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California’s view of arbitration agreements just got more complicated for employers

2/23/22

By: Matthew Jones

The California Court of Appeal in De Leon v. Pinnacle Property Management Services, LLC reviewed the issue of whether an employer’s arbitration agreement was unconscionable. The employee initially filed a lawsuit against the employer under certain wage and hour causes of action. In response, the employer moved to compel arbitration pursuant to its “issue resolution agreement”. This agreement required arbitration for all claims arising out of Plaintiff’s employment, and also included a statute of limitations provision of one year. The trial court denied the motion. The appellate court affirmed the denial, stating the provisions were procedurally and substantively unconscionable. In particular, the court opined that the employee was pressured into signing the agreement despite not knowing how unfair or one-sided the agreement was to the employee.

Further, the one year statute of limitations was substantively unconscionable because the employee may have valid claims with longer statute of limitations. The employer argued that the degree of procedural unconscionability was minimal since the provision was not “buried” in the agreement. Although the court appreciated the argument, the fact remained that the agreement as a whole is “permeated with unconscionability” and contains “more than one unlawful provision.” These multiple issues, as pointed out by the court, proved to be the downfall of the employer’s argument and unenforceable nature of the provision. However, these arguments and court opinions leave open the possibility that a similar provision with less unconscionable terms might be upheld by courts in the future.

For further information and inquiries please contact Matthew Jones at mjones@fmglaw.com