In Carbajal v. CWPSC, Inc., the Court upheld a trial court’s ruling to deny a motion to compel arbitration. A former employee filed a lawsuit against the defendant employer for wage and hour claims. The defendant tried to force her into arbitration. The trial court denied the motion to compel arbitration because it found the arbitration provision was both procedurally and substantively unconscionable. The appellate court agreed
The Court held that the arbitration provision was procedurally unconscionable because it was part of an adhesion contract the employer imposed on the employee as a term of her employment. It also felt it was procedurally unconscionable because the provision required the parties to arbitrate their disputes under the American Arbitration Association’s (AAA) rules, the provision did not identify which of AAA’s many different rules would apply, the employer failed to provide the employee with a copy of the rules it believed applied, and the employer required the employee to sign the agreement without telling her where she could find the governing rules or giving her an opportunity to determine which rules would apply.
The Court found that the arbitration provision was substantively unconscionable because it allowed the employer to obtain injunctive relief in court while requiring the employee to seek relief through arbitration, it waived the statutory requirement that defendant post a bond or undertaking to obtain injunctive relief, and it effectively waived the employee’s statutory right to recover her attorney fees if she prevailed on her Labor Code claims.
The Court stated that the trial court was not required to sever these unconscionable terms and enforce the remainder of the arbitration provision. A trial court has discretion to deny enforcement of an arbitration agreement when the existence of multiple unconscionable terms permeates the entire agreement and acted properly. Lastly, it said that the Federal Arbitration Act did not govern and that the employer did not show it applied by presenting evidence establishing the contract has a substantial relationship to interstate commerce.
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