Failure To Highlight Provision In Multi-Page Employment Handbook And To Notify Employees That Signing The Handbook With The Provision Could Forfeit Their Ability To Participate In The Existing Class Action Cemented The Unconscionability Conclusion.
In law school, many of us got introduced to the notion of contractual unconscionability through the interesting decision in Campbell Soup Co. v. Wentz, 172 F.2d 80 (3d Cir. 1948). There, an onerous carrot approval clause by a well-known soup company was partially invalidated by the appellate court under the equitable unconscionability doctrine—in the process indicating that one of the provisions was akin to “carrying a good joke too far” and that “equity does not enforce unconscionable bargains is too well established to require elaborate citation.” (Id. at 83-84.) [This case brings back memories for my colleague and calattorneysfees.com co-contributor Mike, who attended Rutgers-Camden School of Law and who remembers being able to smell the soup being brewed in the Campbell Camden plant when walking from the subway station to the law school. It has significance for me, Marc, because my wife is Cathy Campbell.]
Unconscionability was the doctrine which invalidated an employment arbitration clause in relation to an employee wage/hour class action in the recent unpublished decision in Nguyen v. Inter-Coast Int’l Training, Inc., Case No. B270305 (2d Dist., Div. 4 Apr. 20, 2018) (unpublished) (Collins, J., concurred in by Epstein, P.J. and Manella, J.).
What happened here was that the employer modified its employee handbook, which had an arbitration provision and which many employees signed, over a year after a putative wage/hour class action had been filed. Sixty-two putative class members signed the arbitration provision in the modified employee handbook after the filing of the class action. Employer moved to compel arbitration, but the trial judge denied it on both procedural and substantive unconscionability grounds.
The 2/4 DCA affirmed. Like the trial judge, it found the arbitration provision was procedurally unconscionable because it was part of an 11-page employee handbook with no stylistic features which differentiated the arbitration provision from the other non-related section of the handbook. (The hidden or surprise elements of the unconscionability doctrine.) With respect to substantive unconscionability, that was present also because nothing in the handbook or the employer communications to employees flagged that employees were giving up rights to participate in the earlier-filed class action by signing the handbook with the arbitration provision. (The language in the arbitration provision did not clarify that the provision was both forward- and backward-looking in nature, with the employer not communicating the impairment of an employee’s ability to participate in the class action.)
BLAWG UPDATE: The winning employees requested publication of that decision, but on May 15, 2018, the 2/4 DCA denied this request and sent a letter to the California Supreme Court (the ultimate decision-maker on the request) to see if it agreed or disagreed.
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