Court Of Appeal Affirms Trial Court's Order Denying Employer's Motion To Compel Arbitration.
Notwithstanding the trend in the SCOTUS, (and as the immediately preceding post demonstrates, in Congress too), to enforce arbitration agreements, many California Courts of Appeal continue to vigilantly scrutinize arbitration agreements for unconscionability. Baxter v. Genworth North America Corporation, et al, A144744 (1/3 10/26/17) (McGuiness, Siggins, Jenkins), affirms a trial court's order, concluding that an employment arbitration provision was both procedurally and substantively unconscionable.
The agreement required the employee to follow a four-stage dispute resolution process: (1) submit concern in writing to company administrator; (2) meet with manager and HR representative; (3) mediate; (4) arbitrate.
The Court readily found a degree of procedural unconscionability based on the "take it or leave it" nature of the agreement and the unequal bargaining power. The Court of Appeal's conclusion that this presented a "high degree of oppressiveness" as opposed to procedural unconscionability may seem a little unusual, since this appears to be a garden variety case of procedural unconscionability. Weighing in a bit on the procedural unconscionability scale was the fact that the employee had been employed for five years before she was required to agree to arbitration. This too does not seem so unusual. But the point is that there was procedural unconscionability.
The Court of Appeal probed deeper into the issue of substantive unconscionability. The factors that led the Court to conclude that the agreement was overly one-sided were the following: (1) employees were prohibited from communicating with other employees; (2) the default limitations on discovery were too restrictive for a case that the Court viewed as factually complex -- and the employee set forth facts to show that the discovery would be inadequate to vindicate her rights; (3) a shortened limitations period was insufficient to protect the employee's statutory rights; (4) administrative remedies under the FEHA were limited, because the employee could be forced to pursue its administrative remedy only after it had already arbitrated; (5) default timelines for concluding arbitration created "a modest degree of unconscionability."
COMMENT: Findings of unconscionability -- especially substantive unconscionability -- tend to be very fact-oriented, often appear in shades of gray, and require the exercise of judgment. Several examples of the tentative language in this particular published opinion demonstrate my point: "Baxter sets forth facts tending to show . . . " (slip op. p. 14), "provisions . . . tend to be substantively unconscionable" (p. 15), "we would tend to agree" (p. 19), "we tend to agree with the trial court's assessment" (p. 22), "short default arbitration timelines give some cause for concern" (p. 23).
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