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A new case has recently been decided on the enforceability of an arbitration clause in the employment context.  The Case entitled Roman v. Superior Court, (— Cal.Rptr.3d —-, 2009 WL 975994, Cal.App. 2 Dist.,April 13, 2009) addressed several issues relating to the enforcement of an arbitration clause. 

 

The primary issue addressed involved an application for employment that contained an arbitration clause providing that “I agree, in the event I am hired by the company, that all disputes and claims that might arise out of my employment with the company will be submitted to binding arbitration.” The court was deciding whether the arbitration agreement was one-sided and thereby unconscionable against the employee.   

 

In 1997, Gabriella Roman began working for Flo-Kem, Inc.  At the time of her employment, she signed the above arbitration agreement.  She argued that the agreement was procedurally and substantively unconscionable, and that the defendants had waived the right to arbitrate the claim.

 

The case addressed several issues.

 

  • Procedural Unconscionability.   The court agreed that there was an adhesive nature to the agreement, but that did not make it procedurally unconscionable.  Further, procedural unconscionability alone does not make an agreement unenforceable.  There must be some substantive unconscionability.
  • Substantive Unconscionability.  The court held that the language “I agree” by itself does not make a contract unilateral, and therefore substantively unconscionable.  The court distinguished the cases cited by Plaintiff including the Higgins case (orphaned children signed an arbitration clause with a reality T.V. show that created unilateral obligations and had severe procedural unconscionability). 
  • “In sum, we simply do not believe the Higgins court intended to hold the mere inclusion of the words “I agree” by one party in an otherwise mutual arbitration provision destroys the bilateral nature of the agreement.”
  • Arbitration Agreement Does Not Limit Statutory Rights.   Plaintiff argued that the agreement prevented her from making administrative claims. The Court disagreed.
  • Arbitration Agreement does not limit overly limit discovery.  The agreement allowed for discovery under AAA rules, and therefore was sufficient.
  • Arbitration Agreement’s Cost Splitting Provision Does Not Make it Unenforceable.  Plaintiff argued that at the time the agreement was signed, that the AAA rules which were applicable to the agreement required cost-splitting of the arbitration fees, which was unenforceable.  The court disagreed stating that the agreement allowed the AAA rules to be used at the time of the arbitration, and the current rules have the employer paying the costs.  Further, the court indicated that it can sever the unenforceable provision anyway.
  • Defendant Did Not Waive Its Rights by Conducting limited Discovery.  The defendant had demurred and sent out written discovery.  The court held that such action was not enough to constitute waiver when the petition was filed only two months after the complaint was filed.

If you would like a copy of this case, please feel free to contact Steve Mehta and ask him to email you the case. 

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