific language of the agreement, the court would be re-writing the arbitration agreement and declined to do so.

Fortune 500 companies (and many of lesser size) routinely demand that employees sign arbitration agreements. California has strictly required that employers pay for the entire arbitration, allow all discovery and recoveries available in a court of law, and maintain both a procedural and substantively fair agreement. Just a procedural unfairness (“you must sign this before clocking in”) won’t be enough. Two substantive unfairness clauses (such as allowing the employer to go to court for restraining orders while denying that to employees) will invalidate the agreement.

So its really a great win when a case comes along that concludes there was no agreement to arbitrate the dispute in the first place. We are currently litigating an automobile dealership case where the luxury car sales employee moved from one dealership under the same umbrella to another. Unfortunately for the defendant, the “second” dealership,  a new arbitration agreement had not been signed and the language strictly limited the signed one to the first dealership. On appeal, the court has ruled that the employee is not required to arbitrate and we are well underway in our discovery efforts in the trial court.

There is almost no industry these days that’s immune from arbitration agreements.  Even consumers who buy products find that they are required to sign agreements that deny them the right to arbitrate on a class-wide basis. This makes any judicial resolution unlikely since each consumer who may have lost only a few hundred dollars, would be unlikely to sue individually.  Well, we can save that discussion for another day, but for now, if you are a California employee with wrongful termination, harassment, retaliation, discrimination, or another claim, let a statewide California employee-side law firm advise you of your rights. Call now! I’d love to chat with you. Call  877 789 9707.