California Labor &
Employment Law Blog
Feb 24, 2011

Court Says Arbitration Agreement With Independent Contractor Invalid

Topics: Arbitration Agreements, Court Decisions

This week a California court held that a mandatory arbitration provision in an independent contractor agreement is subject to the same standards as arbitration agreements in the employment context. In Wherry v. Award, Inc., the court held refused to enforce an agreement to arbitrate between Award, Inc. andtwo of its independent contractors, finding the agreement procedurally and substantively unconscionable under Armendariz standards. The plaintiffs were salespersons who worked for Award, Inc. asindependent contractors.Each of their independent contractor agreements contained a mandatory arbitration provisionfor resolving any disputes between them and Award, Inc. AfterAward, Inc. terminatedthe plaintiffs' services, the plaintiffs sued forgenderdiscrimination and harassment under FEHA. Award, Inc. moved to compel arbitration.

The courtrefused toorder the case to arbitration,finding the arbitration agreement unconscionable and unenforceable. The court reasoned that the agreementwas presented on a take it or leave it basis with no real opportunity to negotiate terms, and included ashortened statute of limitations and afee-shifting provision that were contrary to FEHA. Notably, the courtfurther held that the fact that plaintiffs were independent contractors, not employees, made no difference to the analysis of enforceability of the arbitration agreement.

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About the Editor

Robin Largent has a regular presence in California state and federal courts and has been lead defense counsel and appellate counsel for large and small California employers in litigation (and arbitration) ranging from individual discrimination and harassment claims to complex wage and hour representative and class actions. She also leads the firm’s appellate practice, having substantial experience and success handling appeals, writ petitions, and amicus briefs in both state and federal court on issues such as class certification (particularly in the wage and hour arena), manageability and due process concerns associated with class action trials, exempt/non-exempt misclassification issues, meal and rest break compliance, trade secret/unfair competition matters, and the scope of federal court jurisdiction under the Class Action Fairness Act.
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