Bay Area Employment Lawyer Blog

CantorCO2e's mandatory employment agreement was riddled with unconscionable provisions, errors, and bias. No wonder the California Court of Appeals decided that the court should determine the validity of the agreement and then determined that the agreement was not valid. Ajamian v. CantorCO2e, LLP, ___Cal.App.4th ___ (Feb. 16, 2012).

As part of employers' end run around employees' right to a jury trial, not only are employers making employees sign mandatory arbitration agreements, but they are trying to make the courts forfeit their right to even examine these agreements to see if they are illegal. Here CantorCO2e argued that its agreement does just that, but its agreement is so vague and unclear, and its arguments so tenuous, that the court rejected this proposition.

In order for an employer to take away the employee's right to have a court determine whether an arbitration agreement is valid, it must do so in a way that is "clear and unmistakable." Here, there are multiple reasons that the alleged attempt to take away these rights is not clear and unmistakable. It is important to note - for the future - that the court here limited its holding to the facts of this case, leaving employers multiple avenues by which they can strip a court of its right to judge the employer's arbitration agreement and give this right to the employer's hand pick and paid arbitrator. How this plays out in the future remains to be seen, but taking away a court's right to review this important matter is dangerous and should be remedied by legislation if necessary.

After finding that the court has the right to determine whether CantorCO2e's arbitration agreement was unconscionable, the court went ahead and found that it was unconscionable on a number of grounds:

1. Ajamian had no real bargaining power as Ms. Ajamian had already worked for the company for ten years and was required to sign the agreement to obtain compensation she had already been promised;

2. The agreement prohibited Ms. Ajamian from obtaining punitive or special damages which she might be entitled to under the law and permitted CantorCO2e to obtain liquidated damages, which are akin to punitive damages!;

3. The agreement mandated that New York law apply to this California employee without providing any apparent nexus to New York law; and

4. The agreement made Ms. Ajamian liable to the company for fees without making the company mutually liable to Ajamian for fees.

Courts need to stand up for employees' right to basic legal protection by a court of law, and, at the same time stand up for a fair, public, and egalitarian justice system, rather than a hidden private system of justice riddled with favoritism towards employers and companies. This case reached the right holding but could have done with a stronger voice for fairness!

Jody LeWitter

March 21, 2012

I know I've said this before, but if employers so relish their precious right to force employees to arbitrate all their claims, why can't they get it right and draft a simple arbitration agreement so that it is enforceable? Mayers v. Volt Management Corp.,__ C.A.4th___ (Feb. 2, 2012) is another example of an employer getting it wrong. For reasons any reasonable employer could have predicted, the California Court of Appeals struck down Volt's mandatory arbitration agreement.

Here Volt started out by providing its arbitration agreement to Mr. Mayers on a take-it-or-leave-it basis. Second, Volt failed to shed light upon the arbitration rules it required Mr. Mayers to follow should any case wind up in arbitration. Instead, it simply told Mr. Mayers that any arbitration would be governed by "the applicable rules of the AAA [American Arbitration Association]". Volt neither provided a copy of these rules to Mayers, nor did it tell him how or where to obtain such a copy himself. The court characterized these errors are procedurally unconscionable.

To top it off, Volt's arbitration agreement mandated that the arbitrator may award costs and attorney's fees to the prevailing party. If Volt had a lawyer, Volt would have known that this was an absolute no-no. The Fair Employment & Housing Act (FEHA) prohibits a court from awarding fees to an employer (for claims governed under the act such as covered employment discrimination or retaliation claims) unless the claims were frivolous, unreasonable and without foundation. Here Volt changed this standard of the law to favor the employer.

This case is a yawner - except it highlights - again - how employers just can't seem to play by the rules in their attempt to force arbitration agreements down their employees' throats!

Jody LeWitter
March 14, 2012

The conservative US Supreme Court's activist agenda is in full throttle in the mandatory arbitration arena. In the AT&T v. Concepcion case (see prior blog of July 6, 2011), the US Supreme Court planted its thumb squarely on the employer's side of the scales of justice by overturning past law and holding that there is no per se invalidation of class action arbitration provisions (Concepcion is a consumer class action case). Now the US Supreme Court apparently wishes to tip the scales at the opposite end of the spectrum: by applying this class action holding to individual Berman hearings brought by California workers for the payment of wages. The US Supreme Court has reached out and vacated (as well as remanded) the California Supreme Court's holding in Sonic-Calabasas v. Moreno (2011) 51 Cal.4th 659. Why can't the US Supreme Court stay out of our backyard?
The holding which the US Supreme Court vacated was quite modest. It simply upheld an employee's right to a "Berman hearing" before the California Labor Commissioner, pursuant to California Labor Code, section 98, for the payment of unpaid wages. Berman hearings are a streamlined administrative procedure for employees to recover unpaid wages--including overtime, meal and rest period pay, and waiting time penalties--without having to go to court, allowing many employees who cannot afford a lawyer the ability to stand up for their workplace rights. The right to a Berman hearing protected by the California Supreme Court in Sonic-Calabasas was limited to the first instance only; the California Supreme Court permitted the employer to enforce a mandatory arbitration of the employee's next step appeal, which would have otherwise taken place in the superior court.
The US Supreme Court vacated this opinion in light of Concepcion. See, Sonic-Calabasas, Inc. v Moreno (October 31, 2011) No. 10-1450. Does the US Supreme Court really believe that this minor right to an administrative hearing in the first instance should be wiped out? Does it really believe that an employer has a right to hijack a benign administrative process to entitle an employee to obtain his or her basic wages?
The US Supreme Court ought to keep its tentacles out of California' s modest procedural apparatus for an employee to obtain his or her wages. It is downright hypocritical for the Court to pay lip service to states' rights when it serves conservative interests, and ignore states' rights when it might be used to protect an employee.
We can only hope that the California Supreme Court, on remand, stands its ground. This may be high hope given the recent argument before the California Supreme Court in Brinker Restaurant v. Superior Court, 85 Cal.Rptr.3d 688 (Oct. 22, 2008) (petition for review granted; case argued November 8, 2011), which addressed meal and rest break issues and in which all the justices uniformly appeared not to understand the fundamental role of the law in providing employees with basic rights, such as meal and rest periods.

Jody LeWitter

November 20, 2011

Ms. Zullo worked for a newspaper publisher, Inland Valley Publishing Company. The employer's handbook contained a policy requiring mandatory arbitration of employment disputes. The handbook stated that any arbitration would be governed by the American Arbitration Association rules, but failed to set forth those rules in detail. The handbook did require that an employee who filed an arbitration demand meet strict timelines, altered the law by shortening potential statute of limitations, and required that an employee respond to an arbitrator's communication within ten business days. The remedy for an employee's violation of these rules was the dismissal of his or her claims. In order to work for Inland, an employee was required to sign and acknowledge this handbook.

After Ms. Zullo was fired, she filed a lawsuit in court. Inland sought an order to send her case to arbitration. The trial court ordered that the case be sent to arbitration. However, the Court of Appeals reversed, holding that the arbitration agreement was unconscionable. Zullo v. Superior Court, 197 Cal. App. 4th 477 (2011).

It is getting rather tiresome reading all the ways in which employers heavy handedly force employees to "agree" to arbitrate their claims, as well as all the ways in which the employers attempt to manipulate the arbitration process to favor the employer. Even though courts generally keep overturning such overreaching agreements, employers keep promulgating them. The reason is because most employees don't always have the resources and where-with-all to hold the employer to the letter of the law.
Employees are thus required -again and again - to contest these unfair, unequal and illegal arbitration agreements. Here the Court found that the agreement was procedurally unconscionable where the rules weren't clear from the face of the handbook and the situation was really a take-it-or-leave-it one. Interestingly, the Court also found that no testimony need be presented to prove this unconscionability as the handbook "speaks for itself."

The Court also found that the agreement was substantively unconscionable because it altered the law (here the statute of limitations) in favor of the employer, made up timelines (e.g., respond to the employer within 10 business days) to the detriment of the employee, and applied to claims an employee would bring, but not claims an employer might bring.

I can only wish Ms. Zullo the best of luck pursing her claims in state court, where they belong.

Jody LeWitterSeptember 7, 2011

Despite the prevalence and overreaching of arbitration agreements in employment cases, traditionally in state and federal court, interpreting both the Federal and California Arbitration Acts (FAA and CAA, respectively), employees have at least been permitted to seek a Court's determination about whether or not the arbitration agreement the employee signed is enforceable. In other words, despite the fact that an employee signed an arbitration agreement, the employee still generally had been able to ask a court to rule on important enforceability issues such as the existence of the agreement and whether an agreement is so unconscionable as to be unenforceable.

Then came the US Supreme Court in Rent-A-Center, West, Inc. v Jackson, 130 S. Ct. 2772 (2010) and poked a rather major hole in this important safeguard.

Rent-A-Center, interpreting the FAA, held that - where the arbitration agreement itself took this important safeguard away from the courts and assigned it to the arbitrator - the arbitrator holds all the power to rule on whether or not the arbitrator gets to hear the case (i.e., the existence and enforceability of the agreement).

Basically, the US Supreme Court permitted the employer to require an employee not only to give us his or her access to the courts, but to require the employee to give up the important checks and balances of holding out for a judge to determine whether the case must go to arbitration. The Court held that the very arbitrator who will earn significant income from presiding over the case gets to decide whether or not the arbitrator keeps the case or loses the case to the court system. Talk about the fox guarding the hen house!!

It is important to note a few parameters of this ruling: (1) although the ruling is the pronouncement of the highest court in the land, it is unclear how the California courts will interpret the CAA, and we can only hope they will do so in a more honest and forthright manner, with at least a bit of concern for the employees whose hands are tied by this absurd ruling, and (2) the US Supreme Court did leave open some possible limitation to this ruling, by noting that the employee in Rent-A-Center did not specifically claim that this provision permitting the arbitrator to rule on the existence and enforceability of the agreement, as applied to this provision, made this provision unconscionable.

Although there are many fair minded arbitrators out there, it is simply an inherent and untenable conflict of interest to permit the very arbitrator who has a vested economic interest in the outcome, to rule on whether or not the case should be heard by the arbitrator. Let's hope the courts interpret the CAA differently and take a second look at this precipitous ruling.

Jody LeWitter
January 3, 2011

It is another win for the employee in the ongoing battle to make mandatory employment arbitrations more equitable to the employee. Since the concept of mandatory arbitration agreements has been so overwhelmingly endorsed by the courts, some courts have still felt compelled to keep striking down a host of scurrilous provisions employers keep tacking onto their mandatory arbitration agreements. After a while, we must simply ask, again: should employer really be permitted to make arbitration agreements mandatory when there is all this abuse of the process going on?

In Trivedi v Curexo Technology Corp. (Cal. Court of Appeals, October 2010), the court looked first at whether the agreement was "procedurally unconscionable" (i.e. whether the manner in which the employer obtained the agreement was so unfair that it was illegal). Curexo presented Mr. Trivedo with the arbitration agreement in a take-it-or-leave-it manner, requiring that he arbitrate all claims that may arise in the future, using American Arbitration Association ("AAA") rules without providing him with a copy of the rules. The court found the failure to provide the rules made the procedure procedurally unconscionable.

Next the court looked at whether the agreement was "substantively unconscionable" (i.e. whether the actual terms of the agreement were so unfair that it made the agreement illegal). Curexo's agreement contained two terms that the courts had already frowned upon, so it was little surprise that the court found the terms unconscionable. The first was changing the law to make it easier for the company to collect attorneys' fees against the employee, should the employee lose his claim. The second was allowing a party to by pass the so-called mandatory arbitration process for claims generally brought by employers, thus making the arbitration mandatory for employees but not for the employer.

As with almost all arbitration decisions, this one doesn't set forth clear precedent for the future, because most arbitration agreements contain slightly different language and are presented to the employee in slightly different manners. One thing that does seem clear: until the legislature steps in and bans mandatory employment arbitrations, cases interpreting arbitration agreements will keep on coming.

Jody LeWitter
November 15, 2010

On August 2, 2010 the California Supreme Court saw no problem with the fact that a disgraced and discredited retired judge - who was publicly censured for creating "an overall courtroom environment where discussion of sex and improper ethnic and racial comments were customary" - served as an arbitrator in a medical malpractice case brought by a female patient, without even disclosing the censure to the parties. The Court, in an opinion for which it should be deeply embarrassed, basically held that a retired judge's clearly sexist and harassing conduct towards female staff does not in any way establish that the judge holds any bias against female litigants enough to even disclose the fact. In reality, the Court simply felt that the finality of arbitration awards was more important than fairness to the female plaintiff. Haworth v. Superior Court (Ossakow) S165906.

On October 12, 2010, the California Court of Appeals did what it could to limit the impact of this holding and raised some very good issues while doing so. Addressing a different set of facts involving potential arbitrator bias, it ruled the other way, distinguishing the facts from Haworth. In Benjamin, Weills & Mazer v. Kors, A125732, the arbitrator failed to disclose that he regularly represented law firms in fee disputes, in a case involving just such a fee dispute, i.e. he did not disclose that he normally and currently represents one side in the very type of case before him. The Court of Appeals held that the arbitrator should have disclosed this. The court held that this business relationship "could reasonably cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial."
The Court went on to approve of a broader disclosure for an arbitrator than what is required for a judge, and to analyze the different circumstances and interests of arbitrators and judges. Explaining that since arbitrators have their own business interests, and that private arbitration as a whole "is a commercial enterprise", the situation is different than the judicial system. (Indeed, there are other reasons to provide a higher level of scrutiny to arbitrator bias than judicial bias. For example, an arbitrator is the gatekeeper and fact finder, judge and jury, whereas in a court preceding the litigants normally have the right to a jury to act as the ultimate fact finder instead of the judge).

These two cases exemplify a problem that occurs every day in arbitrations. Arbitrators aren't necessarily neutral; and it is difficult to even find out what an arbitrator's biases are. Discloses are minimal and sometimes intentionally obfuscate the arbitrator's bias. In employment cases, where the employer often mandates an arbitration without the employee having any free choice and where the employer often hand picks the panel from which the arbitrator will be selected, this lack of transparency and choice is especially troubling.
The legislature should promulgate legislation requiring neutral panels of arbitrators and rigorous disclosures of biases. This should apply not only to situations covered by Kors but also by situations covered by Haworth. After all, the arbitrator is the ultimate fact finder and in the exact same position as a jury. There is no doubt that a juror could be asked to disclose and discuss the very biases referred to in Haworth, i.e. whether the fact that he was censured for sex discrimination and harassment against court staff might result in bias in a case involving a female plaintiff bringing a claim.
Unless and until the legislature fixes this problem, we'll have to limp along, doing the best we can to probe arbitrator biases and make pre and post arbitration motions to disqualify arbitrators and set aside arbitration results where necessary. The Kors case will assist in this process but victims of discrimination and other litigants deserve more.

Jody LeWitter
Siegel & LeWitter
October 18, 2010