About Us  |  About Cheetah®  |  Contact Us

Arbitration provisions unconscionable; trial court properly refused employers’ efforts to enforce agreement

Arbitration provisions in independent contractor agreements were unconscionable and, therefore, a trial court properly denied a petition by employers seeking to enforce those provisions in order to arbitrate gender and sexual harassment complaints filed by the plaintiffs, a California appeals court ruled in affirming the trial court (Wherry v Award, Inc, February 9, 2011 [certified for publication February 23, 2011], Rylaarsdam,W).

Here, there were elements of both procedural and substantive unconscionability, the court ruled. Procedural unconscionability is present when a party does not have a meaningful negotiating power, the court noted, or when the contract is presented on a “take it or leave it” basis. In this case, the plaintiffs filed declarations that when they were given the contracts, which contained the arbitration agreements, they were told that if they wanted to work for the employers they had to sign the contracts. Additionally, the plaintiffs were not given time to ask questions, and no one described the provisions. The appeals court noted that, although the employers made several arguments disputing the unconscionability, they presented no evidence contrary to that proffered by the plaintiffs.

The contracts were also substantively unconscionable, which addresses the one-sidedness as to the actual terms of the contract. The plaintiffs alleged that there were numerous provisions in the contract that fell into that category, including the lack of provision for discovery, a provision that plaintiffs are subject to fees and costs prohibited by the Fair Employment and Housing Commission (FEHA), and a provision calling for a limitations period that was less than what is allowed by statute. Citing the California Supreme Court case Armendariz v Foundation Health Psychare Serv, Inc, the court ruled that arbitration agreements could not be used as a vehicle to circumvent statutory rights created by FEHA. Here, the terms of provision could be used to force plaintiffs to pay fees and costs, contrary to FEHA. Moreover, the provision provides for the recovery of fees, without any showing of bad faith or a finding of frivolousness, contrary to the teachings of Armendariz, the appeals court stated. Similarly, the arbitration clause provided that actions had to be filed within 180 days—far shorter than the one-year statute of limitations for FEHA claims. Thus, the contract was also substantively unconscionable. Therefore, the appeals court affirmed the trial court’s order denying the employer’s petition seeking to arbitrate the plaintiffs’ gender and sexual harassment discrimination claims.