Also, Burdens Upon The Employee Were Not So Great As To Make Arbitration Provision Unconscionable
In our next case, the Court of Appeal, in a published opinion, reversed the trial court’s denial of a petition to compel arbitration. Galen v. Redfin Corporation, A138642 (1st Dist. Div. 1 July 21, 2014) (Dondero, Margulies, Becton) is an indication the law concerning arbitrability of employment claims is in a state of flux, sometimes creating substantial uncertainty as to whether an arbitration provision will be enforced.
The trial court concluded that plaintiff’s claims were based on statutory violations that were not encompassed by the parties’ agreement, and that if the claims were encompassed, the arbitration provision was unconscionable. The Court of Appeal disagreed on both points.
The trial court concluded that the Federal Arbitration Act (FAA) applied to the agreement; that California law applied because a Washington choice-of-law provision disclaimed the application of Washington law; that wage claims were outside the arbitration agreement; and that the arbitration provision was procedurally and substantively unconscionable.
The Court of Appeal agreed that the FAA applied. The Court found the choice-of-law provision, disclaiming the application of Washington “conflict or choice of law” laws to be ambiguous, and therefore applied California law. The Court interpreted the arbitration provision, which applied to disputes “arising out of or related to” the employment agreement, to include Labor Code section 229 wage claims. The Court’s discussion distinguishing and disagreeing with other California appellate cases is worth reading.
The Court assumed some element of procedural unconscionability – the contract was adhesive – but did not view the procedural issues as serious ones creating surprise or oppression.
Most interesting were the Court’s holdings on substantive unconscionability.
First, the Court was not troubled by the fact that the agreement included a reciprocal attorney’s fees provision, even though California Labor Code provisions did not allow the employer to get fees:
“It is true that a plaintiff employee is not responsible for the employer’s attorney fees if the employer prevails on an employee’s overtime claim. (Lab. Code, § 1194, subd. (a); Earley v. Superior Court (2000) 79 Cal.App.4th 1420, 1429.) Nevertheless, we cannot conclude that a mutual attorney fee provision ‘shocks the conscience’ simply because it fails to contemplate that there are some Labor Code claims that do not allow a prevailing employer to recover attorney’s fees from an employee.”
Second, the Court did not believe that plaintiff had “shown that the forum-selection clause is so one-sided as to ‘shock the conscience,’ or that it imposes harsh or oppressive terms.” The forum selection clause required plaintiff to arbitrate his employment claims in Washington, though he lived in Danville, California.