California Court Holds Armendariz Still Applies After Concepcion

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This week a California court held that the United States Supreme Court's recent decision in AT&T Mobility v. Concepcion does not overrule California unconscionability standards for assessing employment arbitration agreements, including the standards generally prescribed by the California Supreme Court in Armendariz v. Foundation Health.  Armendariz is the leading case setting forth basic standards for assessing whether an employment arbitration agreement is unconscionable in California.  The case makes clear that in order to be enforceable, an agreement must include a mutual agreement to arbitrate, must provide for adequate discovery, must not impose costs on the employee that the employee would not normally bear in court, must provide for selection of a neutral arbitrator, and similar other fairness requirements.  In addition to Armendariz, the California Supreme Court issued a decision in a case called Gentry, providing grounds for assessing whether a class action waiver in an employment arbitration agreement is unconscionable and unenforceable.  Recently, the continued validity of these cases was called into question when the US Supreme Court issued its decision in Concepcion, overruling a California Supreme Court case known as Discover Bank, which is a case similar to Gentry but sets forth unconscionabilty standards for class action waivers in consumer (not employment) arbitration agreements.  The US Supreme Court held that the FAA preempts state laws that place unique restrictions on the enforceability of arbitration agreements.  Although Concepcion did not specifically address Armendariz or Gentry, their continued validity is called into question by the reasoning of Concepcion.  This week, one California court specifically held that Concepcion does not overrule Armendariz and that the Armendariz standards still apply to employment arbitration agreements in California.  The court relied on Armendariz to find the agreement at issue unconscionable and unenforceable, primarily because it was presented on a take it or leave it basis, required the employees (actually contractors) to arbitrate all claims but reserved a judicial forum for certain employer claims, shortened the statute of limitations for filing claims, and contained a unilateral fee-shifting provision requiring the workers to pay the employer's costs in certain circumstances.  The case is Samaniego v. Empire Today, and the full decision is here.  Stay tuned for further developments in this evolving area of law. 

NLRB Takes Aim at Class Waiver in 24 Hour Fitness’ Arbitration Policy

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The NLRB filed a complaint today against 24 Hour Fitness, alleging the company's arbitration policy violates the NLRA.  According to the NLRB, the action was prompted by a complaint lodged with the NLRB by a 24 Hour Fitness employee in California.  24 Hour Fitness' arbitration policy, like those of many companies, contains a class action waiver provision that effectively requires employment disputes to be resolved individually.  As employers may recall, the NLRB recently issued a decision in a case called D.R. Horton, holding that class waiver provisions violate employees' section 7 rights to engage in concerted activity.  D.R. Horton has been appealed and it was not clear how active the NLRB was going to be in enforcing its position declaring class waiver provisions unlawful.  Well, the NLRB's complaint against 24 Hour Fitness may be a sign of  more to come.  Stay tuned.  For the NLRB's press release on the 24 Hour Fitness matter, click here.

Employer Cannot Be Compelled to Arbitrate Class Claims Absent Express Agreement to Do So

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Today a California court held that where an employment arbitration agreement is silent on the issue of whether class claims may be arbitrated, the employer may not be ordered to arbitrate such claims.  In Kinecta v. Sup. Ct., the employer and employee had an agreement that any disputes between them arising out of the employment relationship would be resolved by binding arbitration.  Notwithstanding the agreement, the plaintiff employee filed a wage and hour class action against Kinecta in California state court.  Kinecta moved to compel arbitration of the plaintiff's individual claims and to dismiss the class allegations from the complaint.  The trial court granted the motion to compel arbitration, but denied the motion to dismiss the class allegations, thereby effectively requiring Kinecta to arbitrate class claims.  Kinecta appealed and the court of appeal agreed with Kinecta that it should not have been ordered to arbitrate class claims.  The court of appeal relied on the United States Supreme Court 's decision in Stolt-Nielsen v. Animalfeeds Intl., 130 S.Ct. 1758 (2010), in which the Supreme Court held that a party cannot be compelled to arbitrate class claims unless the party has expressly agreed to do so.   The arbitration agreement between Kinecta and its employee was silent on the issue of classwide arbitration.  Because there was no express agreement to arbitrate class claims, the court held that they could not be compelled to arbitration based on Stolt-Nielsen.   As a result, the court of appeal issued an order directing the trial court to dismiss the class allegations. 

In its decision, the court of appeal considered whether the agreement's practical prohibition on an individual pursuing claims as a class action in any forum was enforceable under the California Supreme Court's decision in Gentry.   The court noted that "there is some question" whether Gentry is still good law or whether it is preempted by the United States Supreme Court's decision in AT&T v. Concepcion.  However, the court held that it need not decide that issue because even if Gentry is still good law, the plaintiff had failed to make an evidentiary showing that the waiver of class claims would be unenforceable under the standards set forth in Gentry.  The Kinecta decision is here.

Employer Right to Modify Arbitration Agreement May Make It Unenforceable

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This week, a California court held that an employment arbitration agreement was unenforceable based on a provision in the agreement giving the employer the right to modify or revoke the agreement on 30 days' notice to the employee.  The court held that the termination right rendered the agreement illusory and lacking sufficient "mutual" agreement to arbitrate.  In Peleg v. Neiman Marcus, the employer's arbitration agreement provided that Neiman Marcus could modify or revoke the agreement on 30 days' notice to employees and that claims not "filed" with AAA by the end of 30 day period would not be subject to the agreement.  Thus, the agreement did place some limit on Neiman Marcus' ability to selectively avoid arbitration of claims.  Nonetheless, the court held that the notice provision was insufficient to save the agreement from being illusory.  The court held that a provision allowing the employer to modify/revoke the agreement must make clear that it applies prospectively only, and does not apply to claims that are "accrued" and/or "known" prior to the date of the change.  In the case of Neiman Marcus' agreement, the requirement that claims be "filed" within 30 days of notice of the change in order to be covered by the agreement to arbitrate impermissibly shortened the statute of limitations applicable to pursuing claims. 

Neiman Marcus' arbitration agreement had a provision in it stating that it was governed by Texas law.  The California court applied the choice of law provision (and Texas law) in holding that the modification provision rendered the agreement illusory and unenforceable.  However, the court held that application of California law would essentially lead to the same result.  The only difference is that under California law, if a modification provision is silent on whether it applies prospectively only, the court could "imply" or read into it that it operates prospectively only and thereby avoid a finding that it renders the agreement illusory.

Many employers' arbitration agreements contain clauses expressly giving the employer the right to make changes to the agreement, or to revoke it entirely.  In order to avoid a finding that this clause renders the agreement illusory and unenforceable, employers should review their clauses and revise, as appropriate, to make clear that any changes will be made with reasonable notice to employees, will operate prospectively only, and will not apply to claims arising prior to the date of the change. 

California Supreme Court to Address Post-Concepcion Arbitration Issues

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As most California employers are aware, mandatory employment arbitration agreements have taken a lot of hits in California courts.  It seems that many (but certainly not all) judges will find any reason they can to refuse enforcement of the agreement.  In most cases where enforcement is denied, it is on the basis of a finding that the agreement is unconscionable—meaning that the employee has no meaningful choice but to sign the agreement and the agreement contains terms that are unfair to the employee in some way.  Most recently, courts began grappling with the inclusion of “class action waivers” in these agreements, often finding such waiver provisions unconscionable.  A class action waiver is a provision in the agreement that makes clear that the employee will be required to arbitrate any individual claims he or she may have against the employer, but will not be permitted to pursue any type of classwide or representative relief in the arbitration.  These class action waivers were, and are, common in both employment arbitration agreements and in consumer arbitration agreements.  The California Supreme Court issued a decision that became known as the Discover Bank rule, providing grounds to find most class waivers in consumer contracts unconscionable.  The California Supreme Court then issued a decision in a case called Gentry, which provided similarly reasoned grounds for finding class waivers in employment arbitration agreements unconscionable.  Because the rules were not “bright-line” prohibitions on such waiver provision, these provisions came to be analyzed on a case-by-case basis with some being enforced and some being found unconscionable and unenforceable.

The United States Supreme Court then provided what appears to be bright line guidance on this issue in AT&T Mobility v. Concepcion, in which the Court held that the Federal Arbitration Act preempts California’s Discover Bank rule and permits class action waivers in consumer arbitration agreements.  To be clear, the Court acknowledged that arbitration agreements may be found unenforceable on grounds that would apply to the enforceability of any contract (e.g. fraud, duress, unconscionability).  However, the Court emphasized that these doctrines may not be used to apply special standards simply due to the fact that an arbitration agreement is at issue. 

In the wake of Concepcion, there are unanswered questions about its scope and whether its reasoning applies with equal force to class action waivers in employment arbitration agreements.  In other words, is Gentry still good law?  There is not yet any published California state court opinion holding that Gentry has been effectively overruled by Concepcion, and many trial courts continue to apply the Gentry criteria to determine whether to enforce a class action waiver in an employment arbitration agreement.

Are employers going to get some guidance on the California Supreme Court’s take on the scope of Concepcion?  Perhaps.  The California Supreme Court has two cases before it that should require some guidance:  Sonic Calabasas v. Moreno, and Sanchez v. Valencia Holding Co.

The Sonic Calabasas case is an interesting one because it is an employment case in which the California Supreme Court held that an arbitration agreement foreclosing an employee’s right to pursue administrative relief for unpaid wages before the DLSE, was unconscionable and unenforceable.  Sonic Calabasas petitioned for review by the United Stated Supreme Court, which in turn remanded the case to the California Supreme Court with specific (and interesting) direction to reconsider its decision in light of Concepcion.  As a result, the California Supreme Court will have to determine the proper application of Concepcion in this employment context.

Also relating to Concepcion, the California Supreme Court just granted review in Sanchez v. Valencia Holding Co., which involves a class action waiver in a consumer arbitration agreement (similar to the Concepcion case).  In Sanchez, the trial court held that the class action waiver was unconscionable and unenforceable, notwithstanding Concepcion.  The court of appeal chose a different route and dodged the issue of Concepcion by finding the arbitration agreement as a whole unconscionable, without reaching the propriety of the class action waiver.  The court basically reasoned that many other terms (beyond the class waiver) were unconscionable under California state law and that this precluded enforcement of the agreement to arbitrate, even if the class waiver itself passed muster under Concepcion.  The California Supreme Court granted review and may provide guidance on its interpretation of the scope of Concepcion and the extent to which it believes California unconscionability law is (or is not) preempted.

California employers should stay tuned for further developments in this important area of evolving law.

California Court Invalidates Another Arbitration Agreement

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One of our last posts reported on a California court refusing enforcement of an employment arbitration agreement on unconscionability grounds.  Today we report on yet another example.  In Mayers v. Volt Management, the court invalidated an employee’s agreement to arbitrate his discrimination claims, finding the employer’s arbitration agreement too unconscionable to be enforced.  Why?  Because the arbitration agreement stated that arbitration would be conducted pursuant to the rules of the American Arbitration Association, but the employer did not provide the employee with a copy of those rules or direction on where the employee could access those rules.  Additionally, the agreement stated that the prevailing party could recover attorneys’ fees at arbitration.  The court found that this provision exposed the employee to greater fee exposure than he would face if proceeding in court (because a court would simply apply the statutory language of the applicable discrimination statute, FEHA, which for the most part only permits a prevailing plaintiff to recover fees).  The court refused to simply sever the offending fee shifting provision and instead invalidated the entire arbitration agreement, allowing the employee to proceed with his claims in court.

This is not the first California case to find unconscionable an agreement that incorporates rules published elsewhere without providing an employee a copy of those rules.  However, this has not been a predominant, or even common, basis for invalidating arbitration agreements in California.  The Mayers case serves to highlight that some California courts will look for any reason to invalidate a mandatory arbitration agreement.  California employers should strive to draft their agreements as cautiously as possible to avoid any such ground for a court to invalidate the agreement.

Another Arbitration Agreement Bites the Dust

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With the advantages inherent to arbitrating – rather than litigating – employment disputes, arbitration provisions between employer and employee have seen a sharp increase in recent years.  There have also been some significant new court decisions out of the United States Supreme Court favoring enforceability of these agreements.  Nonetheless, it remains true that California courts continue to scrutinize these agreements carefully and in many cases, still find them unconscionable and unenforceable.  The recent case of Ajamian v. CantorCO2e is one such example. 

In Ajamian, the employer and employee entered into an arbitration agreement providing that any and all disputes would be resolved by final and binding arbitration.  In March 2010, Ajamian’s employment was terminated, and later that year she filed a complaint in civil court, asserting claims for sexual discrimination, sexual harassment, retaliation, and various wage-hour claims.  Ajamian refused to arbitrate.

The first issue the court addressed was whether the parties’ agreement called for an arbitrator or a court to decide the preliminary issue of whether the arbitration agreement was enforceable.  Under the Federal Arbitration Act, the enforceability of an agreement is ordinarily to be determined by the court, but the parties may agree in the arbitration agreement that the enforceability issue will be delegated to the arbitrator.  To establish this exception, it must be shown by “clear and unmistakable” evidence that the parties intended to delegate the issue to the arbitrator.  The relevant language of the agreement in this case read: “Any disputes, differences or controversies arising under this Agreement shall be settled and finally determined by arbitration.”  The employer argued this language showed the parties intended that even the threshold issues of unconscionability would be decided by the arbitrator.  The employee, on the other hand, argued the language encompassed only all substantive disputes, while the enforceability of the arbitration provision itself remained a matter for determination by a court.  The court agreed with the employee that the language was not explicit enough to show that the parties expressly intended for an arbitrator to decide the issue of enforceability.  As a result, the issue was left to the court to decide.

After determining the court was tasked to decide enforceability, it then turned to whether the agreement was sufficiently fair to Ajamian to allow the dispute to go to arbitration.  First, the court found the non-negotiable, “take-it-or-leave-it” nature of the agreement amounted to some unfairness.  Despite the fact that Ajamian had an attorney review the agreement on her behalf prior to her signing it, the court found that the agreement still was not a product of negotiation.  Ajamian had no “realistic bargaining power,” and was required to sign the agreement to receive her promised compensation for work she had already performed.  As such, the agreement was procedurally unconscionable.  The court also found several of the agreement’s terms substantively unconscionable.  The agreement limited Ajamian’s ability to recover certain damages, forced her to forfeit otherwise “unwaivable” California statutes, and compelled her to travel to New York from California to attend arbitration, thereby costing Ajamian thousands of dollars she otherwise would not have to spend.  Most importantly, the agreement allowed the employer, but not the employee, to recover its attorneys’ fees as prevailing party.  These factors, taken as a whole, led the court to hold that the arbitration agreement was unconscionable and unenforceable.

This case is a reminder that any arbitration provision intended to leave the issue of enforceability to an arbitrator must be explicit.  Employers should also ensure that the substance of the agreement (e.g., not limiting employee’s recovery and not adding extra costs to employee) is sufficiently fair to the employee to pass muster.

NLRB Enters Fray on Non-Union Employment Arbitration Agreements

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Last week the increasingly controversial NLRB issued a decision holding that class action waivers in employment arbitration agreements (non-union) violate employees' rights to engage in protected concerted activity under the NLRA.  The case involved a national homebuilder, D.R. Horton, Inc.  Like many employers, D.R. Horton several years ago started requiring its employees, as a condition of employment, to agree to resolve any employment-related disputes by way of binding arbitration.  Also like most similar agreements, D.R. Horton's agreement contained a class action waiver provision--a provision that precludes arbitration of collective or class claims.  There has been much litigation both in California and on the federal level concerning the enforceability of class action waivers, the most recent important decision being that of the United States Supreme Court in AT&T Mobility v. Concepcion.  In the AT&T Mobility case, the Supreme Court upheld the validity of class action waivers in consumer arbitration agreements, holding that the Federal Arbitration Act (FAA) preempted a California state law invalidating such class action waivers in consumer agreements.  Although the AT&T Mobility case was not an employment case, its reasoning may be applied to similarly support the enforceability of class action waivers in employment arbitration agreements.  There have been numerous legislative efforts both in California and in the United States Congress to bar mandatory arbitration agreements in the employment context but none of these legislative efforts have succeeded to date.  With the NLRB's decision in D.R. Horton, it appears the NLRB is now presenting a new attack on the validity of such agreements, at least insofar as the agreements contain a class action waiver. 

In the D.R. Horton case, the employees were required to sign an agreement to arbitrate any and all employment disputes arising between them and the company.  The agreement included a provision indicating that arbitration proceedings had to be conducted individually and not on a collective or classwide basis.  Notwithstanding this provision, an employee by the name of Michael Cuda advised the company that he intended to initiate arbitration of a claim for unpaid overtime on behalf of himself and all similarly situated employees who were allegedly misclassified by the company.  D.R. Horton took the position that the demand for arbitration was invalid because the arbitration agreement precluded class claims and mandated that any claim in arbitration be pursued individually.  Cuda filed an unfair labor practices charge with the NLRB, alleging that the class action waiver provision violated the employees' rights under the NLRA.  The NLRB agreed.

The NLRB first held that the arbitration agreement violated the NLRA because its scope could be interpreted by employees as precluding them from filing unfair labor practice charges with the NLRB.  If this were the sole finding of the NLRB, it would not be much cause for alarm because employers with mandatory arbitration agreements could simply revise them to clarify that the agreement does not prohibit the filing of unfair labor practice charges with the NLRB.  Most administrative claims (for example, EEOC claims and claims filed with similar state agencies) are already exempted from the scope of arbitration agreements by virtue of applicable law.   The NLRB did not so limit its holding, however.   Instead, the NLRB went on to hold that the agreement's class action waiver further violated employees' rights to engage in concerted activity to improve the terms and conditions of employment on matters such as wages, hours and working conditions.  According to the NLRB, an individual pursuing a lawsuit on behalf of other employees is one such means of concerted activity:  "Clearly, an individual who files a class or collective action regarding wages, hours or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7."

The NLRB held that neither the FAA nor the Supreme Court's decision in AT&T Mobility compelled a different conclusion.  The Board held that the FAA does not require enforcement of arbitration agreements where a party is precluded from vindicating substantive rights protected by statute.  The NLRB reasoned that the class action waiver impairs employees' substantive right to band together to improve working conditions as set forth in Section 7 of the NLRA.  The NLRB similarly distinguished the AT&T Mobility case, reasoning that it did not involve the compatibility of two federal statutes (the FAA and the NLRA) and harmonizing their purposes.  Instead, the AT&T Mobility case involved the issue of federal law (the FAA) preempting a state law disfavoring enforceability of arbitration agreements. 

The NLRB did not go so far as to say that all employment arbitration agreements violate the NLRA.  The NLRB instead said that agreements prohibiting employees from pursuing collective or classwide relief in any forum violate the NLRA.  So long as the agreement allows employees to pursue collective/classwide relief in some forum--arbitral or judicial--it will not violate the NLRA.  This is of course of little practical utility to employers utilizing arbitration agreements. 

Does the NLRB's D.R. Horton decision mean that employers should stop including class action waivers in their arbitration agreements?  Not so fast.  It should be expected that the NLRB's decision will be appealed to the Eleventh Circuit Court of Appeals and possibly further reviewed by the United States Supreme Court.  This is amidst much other controversy surrounding the current NLRB and many of its other recent actions.  There is so much current uncertainty regarding the NLRB and the validity of its recent actions that employers should stay tuned and monitor continuing developments on this front.         

Class Waiver Upheld by California Court Post-AT&T v Concepcion

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A California court ruled yesterday that a class waiver in an employment arbitration agreement was enforceable in a wage and hour putative class action. This is the first published California decision addressing the issue since the United States Supreme Court issued its decision in AT&T Mobility v. Concepcion and held that the Federal Arbitration Act preempts state unconscionability rules interfering with enforceability of arbitration agreements.

In Brown v. Ralphs Grocery Co., the court addressed whether plaintiffs, who sought to represent a class of current and former employees suing for various wage and hour violations, could be compelled to arbitrate their claims on an individual basis as a result of a class action and representative action waiver in the company's arbitration agreement. Importantly, the plaintiffs alleged claims for violation of various Labor Code provisions, a piggy back claim for violation of the unfair competition law, and a representative action under PAGA. In passing on the enforceability of the class action waiver, the court applied the framework for enforceability set forth by the California Supreme Court in Gentry. The court held that Gentry requires the plaintiffs seeking to avoid the class action ban to make an evidentiary showing under Gentry as to why enforcing the class waiver would amount to a waiver of statutory rights. The court took the easy way out and held that the plaintiffs had failed to make any evidentiary showing upon which the court could find the class waiver to result in a waiver of statutory rights. On this basis, the court held that the class action waiver was not unenforceable. The court refused to decide whether AT&T v Concepcion separately mandated a finding of enforceability of the class action waiver based on preemption by the FAA. The court essentially punted the issue, though dropping an interesting parenthetical hinting its belief that had plaintiffs satisfied the Gentry standards, AT&T might not require preemption and enforceability because Gentry is concerned with waiver of statutory rights and not just unconscionability, which was the focus of the AT&T case. (In this author's opinion, this type of effort to distinguish Gentry from AT&T Mobility is a stretch.)

Although the court held that the class action waiver was enforceable as to the class claims, the court decided differently as to the PAGA claim, which is a "representative" claim, not a class claim. As to that claim, the court held that the arbitration agreement's ban on representative actions was not enforceable and that AT&T Mobility v. Concepcion did not apply to this type of waiver. The court relied on the intent behind PAGA to essentially allow private enforcement actions to be maintained without satisfying class certification requirements, with the goal of furthering enforcement of state wage and hour laws. The court held that AT&T Mobility applies to consumer cases brought as class actions and not to private enforcement actions. The result? Expect wage and hour cases to universally include PAGA claims going forward, in an effort to thwart preclusion of pursuit of classwide relief.

Stay tuned for more developments in this arena, which will surely be the subject of much litigation in the coming year.

US Supreme Court Gives New Life to Class Action Waivers in Arbitration Agreements

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There has been substantial litigation in California over the enforceability of class action waivers in consumer arbitration agreements and in employment arbitration agreements. California courts, including the California Supreme Court, have invalidated these class action waivers based on a finding that they are unconscionable and unenforceable under California contract law.Yesterday, the United States Supreme Court, in a 5-4 decision authored byJustice Scalia,dealt a swift blow to this California jurisprudence andheld that the Federal Arbitration Act (FAA) preempts California law that interferes withtheFAA's purpose of promoting arbitration.

The case, AT&T Mobilityv. Concepcion, is not an employment case but a consumer case involvingthe propriety of sales taxcharged by AT&T to consumers for "free" phones. AT&T's customers signed contracts including an agreement to arbitrate any and all disputes.The agreement required that any dispute be pursued individually and prohibited class claims. Theplaintiffs in the case had sought to pursue a class action against AT&T regardingthe allegedly impropercharges. AT&Tmovedto compel arbitration.Thetrial court denied AT&T's motion, finding the arbitration agreementand in particular, theclass actionwaiver, unconscionable and unenforceable under Californialaw.AT&T appealed to the Ninth Circuit,but the NinthCircuit affirmed, agreeing the provision was unconscionable. Both courts relied onCalifornia Supreme Court precedent startingwith a case called Discover Bank, in which the Court explained the circumstances in which classwaivers in consumerarbitration agreementswould be deemed unconscionable. AT&T petitioned for review by the United Stated Supreme Court.

Yesterday, the Supreme Court handed down its decision, reversing the Ninth Circuit and holding that the FAA preempts California law insofar as the law operates to interfere with the purpose of the FAA, which is to promote arbitration as a streamlined procedure for resolving disputes. The Court held that the operation of California law to void the class action waiver in AT&T's contract nullified the parties' agreement to arbitrate and ran afoul of the FAA. The Court held that the FAA requires arbitration agreements to be enforced according to their terms and on the same footing as any other type of contract. The Court explained that defenses to enforceability (fraud,duress, unconscionability)still existbut may not be applied in a manner so as to discriminate against the type of contract at hand. The Courtsuggested that California courts have applied the doctrine of "unconscionability" to disfavor arbitration agreements and avoid their enforcement, contrary to the FAA.

The Court further explained that the FAA permits parties to agree to limit the types of issues to be arbitrated, including limiting class or collective claims, to further the arbitral goal of providing an efficient, streamlined procedure for resolution of disputes. The Court further stated that any rule, like California's,"[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA."

So what does this mean for California employers? As noted, the AT&T case is not an employment case and did not involve the enforceability of a class action waiver in an employment arbitration agreement. That said, the Court's reasoning should apply equally to the enforceability of class action waivers in employment arbitration agreements. This will no doubt be more definitively determined in other cases in the near future. In the meantime, employers continuing to battle the cottage industry of wage and hour class actions in California should certainly revisit their arbitration agreements and ensure that a class action waiver is included. These provisions stand much greater likelihood of enforceability in the wake of the AT&T decision. Employers are cautioned, however, that the AT&T case does NOT hold that all California unconscionability standards relating to arbitration agreements are preempted by the FAA. It is likely that the scope of preemptionwill be the subject of much litigation to come, with the focus being whether the standards are applied or operate inamanner that frustrates thepurpose of the FAA.For now,employers should continue to ensure that their arbitration agreements meet general standards of fairness for employment disputes, generally prescribed by the California Supreme Court in Armendariz v. Foundation Health Psychcare Services.