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Court decides to modify parts of arbitration agreement instead of throwing it all out

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in Employment Law,Human Resources

A federal court has stricken unconscionable parts of an arbitration agreement and ordered arbitration of the remaining parts.

Recent case: Salvador signed on as an independent contractor, delivering delayed and misdirected luggage for a Florida company in California. He provided his own vehicle. His work involved picking up wayward luggage at Bay Area airports and driving it to wherever in California the travellers were staying. The company paid him a flat fee for each delivery.

After two years, the company terminated its agreement with Salvador, who is over age 70 and Hispanic. He sued, alleging age and race discrimination, as well as Fair Labor Standards Act minimum wage and overtime claims. He also said he should have been classified as an employee, not an independent contractor.

The company asked the court to send the case to arbitration because Salvador had signed an arbitration agreement. But Salvador’s lawyers argued the agreement he signed was unconscionable since it purported to apply Florida law (rather than California law) and also required arbitration to take place in Florida.

The court struck both provisions. It reasoned that applying Florida law would mean rights Salvador had under California’s Labor Code would be impermissibly waived. Plus making the case move to Florida would be unfair to Salvador.

But, the court said the rest of the agreement could stand alone and ordered arbitration, with regular reports on progress to the court. (Vargas v. Delivery Outsourcing, No. 15-CV-03408, ND CA, 2016)

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