By Craig T. Reese, Esq., The Maloney Firm, APC

A recent California appellate court opinion, Sarah Coughenour v. Del Taco, LLC (November 20, 2020) Appellate No. E072772, San Bernardino Super. Ct. Case No. CIVDS1831552 (“Coughenour”), addresses the applicability of an arbitration clause in an existing employment agreement after a minor reaches the age of majority during employment.

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Guidance for California Employers

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Many employers choose to include arbitration clauses in their employment agreements which mandate that disputes be resolved through private arbitration rather than by the courts.  As the Coughenour decision shows, however, employers must be vigilant to maintain these arbitration rights.  While minors may enter into employment contracts in California, such employees have a statutory right to disaffirm employment contracts, including agreements to arbitrate disputes.¹

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To avoid disaffirmance issues, a California employer who hires minor employees should institute strict protocols to ensure employee reaffirmance or ratification of all employment contracts and agreements upon reaching the age of majority.  For example, an employer’s human resources department could set calendar reminders for the 18th birthday of minor employees, and ask such employees to re-execute any employee agreements after reaching majority.   Failure to do so may result in the employer waiving rights set forth in the agreements. 

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Coughenour v. Del Taco, LLC

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In Coughenour, Plaintiff was 16 years old when hired by Defendant Del Taco, LLC (“Del Taco”).  Upon her employment, Plaintiff signed a “Mutual Agreement to Arbitrate” which mandated that disputes between herself and her employer were to be arbitrated (the “Agreement”).  Plaintiff continued to work for Del Taco for four months after her 18th birthday.  Plaintiff then resigned and filed a civil lawsuit against Del Taco in Superior Court, alleging sexual harassment, wage and hour violations, and other claims under the Labor Code and the Fair Employment and Housing Act (“FEHA”).  In response, Del Taco filed a motion to compel arbitration, citing to the Agreement.

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The trial court denied Del Taco’s motion, finding that Plaintiff had effectively disaffirmed the Agreement by filing her lawsuit against Del Taco.  The Court’s finding was based on Family Code Section 6710, which allows a person to disaffirm a contract entered into as a minor before reaching majority age, or within a reasonable time afterward.² Del Taco appealed.

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Appellate Review

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At issue in Del Taco’s appeal was the interpretation of the “reasonable time” standard in Family Code Section 6710 pursuant to which a person may disaffirm a contract.  Del Taco argued that because Plaintiff continued to work for employer for four months after reaching the age of majority, she had ratified the Agreement.  Del Taco further argued that because she did not formally disaffirm the contract prior to filing her lawsuit nearly eight months after reaching majority, disaffirmance had not occurred within a reasonable time.

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The appellate court affirmed the trial court’s finding that Plaintiff had effectively disaffirmed the Agreement, writing: “Coughenour’s continued employment does not constitute a ratification of the Agreement and an acknowledgment that she was giving up her right to disaffirmance. . .. To hold that Coughenour impliedly ratified the Agreement by continuing to work at Del Taco for four months after she turned the age of 18 would go against the policy ‘of the law to protect a minor against himself and his indiscretions and immaturity.’”³

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The appellate court further addressed Del Taco’s argument that Plaintiff’s disaffirmance had not occurred within a reasonable time, noting that in the absence of clear statutory guidance, what constitutes a reasonable time must be determined by the specific circumstances at issue:

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“Here, Coughenour worked for almost two years for Del Taco until she reached the age of 18. After she reached majority age, she quit her position after four months and filed her lawsuit within four months of quitting. . .. The filing of the lawsuit was notice that she disaffirmed the Agreement. The trial court did not abuse its discretion by concluding that Coughenour disaffirmed the Agreement within a reasonable time.”

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In so finding, the appellate court confirmed that Plaintiff was not bound by the Agreement’s arbitration terms and could proceed with her suit against her former employer in the court system.

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Coughenour demonstrates one of the many challenges faced by employers in maintaining contract rights.  A conversation with qualified counsel can help employers with questions or concerns regarding employment agreements or employee disaffirmance issues.

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About the Author:

Craig Reese is an attorney at The Maloney Firm, APC.  If you have questions regarding this alert, he can be contacted at creese@maloneyfirm.com.

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¹ Family Code § 6700 et seq.

² Family Code § 6710(“Except as otherwise provided by statute, a contract of a minor may be disaffirmed by the minor before majority or within a reasonable time afterwards or, in case of the minor’s death within that period, by the minor’s heirs or personal representative.”)

³ Citing Berg v. Traylor (2007) 148 Cal. App. 4^th 809, 818.

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