California Court Rejects Arbitration Agreement for Unconscionability


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From JDSupraRafael Nendel-Flores and Hanna Raanan discuss a recent case in which the California Court of Appeal said that an arbitration agreement was both procedurally and substantively unconscionable and allowed the plaintiff to continue with her litigation.  Rafael and Hanna provide practical recommendations for arbitration agreements:

California’s courts continue to be hostile to arbitration agreements in the employment context, and they diligently search for grounds to refuse to enforce such agreements. Arbitration agreements that either directly contradict Armendariz’s minimum requirements or seek to limit an employee’s available remedies make this search far too easy. With this in mind, the Prince case reminds employers that arbitration agreements in the employment context should:

  1. provide that the employer will pay for all fees and costs that are uniquely associated with arbitration;
  2. require employees to pay arbitration filing fees that are no higher than the filing fees imposed by the Superior Court of the county where the arbitration takes place (employers can then forcefully argue that these costs are no more and no less than the costs that an employee would incur if the matter were litigated in court);
  3. provide that the arbitrator has the authority to award the parties all forms of relief that would otherwise be available to the parties in court; and
  4. not state that both sides will bear their own attorneys’ fees and costs, as the default rule in California (and most other jurisdictions in the United States) is that both sides must bear their own attorneys’ fees and costs absent a statutory fee-shifting statute such as FEHA. At best, such a provision adds nothing to the arbitration provision and, at worst, allows courts to construe the provision as an attempt to foreclose a successful employee’s statutory right to recover attorneys’ fees and costs.


Source: California Court Rejects Arbitration Agreement for Unconscionability

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