First District, Division Two Affirms Trial Court's Order Denying Petition To Compel Arbitration And Stay Proceedings.
In many ways, the next case fits the template of a typical case in which unconscionability is found to be a defense to enforcement of an arbitration clause. The Court of Appeal noted that the parties agreed, for purposes of appeal, that the arbitration clause was procedurally unconscionable. And several factors resulted in substantive unconscionability: the parties were required to share costs, posing a barrier to the individual wage earner, who could not take advantage of a relatively inexpensive remedy of a hearing before the Labor Commissioner, and the arbitration clause barred representative and PAGA claims. The agreement also barred recovery of punitive damages, statutory penalties, equitable relief, and attorney's fees. The trial court denied the petition to compel arbitration, and the Court of Appeal affirmed. Subcontracting Concepts (CT), LLC, et al., Plaintiffs and Appellants v. De Melo, Defendant and Respondent, and Department of Industrial Relations, Intervener and Respondent, A152205 (1/2 4/10/19) (Kline, Richman, Stewart).
So why did the Court bother to publish? We hazard two guesses.
First, we note that the matter began as a Berman hearing, allowing for the administrative resolution of wage claims. The corporation filed the court proceeding to petition for arbitration, explaining why the corporation is a plaintiff and appellant. And the California Supreme Court has held that an otherwise valid arbitration agreement may not be deemed substantively unconscionable merely merely because it requires waiver of the right to a Berman hearing -- the relatively inexpensive process available to resolve wage claims. Here, however, the employer did not provide the wage earner with an affordable arbitral forum, and that lack of access factored into the Court's analysis as an element of substantive unconscionability.
Second, the appellant argued that a true employer-employee relationship did not exist, because the agreement stated that respondent was an independent contractor, though appellant did dispute that he was an independent contractor. In the absence of an employment relationship, the appellant argued that California law regarding unconscionability did not apply. Not so, said the Court of Appeal, because the key to California unconscionability analysis is not the employer-employee relationship, but rather the disparity in power between the parties.
COMMENT: This is also one of those cases in which someone with limited English skills (his native language was Portuguese) is asked to sign a contract on the spot, pointing to power imbalance. The employer (or contractor's) ability to preclude the worker's access to an inexpensive forum also points to power imbalance. The language problem might be addressed by translating documents into a foreign language or having someone who is bilingual explain the documents, admittedly something that may be more difficult when the foreign language is Portuguese. And an employer willing to assume the costs of arbitration is going to find it easier to enforce an arbitration provision.
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