California Appeals Court Rejects Employer’s Arbitration Agreement

Many employers in California require employees to sign mandatory arbitration agreements before commencing employment. Despite California laws prohibiting some employers from requiring these agreements, many still require arbitration agreements. Although some of these are lawful, many contain terms that courts find to be unconscionable, or unenforceable because they do not give the employee meaningful choice. However, these agreements often have the effect of deterring employee lawsuits that have merit. Fortunately, tenacious litigants who pursue these claims often find themselves vindicated in California courts, like in a recent employment case.

Facts of the Case

An apprentice electrician brought two separate lawsuits against his employer for unfair practices. Of note, the employee signed an arbitration agreement upon hiring that subjected the employee to binding arbitration for any disputes with the employer. The arbitration agreement included, among other provisions, measures that limited discovery, waived the right to pursue class action lawsuits, and required the complaining employee to pay filing fees and other expenses.

In a previous case, the employee filed a lawsuit against his employer for disability discrimination under the Fair Employment & Housing Act (FEHA). In the FEHA case, the trial court granted the employer’s motion to compel arbitration after severing “substantively unconscionable” terms from the arbitration agreement.

In the present lawsuit, the employee alleged Labor Code violations, including failure to pay minimum, vacation, and overtime wages, unlawful wage deductions, failure to reimburse expenses, and failure to provide meal breaks, among other complaints. This time, the trial court denied the employer’s motion to compel arbitration, noting that unconscionability permeated the agreement both procedurally and substantively and allowed the case to proceed in court. The employer appealed, saying the outcome of the previous case required the enforcement of the arbitration agreement. The employer also argued the arbitration agreement was not unconscionable, or, alternatively, the court should have severed unconscionable terms from the agreement and enforced the remainder of the agreement.

The Court’s Decision

The court ultimately condemned the employer’s arbitration agreement, noting that it was “permeated with unconscionability.” The court explained that the agreement was a form agreement that was a condition of employment, so the employee did not have a meaningful choice in accepting it. In addition, the agreement had small print and was accessed on the employee’s cell phone, making it even smaller. Finally, the arbitration agreement itself was an issue because it wrongfully required the employee to pay filing fees and costs and wrongfully limited discovery.

Because the agreement was so one-sided, the court could not just sever certain problematic provisions but would have to rewrite the entire agreement—an agreement with terms the parties never originally agreed to. The court upheld the trial court’s determination that the arbitration agreement was unenforceable and allowed the employee’s claim to proceed. The court also rejected the employer’s attempt to uphold the arbitration agreement due to the previous court ruling in the other lawsuit.

Do You Need a California Employment Law Attorney?

Do you have claims against your employer but worry you signed away your right to sue? Your claims may still be valid. Contact a California employment lawyer to discuss your situation. The attorneys at The Nourmand Law Firm will review every possible avenue for recovery. For a free, no-obligation consultation with a California employment law attorney, call us today at 310-553-3600.