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C.A.R. Revises Independent Contractor Agreement
In February 2011, a California appellate court found that arbitrations between a broker and a salesperson must be conducted under arbitration rules typical of employment agreements. To be valid the arbitration agreement must include cost caps and pre-agreed rules among other things.
As a result C.A.R. removed the arbitration clause from its Independent Contractor Agreement (ICA). Since that time brokers have been subject to costly class action lawsuits challenging the independent contractor status of associate-licensees.
Thus C.A.R. has again revised its ICA to include an arbitration agreement to address both the requirements of the 2011 case as well as other cases regarding class action waivers. The new page-long clause provides that:
- The parties must first attempt mediation before resorting to court or arbitration
- All unresolved claims must be arbitrated - except claims between broker and associate-licensee and a client
- JAMS (Judicial Arbitration and Mediation Services) rules shall apply
- Broker pays costs greater than those associate-licensee would pay if case brought in court
- The arbitrator will apply substantive law and statute of limitations
- Only individual claims - class action is waived
- The arbitration is confidential
- Associate-licensee must initial separately for the clause to apply
Even though the new clause is drafted carefully, this area of the law is in a state of flux. Brokers may also be paying more than they would if the claim were brought by an individual in court. This must be balanced against the class action waiver and confidentiality. If brokers want to take advantage of the new clause, they will need to have existing associate-licensees sign new ICAs. Of course, brokers need to carefully consider the new clause and determine for themselves if it is beneficial to their business.
If brokers do not want the arbitration clause to apply, simply instruct the associate-licensee to not initial the clause, and if the broker wants to make sure the matter will be heard in court, they may cross out the entire clause 12 and initial the cross-out.
To provide further guidance, C.A.R. has just issued a Q&A addressing the new arbitration clause:
