California Court Invalidates Another Arbitration Agreement
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.