Last week a California Employer secured a victory when the California Court of Appeal held that the employer’s general California choice-of-law provision in its employment agreement did not entitle the employee to pursue class claims for unpaid wages.

In Nixon v. AmeriHome Mortgage Company, LLC, the employment agreement at issue required the employee to arbitrate any employment-related claims on an individual basis and to waive class claims. The employment agreement also included a choice-of-law provision that incorporated state law. Plaintiff relied on that provision to argue that state law governed, not federal, and as such, she should be permitted to pursue class claims for alleged unpaid wages pursuant to Labor Code Section 229 despite the class waiver she executed. Section 229 allows a party to maintain an action for unpaid wages despite the existence of an agreement to arbitrate unless the arbitration agreement is governed by federal law. Here, plaintiff argued that the choice-of-law provision at issue was so general and broad that it incorporated California law making plaintiff’s class claim for unpaid wages exempt from arbitration.

In a published decision, the Court of Appeal disagreed with the plaintiff and affirmed the trial court’s order requiring plaintiff to arbitrate her individual claims and dismissing class claims. The Court of Appeal reasoned that “interpreting a general California choice-of-law provision in an agreement as evidencing the parties’ intent to apply section 229 to an arbitration provision covering all employment claims, including those relating to wages, departs from common sense and makes mischief.”

This case provides employers with guidance on how to avoid claims that are exempt from arbitration and the language that should be incorporated into an arbitration agreement for adequate protection against class claims.