Appellate Court Upholds Trial Court’s Ruling That Arbitration Provision Is Unconscionable

In Mayers v. Volt Management Corp, the Court of Appeals ruled that an arbitration agreement was unconscionable.  There, Plaintiff filed a lawsuit against his former employer alleging several claims under the California Fair Employment and Housing Act (“FEHA”). The Defendant filed a motion to compel arbitration based on plaintiff’s agreement to submit employment-related claims to final and binding arbitration, as evidenced by his signed employment application, employment agreement, and acknowledgment of receipt of the employee handbook. The trial court denied the motion. The Defendant appealed arguing the trial court erred because the arbitration provisions were enforceable and did not contain any unconscionable elements. Defendant argued that, in any event, the trial court should have severed any offending provisions and ordered arbitration.  The Appellate Court disagreed and affirmed the ruling.

The Court held that the arbitration provisions contained in the employment application, employment agreement, and employee handbook each required that plaintiff submit employment-related claims to arbitration pursuant to the “applicable rules of the American Arbitration Association in the state” where plaintiff was employed or was last employed by defendant. Plaintiff was not provided with a copy of the controlling AAA rules or advised as to how he could find or review them. The provisions also failed to identify which set of rules promulgated by the AAA would apply. The Court further stated that the “arbitrator shall be entitled to award reasonable attorney’s fees and costs to the prevailing party.” This would have exposed the employee to greater liability to defendant for attorneys’ fees than he would have been had he pursued his FEHA claims in court. For these and other reasons, the arbitration clause was ruled unconscionable and not enforced.

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