By Marianne C. Koepf
Over the past several years, many California employers have implemented dispute resolution programs and imposed arbitration agreements as a condition of employment—after all, it’s less expensive than litigation! But as the California Court of Appeal recently explained, while arbitration agreements are generally valid, an employer must understand its limits.
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In deciding whether to enforce an arbitration agreement, courts examine whether its terms are both procedurally and substantively unconscionable. Procedural unconscionability focuses on oppression and unfair surprise that primarily results from unequal bargaining power and hidden terms within the agreement. Substantive unconscionability focuses on overly harsh or unfairly one-sided terms.
In the recent case, an employee claimed a number of provisions in the employer’s arbitration agreement were substantively unconscionable, including clauses that:
1. Required her to submit disputes to an unspecified form of dispute resolution and to meet with the employer’s representatives within the first 90 days without an attorney being present;
2. Placed time limits on when she needed to demand arbitration that are more restrictive than under California and federal law; and
3. Required her to split fees and expenses associated with arbitration, except for statutory civil rights claims. After the employee filed her lawsuit, the employer agreed to waive the provision relating to the payment of arbitration fees and costs.
Read more here.