A California Court of Appeal recently held that an arbitration agreement was unenforceable because it was unconscionably one-sided.
The agreement, which all job applicants were required to sign, was unenforceable because it required arbitration of employment issues such as discrimination and labor standards; however, it allowed the employer to go to court for disputes over trade secrets and unfair competition.
Recent case: Leasa applied for a job as a property manager with AmericanServices (AMS). To be considered for the job, she had to sign an eight-page arbitration agreement. After her employment ended, she filed a class-action lawsuit claiming violations of the California Labor Code. She said by misclassifying her as an , AMS broke laws regarding minimum and overtime wages, rest and meal breaks and expense reimbursement.
While the case was in discovery, the U.S. Supreme Court decided AT&T Mobility, LLC v. Concepcion (No. 09–893, 2011), and held that the Federal Arbitration Act (FAA) protects an employer’s right to include a class-action waiver in an arbitration agreement even though a state law bars such provisions as unconscionable. Given this decision, AMS filed a petition to compel arbitration, which the trial court granted.
Leasa appealed. The appellate court held that AMS’ arbitration agreement was one-sided because it required employees to arbitrate their claims while allowing AMS to go to court for unfair competition and trade-secret disputes. The agreement also imposed a one-year statute of limitations on employee claims but did not set similar limits on AMS’ claims for unfair competition and trade- secret violations. (Compton v. American Management Services, No. B236669, Court of Appeal of California, 2nd Appellate District, 2013)