On Monday, the California Court of Appeal for the Fourth District confirmed the continuing viability of the unconscionability defense to arbitration as articulated by the California Supreme Court in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83.  In Mayers v. Volt Management Corp. (Case No. G045036), the plaintiff filed suit against his former employer alleging various claims under the California Fair Employment and Housing Act (“FEHA”).  The employer filed a motion to compel arbitration based on arbitration agreements contained in the plaintiff’s signed employment application, employment agreement and employee handbook.  The trial court denied the motion to compel arbitration.

The Court of Appeal affirmed and distinguished the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740.  The court held that the agreements at issue contained provisions that were both procedurally and substantively unconscionable. Procedural unconscionability existed since the arbitration provisions were contained in contracts of adhesion, and the employer failed to provide the employee with the applicable AAA rules under which the arbitration would proceed or even identify the specific set of rules that would apply.  The court also found substantive unconscionability in the fee provision of the arbitration agreement because it provided that the prevailing party in the arbitration could recover attorneys’ fees.  The court held this provision would place the plaintiff at greater risk than if he pursued his FEHA claims in court, where there would be a higher threshold for a defendant to recover fees.

Though Mayers reiterates previously-established law, it serves as a reminder of the continued role of unconscionability in analyzing arbitration agreements after Concepcion.  Please click here for a copy of the Mayers opinion.

– Keesal, Young & Logan Employment Group

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