Courts will toss unfair arbitration agreements

Arbitration agreements are contracts that can limit when and where an employee can challenge a termination decision. But a court may refuse to compel arbitration if it concludes the agreement is unreasonable or is too one-sided in its terms. Courts are particularly unlikely to consider an arbitration agreement binding if it appears the employee did not understand what he was signing.

Recent case: Jacob worked for a cabinet maker. As a child, he was diagnosed with a variety of learning disabilities, including dyslexia. He reads at the fourth-grade level, cannot perform simple math and has other comprehension deficits. At first, Jacob’s job involved doing rudimentary inventory work, but he was moved to other tasks when he admitted making mistakes because of his trouble reading.

One day, Jacob was given papers to sign, which he later said he could not read and that no one offered to read to him. One of the documents included an arbitration agreement that limited his ability to sue in state or federal court. It capped any arbitration award at just $10,000.

Jacob injured his wrist and arm while lifting boxes and was assigned to office work. He again explained he could not read and asked for accommodations. He was then fired when he didn’t bring in a doctor’s certification immediately.

When he tried to sue, the employer asked the court to send the case to arbitration.

The court refused, reasoning that Jacob had shown he didn’t understand the arbitration agreement he had signed. Plus, the court said the $10,000 cap on recovery made the agreement unconscionable because it severely limited the employer’s liability and took away the employee’s rights. (Heywood v. Casa Cabinets, Court of Appeal of California, 2017)