The Arbitration Provision is Unconscionable, and Concepcion Does Not Change the Analysis

     “Unconscionability” may sound like an abstract legal principle, but it usually entails a very fact-specific analysis.  Try out these facts:  plaintiffs are carpet layers; they speak Spanish; contracts were presented to them only in English; they have difficulty reading simple written English; the contracts were offered on a non-negotiable, take it or leave it basis, with little or no time for review; the arbitration rules were not attached; the employer included a six-month statute of limitations; the agreement included an Illinois choice-of-law provision; the 11 page text was densely worded, single-spaced, in small typeface; all claims had to be arbitrated, except for certain claims employers typically bring in court (declaratory and injunctive relief); an attorney’s fees provision stated that only the employee could be tagged with fees; and the arbitration provision was the 36th of 37 sections.  You know where the court is going to go with those facts.  The only question is:  how many bowling pins remain for the court to knock over.  Samaniego v. Empire Today LLC, Case No. A132297 (1st Dist. Div. 3 filed April 5, 2012; pub. order May 6, 2012) (Siggins, J., author).  Defendant Empire appealed the superior court’s refusal to compel contractual arbitration of claims by the carpet installers.

     One.  Substantial evidence supported a finding of procedural and substantive unconscionability.  See above.

     Two.  California law applies.  Because of the procedural and substantive unconscionability, the choice of law provision was obtained by “improper means”.  Again, see above.  If Illinois law requires enforcement of the arbitration clause, then the enforcing the choice of law provision will result in “substantial injustice.”

     Three.  The “multiple defects” (see above) mean that the arbitration agreement is “permeated” by unconscionability.  Severance would not serve the interests of justice.

     Four.  AT&T Mobility LLC v. Concepcion, __ U.S. __, 131 S.Ct. 1740, 179 L.Ed..2d 742 (2011) does not change the analysis.  The Federal Arbitration Act “permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress or unconscionability,’ [although] not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.”  Id. at 1746.

     Result:  Affirmance. 

     Tip:  If you want an enforceable arbitration provision in an employment agreement, read the case, and consider a different drafting approach.