If there is an area of the law that remains confusing for employers, it’s arbitration agreements.
On one hand, requiring arbitration can reduce legal expenses and help resolve cases quickly and out of the public eye. On the other hand, an employer could wind up worse off if an employee challenges a poorly crafted arbitration agreement in court and gets it stricken.
At the very least, a court challenge adds time and cost to a process that’s supposed to be quick, inexpensive and easy.
Here’s the latest twist in the legal saga of what’s a good agreement and what’s not.
Recent case: Frank worked for a Sonic fast-food franchise. As a condition of employment, he had to sign an agreement that required him and his employer to submit to binding arbitration all employment disputes instead of using any other legal avenues to resolve them.
After ending his employment with Sonic, Frank filed an administrative claim for unpaid vacation time and “waiting time” penalties. Sonic petitioned the trial court to compel arbitration under the terms of the agreement.
The trial judge refused to order arbitration and the case worked its way through the legal system.
Now the California Supreme Court has ruled that a court may strike down an arbitration agreement if it finds that the arbitration agreement is unconscionable. In this context, an agreement would be unconscionable if it imposed risks and costs on an employee that made resolution of the wage dispute inaccessible and unaffordable. A lower court will now decide if that’s the case for Frank. (Sonic-Calabasas v. Moreno, No. S174475, California Supreme Court, 2013)