Courts Continue to Weigh in on Employment Arbitration Agreements
Today, another California court weighed in on the enforceability of an employment arbitration agreement in the context of a class action wage and hour lawsuit. In Compton v. Superior Court, the court refused to compel arbitration of an employee's wage and hour claims, based on the court's finding that the employee's arbitration agreement was unconscionable and unenforceable. The court relied on California unconscionability caselaw, including the seminal California Supreme Court decision in Armendariz. The court held that AT&T v. Concepcion did not preempt Armendariz and that California unconscionability standards remain a proper ground for refusing to enforce an arbitration agreement. Applying those standards, the court held that the arbitration agreement at issue was procedurally unconscionable because it was required to be signed as a condition of employment, and that it was substantively unconscionable because it was insufficiently bilateral. Specifically, the agreement required the employee to arbitrate virtually all claims employees typically bring against an employer, but excluded from arbitration claims an employer is most likely to bring against an employee (e.g. claims for injunctive or equitable relief for trade secret misappropriation). The agreement also provided a shortened statute of limitations for employee claims (one year). As such, the court held that the agreement was “permeated” with unconscionability and refused to sever the unconscionable provisions and otherwise enforce the agreement.
As California employers should know, there are several cases pending before the California Supreme Court on the issue of whether and to what extent Concepcion preempts California law relating to enforceability of employment arbitration agreements. This case may well be taken up for review as well, on a grant and hold basis. Stay tuned for guidance to be issued from the California Supreme Court on this important issue, hopefully later this year.