California Appeals Court Finds Arbitration Agreement with Independent Contractor Unenforceable

arbitration definition

From JDSupra, Richard Reibstein discusses a recent case in California in which an arbitration agreement was unconscionable and unenforceable in part because the agreement did not specify the rules, attach a copy of the rules and the worker had to pay his own fees. Richard writes:

CALIFORNIA APPEALS COURT FINDS ARBITRATION AGREEMENT WITH INDEPENDENT CONTRACTOR TO BE “UNCONSCIONABLE” AND THEREFORE UNENFORCEABLE.  A California appellate court has upheld a San Francisco County trial court judge’s ruling that a driver who signed an owner-operator agreement containing an arbitration provision was not bound by those arbitration terms where they were procedurally and substantively unconscionable. Subcontracting Concepts, LLC filed a motion with the trial court to compel arbitration under the arbitration provisions of the agreement with the driver, who had alleged that he had been misclassified as an independent contractor instead of an employee under California law.  The appellate court held that the terms of the agreement were procedurally unconscionable, stating: “[T]he Agreement containing the clause was adhesive in that it was imposed on [the driver] ‘as a condition of employment’ and with ‘no opportunity to negotiate.’”  The appellate court noted that they driver, whose native language was Portuguese, was not fluent enough in English to fully understand legal documents written in English and did not understand and was not told about the meaning and purpose of arbitration; that the Agreement did not clearly state what rules would govern arbitration; and that the driver was not provided with a copy of the governing rules. The court also found the arbitration provisions were substantively unconscionable because the driver was required to bear his own costs for arbitration; that such costs would be substantial; that the driver was barred from recovering any attorneys’ fees or other costs, barred from seeking statutory remedies (including punitive damages, statutory penalties and equitable relief), and barred from bringing any Private Attorneys General Act (PAGA) claims; and that the driver was precluded from taking advantage of the relatively inexpensive remedy to seek recovery through a complaint filed with the Labor Commissioner. Subcontracting Concepts (CT) LLC v. DeMelo, No. A152205 (Cal. Ct. of App. Apr.10, 2019).

Read the full newsletter at April and May 2019 Independent Contractor Misclassification and Compliance News Update | Locke Lord LLP – JDSupra

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