Issue
In Balandran v. Labor Ready, Inc., (2004 Daily Journal D.A.R. 15,042, Cal.App. 2 Dist., Dec. 17, 2004), the California Court of Appeal addressed the issue of whether job applicants were required to arbitrate their pre-employment discrimination claims against a temporary labor agency where the job application contained an arbitration clause covering employment-related issues but also provided that applicants are not employees until they have been assigned a job.
Facts
Labor Ready, Inc., a temporary labor agency, requires job applicants to sign an agreement providing that an applicant is not considered to be employed until he or she has been assigned a job. The agreement further provides that arbitration is the sole remedy for disputes arising out of employment, including claims for discrimination and other employment-related issues. Labor Ready does not consider workers to be its employees unless they are on a job working for a customer.
Female applicants filed a lawsuit against Labor Ready and one of its customers alleging that Labor Ready agreed to send only male workers to the customer. Relying on the arbitration clause in the employment application, Labor Ready asked the trial court to compel arbitration. The trial court denied its request and Labor Ready appealed to the Court of Appeal.
Appellate Court Decision
The Court of Appeal found that the pre-employment claims of discrimination do not arise out of the applicants’ employment. It concluded that the applicants “merely registered to work” and noted that, by Labor Ready’s own terms, such registration did not constitute employment. Because the applicants “did not have ’employment’ out of which any of their disputes could arise,” the portion of the arbitration clause covering disputes arising out of employment did not apply. The Court further found that the language “all other employment issues” did not create a separate category of claims subject to arbitration.
The Court noted that an employment application can contain an arbitration clause covering disputes arising out of the application itself or out of subsequent employment. However, “the language in Labor Ready’s application cannot reasonably be construed as an agreement to arbitrate pre-employment discrimination claims.”
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