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An arbitration agreement that employees were required to accept as part of a web-based onboarding process was a contract of adhesion permeated by unconscionability and could not be enforced

California

,

USA

An arbitration agreement that an employer required employees to review and accept as part of a web-based onboarding process was permeated by unconscionability In Ramirez v. Charter Communications, Inc., B309408 (Cal. Ct. App. February 18, 2022), the defendant appealed from the trial court’s order denying their motion to compel arbitration after finding that the arbitration agreement at issue was unconscionable. Unconscionability has both a procedural and substantive element, and the more one is present, the less the other is required The two elements of procedural and substantive unconscionability need not exist to the same degree and the more one is present, the less the other is required. The adhesive nature of the arbitration agreement established some degree of procedural unconscionability The Court explained that an adhesive contract is standardized and offered by the party with superior bargaining power on a take-it-or-leave-it basis. In this case, the arbitration agreement was a contract of adhesion that employees were required to agree to as part of a web-based onboarding process that was a condition of their employment. The arbitration agreement was substantively unconscionable as its provisions substantially conflicted with FEHA, lacked mutuality, and limited discovery in a manner that prevented the plaintiff from fairly pursuing her claims The Court found that the practical effect of the arbitration agreement was that it cut the period that would otherwise apply to file a Fair Employment and Housing Act (“FEHA”) action in court by as much as two years and made it possible that the employee would be compelled to arbitrate before the Department of Fair Employment and Housing had completed its investigation and issued a “right-to-sue” letter. Additionally, a provision of the agreement awarding attorney fees to the prevailing party on a motion to compel arbitration violated FEHA.Furthermore, the arbitration agreement lacked mutuality because it compelled arbitration of the types of claims more likely to be brought by an employee but exempted from arbitration the claims that were more likely to be brought by an employer. Lastly, the Court found that the plaintiff demonstrated that the arbitration agreement’s limitation on depositions was inadequate to permit the fair pursuit of her claims. Thus, the arbitration agreement was substantively unconscionable. The trial court’s denial of severance was reasonable The Court found that because the arbitration agreement was permeated by significant unconscionable terms, denial of severance was reasonable. Disposition The Court affirmed the trial court’s order denying the defendant’s motion to compel arbitration.

April 14, 2022
Ramirez v. Charter Communications, Inc., B309408 (Cal. Ct. App. February 18, 2022)
California Courts