Employment Arbitration Agreement Struck Down as Procedurally & Substantively Unconscionable Where Employee not Provided with Arbitration Rules and Other Provisions Favored the Employer

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