Permeated With Unconscionability, Agreement Did Not Require Severance.
Mr. Ryan, an employee in the construction industry, claimed that he was fired in a retaliatory move by his employer. The employer petitioned to compel arbitration. The trial court denied the request, finding the mandatory employment arbitration agreement contained unconscionable provisions, and refusing to sever those provisions. Employer appealed. Barnum v. Paul Ryan Associates, Inc., A138345 (1/2 July 30, 2014) (Kline, Richman, Brick) (unpublished).
Here, the employment agreement incorporated, but did not attach applicable AAA rules. The Court of Appeal acknowledged that whether that renders the agreement unconscionable “turns heavily on the circumstances.” As is common, the employment contract was adhesive. But the real zinger here was that the agreement incorporated a pre-arbitration internal dispute resolution mechanism within the control of the employer, and not requiring use of a neutral mediator, resulting in a procedure that “even the most diligent employees could not learn of or anticipate at the time they agreed to arbitrate.” Thus, the circumstances added up to procedural unconscionability.
Lack of mutuality resulted in substantive unconscionability. Claims likely to be brought by the employee, concerning hiring, employment, or termination, had to be arbitrated, whereas equitable or injunctive relief claims likely to be brought by the employer could be brought in court. In addition, the pre-arbitration internal dispute resolution procedure added to the lack of mutuality by giving the employer a “free peek” at the employee’s case, without giving the employee the benefit of a neutral mediator.
The Court held that “the trial court did not abuse its discretion in determining that the agreement is permeated with unconscionability and cannot be enforced.”