Arbitration Requirement In Employment Contract of Casino Security Director Survives Unconscionability Attack
Plaintiff Gatewood sued his former employee Hustler Casino and its owner El Dorado Enterprises, Inc., for various employment-related claims. The employer moved successfully to compel arbitration. Apparently unsatisfied with the arbitration award, Mr. Gatewood appealed the award and the order compelling arbitration on grounds of substantive and procedural unconscionability. Gatewood v. El Dorado Enterprises, Inc., et al., B237435 (2nd Dist. Div. 4 November 6, 2012) (Manella, J.) (unpublished).
The Court of Appeal first analyzed enforceability of the arbitration agreement under the four “minimum requirements for the arbitration of nonwaivable statutory claims” set forth in Armendariz v. Foundation Health Psychare Services, Inc., 24 Cal.4th 83 (2000). Three of the four requirements were “indisputably” satisfied: no limit on statutorily imposed remedies such as punitive damages and attorney’s fees; a written arbitration decision allowing for review; the employer bears any type of expense the employee would not be required to bear in a court action. While there was a disagreement about a fourth factor, adequate discovery, the Court believed this issue had been forfeited, or else satisfied by a provision stating “[e]ach party shall have the right to conduct reasonable discovery, as determined by the arbitrator as provided in [the] California Code of Civil Procedure.”
The Court found “minimum elements of procedural unconscionability” to be present, because signing the agreement was required to obtain the job. But the agreement was not so one-sided as to create the substantive unconscionability also necessary to find an agreement unconscionable.
The most interesting one-sidedness issue arose because the language permitted Hustler Casino to “change in [its] sole discretion” all the policies, procedures and conditions of employment. But the employer’s discretionary power to modify the terms of the employment agreement “indisputably carries with it the duty to exercise that right fairly and in good faith.” 24 Hour Fitness, Inc. v. Superior Court, 66 Cal.App.4th 1199, 1214 (1998).
The Court distinguished another “unilateral modification” case that we have posted about on April 18, 2012: Peleg v. Neiman Marcus Group, Inc., 204 Cal.App.4th 1425 (2012). In Peleg, Texas law governed. The “unilateral modification arbitration agreement” was invalid, because Texas law requires an express carve-out of claims from the employer’s ability to unilaterally modify, whereas, “[u]nder California law, a court may imply such a restriction if an arbitration agreement is silent on the issue.” Peleg at p. 1466. This is an instance in which Texas law is “more demanding than California law.” Id. at pp. 1466-1467.
The judgment was affirmed.
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