Litigation is not always the most effective practice for resolving complex legal issues. Litigation can be stressful for clients, time-consuming, and costly. When employment issues arise, out-of-court resolution through mediation or arbitration can often optimize case outcomes, while minimizing time and cost, and reducing stress for clients. These processes also allow for flexibility in producing creative solutions.

The Importance of Neutrality

A neutral mediator or arbitrator plays a crucial role in facilitating dispute resolution outside of the courtroom. In order to be completely effective, neutral mediators and arbitrators must evaluate the most appropriate and effective strategies to reach the goals of both parties. A neutral mediator or arbitrator will encourage both parties to voluntarily reach an agreement that meets the needs of both sides. Since mediators and arbitrators play such a key role in shaping the course of a dispute, your choice of an arbitrator or mediator can significantly influence your case.

Choose a Professional with a Strong Legal Background

Arbitration and mediation are complex and continually evolving areas of law; the need for a knowledgeable and fair arbitrator or mediator is paramount. The attorneys at Palmer Kazanjian Wohl Hodson LLP are recognized as expert mediators and arbitrators by NAM (National Arbitration and Mediation).Our attorneys draw on a strong legal background in employment and labor law matters that spans over 30 years. The attorneys at Palmer Kazanjian Wohl Hodson LLP offer a well-rounded perspective; their strong analytical skills give them the ability to overcome complex legal issues and understand the consequences of the issues at hand, to develop reasoned resolutions.

The attorneys at Palmer Kazanjian Wohl Hodson LLP always take a professional approach, which has earned them a respected reputation in the legal community. If you are in need of an expert mediator or arbitrator to resolve an employment dispute, please contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.










In Nakai v. Friendship House Association of American Indians, Inc., the California Court of Appeal determined whether, under the Fair Employment and Housing Act (FEHA), marital issues that spill into the workplace implicate marital status protections and an employer’s duty to investigate.

The Facts

For over 20 years, plaintiff Orlando Nakai (Nakai) worked as a counselor at the Friendship House Association of American Indians, Inc. (Friendship House). Friendship House is a drug and alcohol rehabilitation program for Native Americans. While employed at Friendship House, Nakai married the chief executive officer’s (CEO) daughter.  During Nakai and his wife’s employment at Friendship House, Nakai and his wife experienced marital difficulties that created turmoil in the workplace. In May of 2016, Nakai’s wife revealed to her mother, the CEO of the Friendship House that Nakai “had a gun, was angry with the employees at the Friendship House, was dangerous, and had relapsed on drugs.” Nakai’s wife further told her mother that she had obtained a restraining order against her husband. The next morning, the CEO of the Friendship House, Nakai’s mother-in-law, placed him on administrative leave and then, without investigating her daughter’s allegations, terminated Nakai’s employment. Nakai filed an action for wrongful termination, claiming discrimination on the basis of his marital status and failure to conduct a reasonable investigation prior to discharge. Both claims asserted a violation of the FEHA. The trial court granted summary judgment in favor of the Friendship House, determining Nakai had failed to establish a prima facie case of marital status discrimination and had failed to demonstrate that his employer had an obligation to investigate.

The Court of Appeal’s Analysis

Nakai alleged that he was discharged from the Friendship House “solely because of his status as the spouse of the complaining employee.” Although the FEHA prohibits marital status discrimination, the California Court of Appeal affirmed the trial court’s decision that Nakai could not establish a prima facie case for marital status discrimination. According to the Court, marital status discrimination laws are supposed to “prevent discrimination against classes of people.” For example, employers cannot refuse to hire single people because they are single. On the other hand, the FEHA discrimination laws are not set out to protect people based on their “status of being married to a particular person.”  Since Nakai claimed he was terminated because of his marriage to the CEO’s daughter, not on the basis of being married itself, the Court determined that there was “not a marital discrimination problem.” The Court found that the Friendship House had valid, nondiscriminatory reasons for terminating Nakai; his wife reported that he owned a gun, was allegedly angry at their employees, and was using drugs. The Court determined that because Friendship House had concerns of violence, it had legitimate reasons for firing Nakai.

Next, the Court reviewed Friendship House’s failure to investigate the claims made by Nakai’s wife before firing him. The Court of Appeal explained that Nakai was an at-will employee; therefore, the Friendship House owed him no duty to investigate the wife’s charges before firing him. The Court further explained that absent a contractual or statutory provision to the contrary, employers considering the issue of an employee accused of misconduct “may act peremptorily, arbitrarily, or inconsistently, without providing specific protections such as prior warning, fair procedures, objective evaluation, or preferential reassignment.”  Nakai did not produce a contract or even argue the presence of an implied agreement that required “good cause” for termination. Consequently, the Court of Appeal rejected Nakai’s argument that he had a contractual right to have his employer investigate his wife’s complaints.

The Court of Appeal concluded by considering whether, under the FEHA, employers are under an obligation to investigate the legitimacy of complaints made against alleged perpetrators of crimes. Although the FEHA requires an investigation when a third party accuses an employee of sexual harassment, this was not the charge here. Further, the duty to investigate runs in favor of the victim, not the perpetrator of harassment. Thus, the court determined that the FEHA does not impose a duty to investigate in regards to alleged threats of workplace violence.

Practical Tips for Employers

●This case highlights the conflicts of interest and related issues that can arise when spouses work for the same company, which is not entirely uncommon.

●This case provides guidance to employers on the meaning of marital status discrimination under the FEHA. Additionally, its ruling provides some perspective regarding an employers’ express statutory and contractual duty to investigate misconduct complaints. Unless mandated by contract or statute, there is no express legal duty to investigate.

●However, prudent employers will still consider investigating complaints before disciplining or terminating employees, as this will, among other things, ensure a reasoned decision, prevent future lawsuits, and prevent additional hostility among employees.

●Employers should work closely with expert legal counsel when determining whether to conduct a workplace investigation before disciplining or terminating an employee. If you have questions about workplace investigations or your duty to investigate, please contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.




In McLane Co. Inc. v. EEOC, the U.S. Supreme Court reviewed a district court’s decision on whether to enforce a subpoena issued by the U.S. Equal Employment Opportunity Commission (EEOC). In McLane, a female employee, Damiana Ochoa filed a charge with the EEOC alleging sex discrimination (based on pregnancy) in violation of Title VII of the U.S. Civil Rights Act of 1964 (Title VII). Ochoa claimed that when she tried to return to her job following maternity leave, her employer (McLane Co.) informed her that she could not return to the position she had held for eight years as a cigarette selector, unless she passed a physical strength test. Ochoa’s job as a cigarette selector required her to lift, pack, and move large bins of products into the McLane Co. Distribution Center. McLane Co. had a company policy that required physical evaluations of all new hires and all employees returning from any leave lasting more than 30 days. Ochoa took the test three times but failed to pass and, as a result, she was fired.

As part of its investigation, the EEOC asked McLane Co. to provide them with information about the physical evaluation and individuals who had been asked to take it. Although McLane Co. willingly provided general information about the test and the individuals who had been required to take it, including gender, job class, reason for taking the test, and the score received, McLane Co. refused to disclose “pedigree information” for each test taker, including name, social security number, last known address, telephone number, and the reasons why particular employees were terminated after taking the test.

Case Outcome

After discovering that McLane Co. applied their physical evaluation policy nationwide, the EEOC broadened the scope of its investigation, both geographically and substantively. The EEOC requested McLane Co. provide information for all of the company’s locations nationwide. Additionally, the EEOC requested information beyond the original gender-related inquiries to encompass information relevant to potential age discrimination. However, McLane Co. failed to provide the “pedigree” information related to the EEOC’s expanded information request. As such, the EEOC issued subpoenas for the information. McLane Co. refused to comply with these subpoenas, so the EEOC sought enforcement in the federal district court. The district court declined to enforce the EEOC’s subpoena seeking pedigree information. The district court reasoned that, even if the EEOC had the names of employees who took the physical evaluation, or an opportunity to interview them, the information would not help determine whether McLane Co.’s use of the physical evaluation was discriminatory.

The U.S. Court of Appeals for the Ninth Circuit reviewed the district court’s decisions de novo and reversed. In rendering its opinion, the Ninth Circuit panel questioned, in a footnote, why de novo review applied, observing that other circuits reviewed subpoena enforcement decisions for abuse of discretion. The Supreme Court granted certiorari to resolve the divide between the Ninth Circuit and other circuits over the proper standard of review.

The Supreme Court held that the appropriate standard of review for a district court’s decision to enforce or quash an EEOC subpoena is abuse of discretion. Recognizing that the Title VII provision granting the EEOC subpoena power is identical to the authority granted to the National Labor Relations Board (NLRB) to issue subpoenas, the Court looked to the standard of review used in conjunction with NLRB subpoena enforcement judgments. The Court noted that virtually every circuit courts of appeals reviews EEOC subpoena enforcement cases under the abuse of discretion standard. Further, the abuse of discretion standard falls in line with longstanding practices in other contexts, including in reviewing district court decisions on evidentiary issues at trial and the scope of pretrial criminal subpoenas.

On April 3, 2017, the Supreme Court reversed the Ninth Circuit’s decision and remanded the matter back to the Ninth Circuit to reconsider the EEOC subpoena under the proper standard of review. The judgment was issued May 5, 2017. The Court specifically noted that using the abuse of discretion standard, the Ninth Circuit may, if it believes proper, consider the employer’s arguments regarding whether the EEOC’s subpoenas are unduly burdensome.

Practical Tips for Employers

  • Fighting the EEOC or other governmental entities over a subpoena can be time-consuming and expensive. Since the standard of review is specifically defined as abuse of discretion, it is unlikely there will be frequent overturning of a federal district court’s decision on appeal. Therefore, the real fight over subpoena enforcement will take place in the trial court.
  • As an employer, it is important to know that when governmental entities, like the EEOC, issue information requests that are irrelevant to the charge or appear to overstep their bounds, it is appropriate to challenge the subpoenas on grounds that they are irrelevant, overly burdensome to the employer, or are sought for an improper purpose.
  • However, if faced with an overly broad request for information from a governmental entity, it may be worthwhile to attempt to negotiate a resolution. If an agreement can be reached before a subpoena is even issued, employers may avoid the expense and publicity that could arise from a subpoena enforcement dispute in court.
  • Employers should work closely with expert legal counsel when attempting to negotiate a resolution. If you have questions about compliance with any governmental subpoenas, please contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.

California Court of Appeal Upholds Car Dealership’s “Disturbing” Arbitration Agreement Over the California DLSE Process for Unpaid Wages

California Court of Appeal Upholds Car Dealership’s “Disturbing” Arbitration Agreement Over the California DLSE Process for Unpaid Wages

On August 21, 2017, the First Appellate District in California issued a decision in OTO, LLC. v. Ken Kho, granting a car dealership’s petition to compel arbitration of a complaint filed by a  former employee.

In OTO, LLC v. Kho, the California Labor Commissioner challenged a car dealership’s mandatory arbitration agreement. The agreement required employment disputes to be arbitrated under normal civil litigation rules, before a retired superior court judge, and waived the right to submit wage claims to the Labor Commissioner. The Court of Appeal expressed that it was “disturbed” by the way the employer had drafted and presented the agreement to employees. Despite this proclamation and the fact the agreement bypassed the Labor Commissioner hearing process, the Court upheld the arbitration agreement.


Ken Kho was employed as an auto mechanic for a car dealership. Three years into his employment, he was given a one and one-quarter page agreement entitled, “Employment At-Will and Arbitration.” The agreement was drafted in seven-point font and the entire agreement was contained in a single, dense paragraph. The agreement required the parties to arbitrate their disputes before a retired superior court judge under ordinary pleading, discovery, and evidence rules. Kho received the agreement at his desk from a Human Resource employee, who did not explain the meaning of the agreement or the consequences of signing the agreement to him. Kho claimed to have signed the agreement within approximately three to four minutes.

One year after receiving the arbitration agreement, Kho filed a wage claim with the Division of Labor Standards Enforcement (DLSE), which is regulated by the Labor Commissioner. The dealership filed a petition to compel Kho to arbitrate his wage claim in the Superior Court. The Labor Commissioner intervened to oppose the petition and to uphold Kho’s right to pursue his wage claim before the DLSE.

The trial court denied the dealership’s petition because the arbitration agreement was “highly” unfair and deprived Kho of the advantages an employee has in an informal hearing before the DLSE. That informal hearing, called a “Berman Hearing,” permits employees to avoid court proceedings by trying to resolve wage claims in a speedy, informal, and affordable method for employees. The dealership appealed.

The Court of Appeal’s Decision

Written agreements to arbitrate employment disputes are typically enforceable unless there is something specifically unfair about the agreement’s terms and presentation. These two types of unfairness are called procedural unconscionability and substantive unconscionability. If both forms of unfairness exist to some degree, then a court may find an arbitration agreement invalid.

The Court of Appeal agreed with the trial court that the arbitration agreement was procedurally unconscionable. Kho received the agreement on a take-it-or-leave-it basis; he could not negotiate the terms; and he was presented with it years after he had started working for the dealership. He reasonably assumed he had no choice but to sign it or quit. In addition, the agreement appeared in seven-point font within a block format and had legalistic terms that were difficult to understand without legal training. Further, Kho was not provided with a copy of the arbitration agreement after signing it and did not receive a copy of the arbitration agreement in his first language, which is Chinese. All this together made the degree of procedural unconscionability “extraordinarily high.”

The appellate court closely reviewed the agreement and ultimately ruled in favor of the employer.  The Court determined the agreement was not substantively unconscionable because the arbitration clause was not one-sided and did not overly favor the dealership. All claims between the parties were subject to arbitration and the proceeding would resemble ordinary litigation. Further, although the agreement did not explicitly state that the dealership would have to pay for arbitration, prevailing law requires such a result.

Therefore, although the Court of Appeal was “disturbed” by the way the dealership wrote the arbitration agreement and felt the way it was presented to Kho for signing was “coercive,” the agreement did allow him to pursue his wage claim in an accessible and affordable forum that resembled normal civil litigation. Those features made the agreement substantively conscionable and therefore, enforceable.

Practical Tips for Employers

-Arbitration agreements continue to be a vital tool for companies to speed up the litigation process and reduce fees and costs. However, as discussed above, enforceability of arbitration agreements remains an evolving and complex area of law and a poorly worded arbitration agreement can lead to extensive litigation over the legitimacy of the agreement itself. In order to avoid finding yourself in a prolonged legal battle over an arbitration agreement, it is crucial for employers to maintain up-to-date arbitration agreements that are consistent with recent case law.

-Employers should work closely with expert legal counsel when implementing an arbitration agreement to ensure procedural fairness.  If you have questions about your current arbitration agreement or introducing an arbitration agreement at your company, contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.

Thank you for attending the 2017 Sacramento Area Human Resource Association Annual Conference!

Event Hosted by the Sacramento Area Human Resource Association, with Guest Speakers,  Larry Kazanjian, Managing Partner at Palmer Kazanjian Wohl Hodson LLP and Lukas Clary, Associate at Weintraub Tobin 

Thank you for attending the 2017 Sacramento Area Human Resource Association (SAHRA) Annual Conference, which was held September 19-20, 2017, at the Sacramento Convention Center. The 2017 SAHRA Annual Conference featured guest speakers, Larry Kazanjian, Managing Partner at Palmer Kazanjian Wohl Hodson LLP and Lukas Clary, Associate at Weintraub Tobin. We hope the presentation was informative and useful in providing you with the latest in employment and labor law compliance.

The following topics were covered:

  • Discrimination in the Workplace
  • Sexual Harassment
  • Sexual Orientation Harassment

The case discussed at the Conference is linked below:

Chipotle Mexican Grill Sued by EEOC for Sexual Harassment, Retaliation


We will be providing various seminars throughout 2017 on a variety of employment and labor law topics.  If you would like to receive legal updates and invitations to participate in our upcoming employment and labor law update seminars, please Join our mailing list.  For inquiries, e-mail or contact us at 916-442-3552.

The Enforceability of Class Action Claim Waivers in Arbitration Agreements

Arbitration has become a widely used mechanism for resolving legal disputes, due in part to the increased efficiency and cost-effectiveness it affords employers. The Federal Arbitration Act (“Act”) embodies the “liberal federal policy of favoring arbitration agreements,” and at its core, provides a medium by which disputes can be privately resolved through a neutral third party.  The Act also establishes the legal framework for an enforceable and valid arbitration agreement as well as the grounds upon which an award is vacated or enforced.  The steady increase in the use of mandatory arbitration agreements in employment contracts has been met with controversy, particularly surrounding the enforceability of class action claim waiver clauses.

Enforceability of Class Action Waivers in Arbitration Agreements Not Subject to the NLRB

For over a decade, the courts have grappled with the question of whether a state law that restricts the enforcement of an arbitration agreement is preempted by the Act.  In Conception, the United States Supreme Court endorsed the enforceability of a customer’s agreement to waive the right to file a class action.  Specifically at issue was whether the Act preempted a California state law that deemed class action waivers in adhesive consumer arbitration agreements unenforceable on the basis of unconscionability.  Two AT&T customers brought suit against AT&T mobility alleging that the company had “engaged in false advertising and fraud by charging sales tax on phones it advertised as free.”  The lower courts applied the unconscionability argument articulated in Discover Bank v. Superior Court and ruled that enforcement of the waiver would not allow for appropriate adjudication.  On review, the United States Supreme Court disagreed, concluding that Discover Bank’s rule “interfere[ed]” with fundamental attributes of arbitration” and was therefore preempted by the Act.

California aligned itself with Conception in 2014 when it confirmed that under state law, express class action waivers in employment arbitration agreements are enforceable and specifically that refusal to enforce waivers on grounds of public policy or unconscionability is preempted by the Act. (Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 359, 327 P.3d 129, 133 (2014)).  Turning to the issue of whether an employee’s right to bring a representative action under the Private Attorneys General Act of 2004 (PAGA) may be waived, the court determined that such waivers are “contrary to public policy and unenforceable as a matter of state law.”  Recall that PAGA allows employees to bring an action on behalf of the state for Labor Code violations committed against the employee and other similarly situated employees.  It is not a class action, but rather a representative action.  The court was unpersuaded by the contention that PAGA disturbed “the principle of separation of powers under the California Constitution” and maintained that PAGA representative actions fall outside the scope of disputes that the Act seeks to protect.

Enforceability of Class Action Waivers in Arbitration Agreements Subject to the NLRB

Independently of case law to the contrary, the National Labor Relations Board (“NLRB”) has long held that arbitration agreements requiring employees to waive their right to file a class action as a condition of employment are in violation of Section 7 of the National Labor Relations Act and are invalid.  (D.R Horton (2012).  Murphy Oil USA, Inc.).  However, for the most part, federal courts have taken a different stance, with the 5th, 2nd, and 8th Circuit Courts ruling contrary to D.R Horton.   In addition, the California Supreme Court in Iskanian specifically rejected the argument that the act of participating in a “class proceeding to address wage violations” amounts to “concerted activity under section 7 of the NLRA.”  In light of the disparity between federal and state courts and the NLRB, it is only a matter of time before the issue is taken to the United States Supreme Court.

Class Action Waivers Falling Outside the Scope of the Act

Gentry, the controlling authority in California prior to these rulings, may still have some limited application.  It held class action waivers to be invalid where allowance of the class action leads to “a less comprehensive enforcement of overtime laws” for aggrieved employees.  Gentry considered four factors in making that determination: “[1] the modest size of the potential individual recovery, [2] the potential for retaliation against members of the class, [3] the fact that absent members of the class may be ill informed about their rights, and [4] other real world obstacles to the vindication of class members’ rights to overtime pay through individual arbitration.”  While the court in Iskanian referenced Gentry’s holding as having been “abrogated by recent United State Supreme Court precedent,” it is important to note that Gentry may still be good law in situations where the arbitration agreement is not governed by the Act.

For example, in Garrido v. Air Liquide Industrial, an employee truck driver brought an action against Air Liquide Industrial (ALI) alleging that the company committed a series of wage-related labor code violations and unfair business practices.  The employee opposed ALI’s motion to compel arbitration under reasoning that the Act was not applicable to “transportation workers under 9 United States Code section 1.” The Court of Appeals concluded that while the ADR was not governed by the Act there was nothing to prohibit governance by the California Arbitration Act.  This was of particular significance in that “Gentry could still apply.” Accordingly, the court applied the four factors set forth in Gentry and concluded that a class proceeding in this case would “be a significantly more effective way of allowing employees to vindicate their statutory rights.” Thus, the court affirmed the trial courts order denying Air Liquid’s motion to compel individual arbitration.

What This Means for Employers

This area of the law remains in a state of flux.  Employers who are not subject to the NLRB can rest assured that arbitration agreements barring class actions will likely hold, since class waivers have been deemed enforceable by both, the United States Supreme Court in Conception and the California Supreme Court in Iskanian. It is also important to note that while state laws prohibiting class action claim waivers in an arbitration agreement are preempted by Act, PAGA representative action waivers are not.  Already, the Ninth Circuit has issued a decision in which it upheld the rule established in Iskanian.   As case law on the enforceability of PAGA waivers continues to evolve, employers may wish to err on the side of caution by excluding any representative PAGA action waivers from their arbitration agreements or limiting their application through appropriate language in the arbitration agreement.

Finally, employers subject to the NLRB who are unwilling to absorb the potential costs of litigating matters at the federal administrative and appellate levels may consider excluding the class waiver provision from their arbitration agreements or, again, limiting its application through appropriate language in the arbitration agreement.  However, please recognize that as discussed in a previous article (“Growing Section 7 & 8(a) (1) Violations Pose A Threat To Arbitration Employment Agreements”), recent NLRB decisions demonstrate that a provision making the class waiver optional does not necessarily safeguard the provision.

Still, despite the instability currently demonstrated by the administrative agencies and courts on this issue, arbitration agreements remain a viable option for employers to seriously consider as a means of limiting employment-related claims and actions to a forum that permits more privacy and to a process that is more expeditious and cost-effective.

Spring, 2014