Employment Contracts — Arbitration Agreements

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Serafin v. Balco Properties Ltd., LLC, (1st Dist., March 16, 2015) — Cal.Rptr.3d —-, 15 Cal. Daily Op. Serv. 2617, 2015 Daily Journal D.A.R. 3048

A woman who was terminated from her job as a property management director filed a wrongful termination action against her employer, asserting a number of causes of action including retaliation, harassment, wrongful termination, unpaid earnings, breach of oral contract, common counts, conversion, and defamation. The defendant moved to stay the case pending arbitration, pursuant to a two-page arbitration agreement, entitled “Mandatory Arbitration Policy,” which the plaintiff had signed a few days after beginning her employment.

Following an arbitration decision and judgment in favor of the defendant the plaintiff appealed,  relying on Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 116 Cal.Rptr.3d 804, which held that an arbitration agreement was procedurally and substantively unconscionable because, inter alia, the employer had failed to provide the employee with a copy of the applicable American Arbitration Association (AAA) rules.  The court of appeal affirmed, distinguishing the facts from its decision in Trivedi, and holding the failure to provide a copy of the applicable arbitration rules did not render the agreement procedurally unconscionable:

Balco did not actually attach a copy of the rules.” Instead, the arbitration agreement states, “You can obtain a copy of these rules from the Human Resources department or directly from the American Arbitration Association. …

[I]n Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 171 Cal.Rptr.3d 621 (Tiri ) this division pointed out in a footnote that Trivedi is just one of many authorities concluding an employer’s “failure to provide [the employee] with a copy of the AAA (American Arbitration Association) rules supports a determination that the arbitration agreement as a whole was procedurally unconscionable….”… However, that footnote also cites other cases that have found the failure to attach the applicable AAA rules alone did not render the agreement procedurally unconscionable.

In Tiri, supra, this court credited the context in which the agreement was signed as being important to our fact-specific determination of whether a delegation clause, allowing an arbitrator to determine enforceability of the arbitration agreement, was procedurally unconscionable…. This mode of analysis has been endorsed by our Supreme Court in Sonic–Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 163 Cal.Rptr.3d 269, 311 P.3d 184. “As with any contract, the unconscionability inquiry requires a court to examine the totality of the agreement’s substantive terms as well as the circumstances of its formation to determine whether the overall bargain was unreasonably one-sided.” …

Applying these principles to the arbitration agreement before us, we find Trivedi is distinguishable on it facts. Importantly, in Trivedi not only were the applicable arbitration rules not provided to the employee, but the agreement “was never discussed or explained at the time he signed it or later during his employment.”… In contrast, here the arbitration agreement informed Serafin that she could “obtain a copy of these rules from the Human Resources department or directly from the American Arbitration Association.” Also, unlike Trivedi, there was a human resources representative present when she signed the arbitration agreement specifically to explain the document and answer any questions Serafin might have about it. Thus, we conclude these additional facts mitigate against a finding that the agreement was procedurally unconscionable simply because a copy of the applicable arbitration rules were not affirmatively provided to Serafin.