In the past weeks we have detailed several employment arbitration agreements that California courts have refused to enforce (see "Another Employment Arbitration Agreement Unenforceable"and "Court Strikes Another Arbitration Agreement").  In a somewhat surprising decision the Second Appellate District held that an an employment application  that contained an arbitration agreement was not rendered one-sided by the use of the phrase “I agree.”

In this wrongful termination lawsuit employee, Gabriela Roman, sued her former employer Flo-Kem, Inc. Flo-Kem tried to compel arbitration, citing an arbitration clause in Roman’s initial employment application. The arbitration clause simply stated: “I agree, in the event I am hired by the company, that all disputes and claims that might arise out of my employment with the company will be submitted to binding arbitration.”

The trial court agreed with Flo-Kem and compelled arbitration.  On appeal, the issue was whether the “I agree” language was one-sided and only required Roman to arbitrate her claims.  Arguably, if the arbitration was only one-sided then the agreement could be considered substantively unconscionable and if also found to be procedurally unconscionable the agreement could be unenforceable.

The court of appeal determined that agreement was not one-sided and upheld the trial court's order compelling arbitration.  The appellate court provided some interesting remarks about the arbitration clause.  The court had no trouble finding the arbitration agreement was part of an adhesion contract, but nevertheless believed that whatever procedural unfairness was inherent in an adhesion agreement in the employment context, it was limited in this case.

The court noted that the arbitration provision was not buried in a lengthy employment agreement and was clearly noted with the heading “Please Read Carefully, Initial Each Paragraph and Sign Below.” It was set forth in a separate, succinct paragraph that employees initialed, affirming they had seen it.

The court also correctly noted that procedural unconscionability alone does not render an agreement unenforceable. There must also be some measure of substantive unconscionability.  The court found that absent some indication that the arbitration requirement was limited to the employee’s claims against the employer, the use of the “I agree” language in an arbitration clause that expressly covered “all disputes” created a mutual agreement to arbitrate all claims arising out of the applicant’s employment.  Therefore, despite the procedural unconscionability, the agreement to arbitrate did not lack mutuality of obligation so as it make it substantively unconscionable.

The court struck out the unconscionable provisions (such as the cost-splitting provision) and ordered the case to proceed with the arbitration.

No one factor will necessarily render an employment arbitration agreement enforceable or unenforceable.  If you have an arbitration provision in your employment agreement, or are contemplating adopting an arbitration policy, contact a knowledgeable attorney to advise you regarding the enforceability of arbitration agreements in California.