In Gallo v. Wood Ranch USA, Inc., Wood Ranch USA, Inc. hired the plaintiff as a server for its chain of restaurants in 2015. The company required her, as an employment condition, to sign an arbitration agreement – governing any employer-employee controversy, dispute, or claim – and to consent to the employee handbook’s terms. She was let go in 2018.

The plaintiff sued her former employer for compensatory and punitive damages. She made the following claims:

• discrimination, harassment, failure to prevent discrimination and harassment, and retaliation in violation of the California Fair Employment and Housing Act;
• retaliation under sections 1102.5 and 98.6 of California’s Labor Code;
• failure to engage in the interactive process;
• wrongful termination in breach of public policy;
• intentional infliction of emotional distress.

The ex-employer brought a motion to compel arbitration, which the trial court granted. The plaintiff filed a motion to vacate the trial court’s decision. She argued that the company materially breached the arbitration agreement when it was late in paying its share of the initiation fees under sections 1281.97 and 1281.99.

The trial court granted the plaintiff’s motion and vacated the earlier order compelling arbitration. The court found that the Federal Arbitration Act (FAA) did not preempt sections 1281.97 and 1281.99 and that the former employer lacked a viable excuse for its late payment. The company appealed.

Sections 1281.97 and 1281.99 of California...

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