A spa director sued for pregnancy discrimination after she allegedly was pressured to resign following her leave for postpartum depression. The employer asked the court to compel arbitration in accordance with an arbitration provision in the employment application. Was the arbitration agreement enforceable?
Cathleen Yonahara of Freeland Cooper & Foreman, LLP in San Francisco explains the case.
Employee Signed Arbitration Provision in Application
In July 2006, Mission Bay Management LLC, doing business as Hilton San Diego Resort & Spa, offered Jennifer Hicks the position of spa director.
The offer letter stated: “Your acceptance of this letter and the terms stated herein affirms that there are no other agreements, nor other information upon which you are relying in making your decision.” The letter did not mention arbitration.
Hicks accepted the offer and relocated from Minnesota to San Diego. On Thursday, July 20, four days before her start date, Dan Gaudreau, Hilton’s HR director, gave her a four-page employment application that provided, in part:
I understand that, if employed, that in consideration of employment and continued employment, I agree that any and all disputes or controversies arising during the period of my employment, including, but not limited to those resulting from discharge or layoff from employment, shall be submitted to binding arbitration in accordance with the rules of the American Arbitration Association [AAA].
Hicks signed the application form the same day.
Employee Sues for Pregnancy Discrimination
In May 2010, Hicks sued Hilton and Gaudreau. She alleged that although she was an exemplary employee, Gaudreau questioned her commitment to her job after the birth of her child in April 2009.
After she returned from disability leave for postpartum depression, Gaudreau allegedly warned her that if she took additional leave, her job wouldn’t be protected, it would be best for her to “walk away,” and voluntarily leaving her job would make her eligible for rehire later. Hicks allegedly agreed to resign instead of being fired.
Hilton and Gaudreau asked the court to compel arbitration. Hicks argued that the arbitration clause in the employment application was unenforceable. The trial court agreed with Hicks and refused to compel arbitration. Hilton and Gaudreau appealed.
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Hilton Presented Agreement After Hicks Relocated
Courts won’t enforce an arbitration agreement that is both procedurally and substantively unconscionable. Procedural unconscionability focuses on the factors of surprise and oppression. The appeals court agreed with the trial court’s conclusion that the arbitration provision was procedurally unconscionable.
In this case, the arbitration clause appeared in the last paragraph of a four-page employment application, and none of the text was highlighted, capitalized, bolded, or in a larger font. Hilton didn’t attach a copy of the AAA rules to the employment application or provide any instructions on where Hicks could find a copy of the rules.
Further, when Hilton discussed the terms of Hicks’ employment with her while she was still living in Minnesota, it never mentioned any arbitration agreement. Indeed, it represented that there was no “other information upon which you are relying in making your decision.”
Hilton failed to give Hicks the employment application with the arbitration provision until after she had relocated and four days before her start date. Immediately under the signature line, the application stated, “IN ORDER TO BE CONSIDERED, THIS APPLICATION MUST BE FILLED IN COMPLETELY.” Since she had already moved to San Diego to take the job and rented an apartment there, her bargaining position was significantly undermined.
Although the employment application stated that Hicks had the right to consult an attorney before signing it, Hicks had already accepted the position and moved to San Diego, and two business days wasn’t sufficient time to find an attorney in a new city.
Tomorrow, we’ll look at the details of the arbitration provision itself and get the court’s ruling in the case.
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