March 5, 2012 California Court Strikes Down Arbitration Agreement For Failing to Provide Arbitration Rulesto Employee

With its recent decision in Mayers v. Volt Management Corp. (Cal. Ct. App., Feb. 27, 2012, G045036) 2012 WL 604390, another California Court of Appeal refused to enforce an arbitration agreement in the employment context.

Discussion

The plaintiff in Mayers brought claims against his former employer for disability discrimination, retaliation and age discrimination.  The employer petitioned to compel arbitration pursuant to provisions in the plaintiff’s employment application, employment agreement, and employee handbook that required arbitration of employment claims. 

The trial court denied the employer’s petition, finding the arbitration agreement was procedurally unconscionable because it was a contract of adhesion that the employee was required to sign as a condition of employment, and because the employee was neither informed of the specific rules that would apply at arbitration nor provided a copy of the relevant rules.  The court also found the agreement substantively unconscionable because it permitted the arbitrator to award attorneys’ fees to the prevailing party, thus exposing the plaintiff to a higher degree of risk than he would face if he brought his claims in court.

The Mayers case is the latest in a series of recent California decisions finding arbitration agreements unenforceable in the employment context, including Wisdom v. AccentCare, Inc. (2012) 202 Cal.App.4th 591 and Ajamian v. CantorC02e (Cal. Ct. App., Feb. 16, 2012) 12 Cal. Daily Op. Serv. 2025.  Like Mayers, both the Wisdom and Ajamian courts relied on the employers’ failure to actually provide the specific arbitration rules to employees as one of several factors that led the courts to find the agreements procedurally unconscionable.  However, the Mayers opinion is the first case to find that the entire arbitration agreement was “permeated” by unconscionability for this reason, such that the unconscionable provisions could not simply be severed from the agreement.   

What This Means

While many arbitration agreements provide a link to the rules or simply refer to them, employers should consider whether to provide the actual rules to employees as part of arbitration agreements.

This E-Update was authored by Jeffrey Ames and Matthew Jedreski.  For more information, or questions, please contact Mr. Ames, Mr. Jedreski, or any Paul, Plevin attorney at (619) 237-5200.