John Doe signed an arbitration agreement in 2015 as a condition of his employment with Cisco Systems, Inc. The agreement required Cisco and Doe to arbitrate “all disputes or claims arising from or relating to” Doe’s employment, including claims of discrimination, retaliation, and harassment.
Several years after signing the arbitration agreement, Doe filed a complaint with the California Department of Fair Employment and Housing, which was renamed the California Department of Civil Rights or CRD effective July 2022. Doe’s CRD complaint alleged discrimination on account of his ancestry or race. Doe also alleged Cisco retaliated against him after he complained.
The CRD notified Cisco of Doe’s complaint, investigated it, and decided it had merit. At that stage, the CFD tries to resolve the claim informally with the employer. If a claim is not resolved informally, the CRD has the following options: 1) decline to pursue the matter further and issue a right to sue notice, which allows the employee to sue the employer; or 2) CRD may sue the employer. The claimant employee may participate in a CRD lawsuit but is not required to do so.
The CRD attempted to resolve Doe’s claim but was unsuccessful. The CRD filed a lawsuit against Cisco. Doe did not join as a party to the CRD lawsuit.
Cisco filed a motion to compel arbitration, contending that the CRD was bound by Doe’s arbitration agreement. The trial court denied the motion, and Cisco appealed.
On appeal, the California Court of Appeal framed the issue as whether a contract, such as an arbitration agreement, binds a third party who did not sign the contract. The Court of Appeal quickly agreed with the trial court, stating that a fundamental aspect of any contract is mutual consent and that a contract cannot exist unless both parties have agreed to the same thing. Here, the CRD never consented to resolve disputes with Cisco by arbitration, so it was not contractually bound to arbitrate.
This finding did not end the inquiry. Cisco argued that the arbitration agreement also bound the CRD because the CRD was acting as Doe’s proxy. This theory also failed. The California Legislature gave the CRD the independent authority to sue an employer for some violations and to decide which course of action to pursue. The CRD acts independently from any employee-claimant, does not assume any obligations, and does not have an agency relationship with the claimant.
Dep’t of Fair Emp. & Housing v. Cisco Sys., Inc., 82 Cal.App.5th 93 (2022).
Note:
This case serves as a helpful reminder that, no matter what sort of agreements may exist between an employer and employee, the CRD is a separate entity that can pursue claims of its own accord.