An Employer’s Duty to Provide an Interpreter to Foreign Employees Who Sign Arbitration Agreements.
There is a growing need for legal document translation of arbitration agreements and for legal interpreter services prior to getting employees sign an arbitration agreement. In March 2023, the United States Department of Labor (DOL) announced its resolve to more actively “enforce the rights of workers who often cannot do so themselves, including workers subject to mandatory arbitration agreements and class-action waivers.”. In its announcement, the DOL noted that in the early 1990s, only about 2% of private sector workers were affected by the inclusion of mandatory arbitration agreements in employment contracts. In 2023, more than 60 million private workers, including 56% of non-union private employees and 65% of employees earning less than $13 per hour, are subject to mandatory arbitration. This does not include 14.3 million union members and 1.7 million workers whose jobs are subject to union contracts. According to the Bureau of Labor Statistics, U.S. Department of Labor, trade union membership of public-sector workers (33.1%) is five times higher than the union membership rate of private-sector workers. A large percentage of union members are Asian (8.3%) and Hispanic (8.8%) workers.
The prevalence of mandatory arbitration in employment contracts is partly the result of employers opting for more cost-effective alternatives to litigation. But because employers typically bear the cost of arbitration, it is incumbent upon the employer to ensure that its arbitration clauses and agreements are valid and enforceable, regardless of the language spoken by the employee. Based on several recent cases addressing the validity of arbitration agreements signed by foreign employees who do not read or understand English, the best way for an employer to ensure the enforceability of its arbitration agreement, and the arbitration process as a whole, is to provide foreign employees with certified interpreters—not just other employees who translate or interpret—to be sure foreign employees understand the nature of the contracts they sign and the provisions the contracts include. This is especially important not just for domestic employers but for international and global employers hiring employees who speak any other language.
Courts Refuse to Enforce Arbitration Agreements Signed by Foreign Employees Who Do Not Read English
Just one month after the DOL announced that it will revitalize its efforts to defend workers against violations in arbitration clauses, the United States District Court for the Eastern District of California, in Dimas v. Costco Wholesale Corporation, No. 2:21-cv-02006-TLN-JDP (Apr. 18, 2023), decided the enforceability of an arbitration agreement that the plaintiff, Dimas, electronically signed as part of his employment application with Costco. In its opinion, the court considered the plaintiff’s claim of “fraud in the execution” in the plaintiff’s request to invalidate Costco’s arbitration agreement.
In Dimas, the plaintiff used a temporary employment agency, Select Staffing, to find employment. The plaintiff spoke and read Spanish, communicated very little in English, was unable to read English except for a few basic words, and was unable to communicate with the representative from Select Staffing. The plaintiff returned to Select Staffing the following day and was able to speak with another Select Staffing employee who spoke Spanish. The plaintiff was told to fill out an application on the computer. The plaintiff stated that he did not know how to use a computer, so the employee assisted the plaintiff in setting up an account and filling out forms on the computer. The forms the plaintiff completed were written in English. The plaintiff saw no option to complete the forms in Spanish and the employee did not tell the plaintiff that Spanish forms were available or that he could complete the form at home. Instead, the plaintiff completed the forms at the Select Staffing office with the employee of that office. The Select Staffing employee never mentioned the word “arbitration” or explained to the plaintiff that he was signing an arbitration contract in which he was giving up his right to file a lawsuit against his employer, Costco. When the plaintiff subsequently joined a class action suit against Costco alleging various state law wage and hour violations, Costco sought to enforce the arbitration agreement that the plaintiff signed.
In determining the validity of the arbitration agreement, the court must apply normal state-law principles for the formation of enforceable contracts. The court held that the party compelling arbitration, here Costco, has the burden of proving that a valid agreement exists, and the party opposing arbitration, here Dimas, has the burden of presenting any defenses. Here, Dimas raised the defense of “fraud in the execution.”
Courts Find Fraud in the Execution Performed Against Foreign Employees
To demonstrate fraud in the execution of a contract, the plaintiff must show that he was “deceived as to the nature of his act” or that the contract lacked mutual assent. This requires the plaintiff to show that: (1) there was a misrepresentation; and (2) he or she reasonably relied on that misrepresentation. In applying this standard, the court in Dimas relied on three cases in which workers who were not proficient in English signed arbitration agreements and the courts held the arbitration contracts to be unenforceable.
In Castillo v. CleanNet USA, Inc., 358 F. Supp. 3d 912, 928 (N.D. Cal. 2018), the employer, through another employee, encouraged the plaintiff to sign an employment contract but did not disclose that the contract contained an arbitration agreement clause. The plaintiff was not proficient in English and could not have understood the arbitration agreement without assistance. The plaintiff requested a translation of the agreement in his own language but was told there was none. Instead, the employee told the plaintiff that she would assist him, just as she had done with the plaintiff in other meetings during which she and the plaintiff had filed applications together, and that he could rely on her translation of the documents. In addition, the plaintiff was not given an opportunity to review the contract before signing, nor did the employee encourage the plaintiff to consult with an attorney or obtain assistance with the translation from the English language. Based on these facts, the court held that the agreement was void because the plaintiff reasonably relied on the employee’s translation and did not know that the contract contained an arbitration clause.
In Rosenthal v. Great Western Fin. Securities Corp., 14 Cal.4th 394, 413 (1996), the plaintiffs sued an investment company for loss of funds. The investment company sought to compel arbitration based on the agreement the parties signed. The plaintiffs claimed fraud in the execution because they were never told that the agreement contained an arbitration clause. The court found that two of the plaintiffs reasonably relied on the company’s omission because they had a limited understanding of English, they believed the company’s representative worked for another company with which the plaintiffs had prior dealings, and the representative recited the provisions in the agreement and told the plaintiffs that the oral recitation accurately represented the terms of the agreement. The court denied the employer’s motion to compel arbitration for these plaintiffs. However, the court enforced the arbitration agreement against other foreign plaintiffs because, although they showed limited understanding of English, they never told the representative that they could not read English and did not present evidence that the representative read or explained the contract terms to them.
In Ramos v. Westlake Servs., 242 Cal. App. 4th 674, 686-87 (2015), where the plaintiff also had limited capacity in English, the plaintiff signed an English version of a contract that contained an arbitration clause. The plaintiff also received a version of the contract translated to Spanish, but the Spanish version omitted the arbitration clause. The court held that because the plaintiff reasonably relied on the Spanish version provided by the employer, the arbitration clause present in the English version was not enforceable.
Contract Held “Unconscionable” For Worker Who Cannot Read English
Because the enforceability of contracts is based on state law, any jurisdiction could find that an employer’s arbitration agreement is unenforceable when signed by an employee who cannot read English. The outcome depends on the totality of the circumstances. For example, in Delfingen US-Texas, L.P. v. Valenzuela, 407 S.W.3d 791 (2013), the court found the employer’s arbitration agreement to be “unconscionable” where the employee, Valenzuela, who could not read English, signed the agreement after attending an orientation session for new employees at which a human resources representative from Delfingen conducted the entire session in Spanish. However, Valenzuela alleged that the representative said that she would explain only “the important parts” of the paperwork (attendance policies and production requirements) but never explained the arbitration agreement. The representative claimed that she did explain the arbitration clause in Spanish during the orientation.
The court in Delfingen held that the agreement the parties signed was “procedurally unconscionable” or “shocking.” Procedural unconscionability refers to the circumstances surrounding the adoption of the contract or the facts relevant to the bargaining process. In Delfingen, the court examined several factors:
• The “entire atmosphere” in which the agreement is made;
• Any alternatives available to the parties at the time the contract is made;
• The “non-bargaining ability” of one party;
• Whether the contract was illegal or against public policy; and
• Whether the contract is oppressive or unreasonable.
Although Valenzuela was provided the documents before the “new-hire” session, the parties agreed that there was no Spanish translation of the English document. The parties disagreed about whether the arbitration agreement was orally explained during the orientation. The court also considered that Valenzuela did not ask anyone at the orientation to read the agreement to her, nor did she ask any questions about the documents. She signed the documents because “she wanted the job.”
The Delfingen court stated that a worker’s illiteracy in English, alone, is not sufficient to find a contract to be unenforceable. The parties are held to have known the words used in the contract and to have known their meaning. “Illiteracy is not a defense to the enforcement of a contract.” Rather, a person who signs a contract is presumed to have read and understood the terms. However, the court also held that a person’s illiteracy may be directly related to the assertion that the employer affirmatively misrepresented the nature of the agreement. Although there may be no duty for an employer to explain an arbitration agreement, where an employer knows that an employee does not read or understand English and does not explain, discuss, or translate the agreement so that the employee can mutually agree to the arbitration agreement, the court may find the process of executing the arbitration agreement to be unconscionable and unenforceable.
Why Employers Should Always Provide Certified and/ or Qualified Interpreters to Foreign Employees Who Sign Arbitration Agreements
The court in Dimas v. Costco Wholesale Corporation agreed that a plaintiff’s inability to understand English, without more, is not dispositive as to the enforceability of the contract, even if the contract is only presented in English. The onus is on the employee to read and understand the contract. As the court in Dimas stated, “If [the employee] cannot read, he should have it read or explained to him.” Unlike the plaintiffs in Castillo and Ramos, the plaintiff in Dimas did not ask for a translated version of the agreement or for the agreement to be read and explained to him. Nor did he present evidence of a prior relationship with the Select Staffing employee such that he should have reasonably relied on her description of the documents. Therefore, the court held that the plaintiff’s “failure to take measures to learn the contents of the document he signed [was] attributable to his own negligence, rather than to fraud on the part of Defendants.”
Arbitration continues to grow as a valid and legal process for employers to be more cost effective in resolving disputes with employees. Although the outcome in Dimas favored the employer, the holding is hardly one on which a prudent and cost-conscious employer should risk the expense of litigation and the credibility of its reputation. An employer does not have a duty to read or explain the terms of a contract to its employee simply because the employee cannot read English. However, recent caselaw is clear that it is fraudulent and unconscionable for an employer to induce a foreign employee, who indicates that he or she is not proficient in English, to sign an arbitration agreement without providing some assistance for reading and understanding the arbitration terms of the contract. The most prudent step an employer can take to avoid the cost of litigation and to secure its reputation as a conscientious employer is simply to provide a certified translation of its arbitration agreements, or provide certified interpreter assistance (or qualified interpreter assistance for rare and exotic foreign languages in which there are no certified legal interpreters) before employees sign such agreements, or to do both.
Get in touch with All Language Alliance, Inc. to obtain legal document translation of an English arbitration agreement to any foreign language, including Amharic, Farsi, Russian, Korean, Spanish, French, Mongolian, Czech, Thai, Somali, Arabic, Polish, Nepali, and other rare, exotic and common foreign languages; and to hire a certified interpreter or a qualified court interpreter to assist the non-English-speaking employee with understanding the terms of the arbitration agreement prior to getting it signed.
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