May. 9 2012

California Court Holds Armendariz Still Applies After Concepcion

Topics: Arbitration Agreements, Court Decisions

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. 

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About the Editor

Robin Largent represents employers, including major food and retail companies, in all types of employment litigation: wrongful termination, retaliation, breach of contract, wage and hour (California Labor Code) and unfair competition. She also regularly counsels and advises California employers on issues of compliance with California and federal employment laws.
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