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Whistle-blowers and other workers fired in violation of public policy are entitled to the same basic arbitration protections as employees who claim their statutory rights were violated. So ruled the California Supreme Court on Thursday in a decision that also struck down certain appellate arbitration provisions as unconscionable, and reaffirmed the fact that employers must bear the costs of mandatory arbitrations. The decision, Little v. Auto Stiegler Inc., 03 C.D.O.S. 1684, was hailed by plaintiffs attorneys as a victory for workers as it extends the reach of a 2000 Supreme Court ruling that established minimal standards for mandatory pre-dispute arbitration agreements. In Armendariz v. Foundation Health Psychcare Services Inc., 24 Cal. 4th 83, the court held that such agreements must allow for arbitrations with sufficient discovery, that entail a written decision and that do not cap the amount of damages. Writing for a 4-3 majority Thursday, Justice Carlos Moreno said that these basic standards do not apply solely to claims alleging violations of the Fair Employment and Housing Act, as was the case in Armendariz. Whistle-blower protections, which are in the public interest, are unwaivable and cannot be contravened by a private agreement, the court found. “An employment agreement that required employees to waive claims that they were terminated in violation of public policy would itself be contrary to public policy,” wrote Moreno. Dissenting on this point were Justices Janice Rogers Brown, Marvin Baxter and Ming Chin. The case involved Alexander Little, a service manager at an automobile dealership. Little alleges he was terminated for investigating and reporting warranty fraud. Like many auto dealership employees, Little had signed a contract agreeing to take any disputes to arbitration. The agreement contained a clause that any arbitration award over $50,000 could be appealed to a second arbitrator. All seven justices agreed that this appeal provision, with its $50,000 threshold, was unconscionable, since it tilted the table in the defendant’s favor. “Each of these provisions is geared towards giving the arbitral defendant a substantial opportunity to overturn a sizeable arbitration award,” wrote Justice Moreno. The court did not nullify the entire arbitration agreement, however. Instead it held that the overall agreement was still valid once the appellate provision had been removed. Christopher Hoffman, an Orange County attorney for the defendant, cast the decision as a victory for employers since the arbitration agreement at issue was held to be enforceable in its modified form.

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