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In reversing an order compelling arbitration of an employment, the California Court of Appeal held that an employee’s arbitration agreement was unconscionable because it lacked mutuality and the employee had no choice but to accept the agreement or lose her job.
In Louie v. Superior Court, No. B196537, 2007 WL 2318968 (Cal. Ct. App. Aug. 15, 2007), PPG implemented Resolve, a new dispute resolution program that required non-union employees to submit any employment related claims to arbitration. Louie, a PPG employee, sued for employment related violations of the California Fair Housing and Employment Act (FHEA). PPG moved to compel arbitration pursuant to Resolve’s arbitration provision. Louie opposed the motion by asserting the agreement was unconscionable. The trial court compelled arbitration and Louie appealed.
While acknowledging the strong public policy presumption favoring arbitration, the Court held that the arbitration agreement was unenforceable, as Louie’s claims arose from unwaivable FHEA rights. California case law requires that an agreement to arbitrate public policy claims must not impose additional forum costs on the employee. Here, Resolve improperly required an employee who wanted a recorded hearing to pay for a court reporter, an expense the employee would not have to pay in court.
Additionally, the Court found the arbitration clause unconscionable. The arbitration provision was procedurally unconscionable because Louie had no alternative but to accept it or resign her employment of 14 years. The arbitration provision was also substantively unconscionable, as it lacked mutuality in two ways. First, the arbitration award was always binding on the employee, but not on PPG. Second, the claims an employee was most likely to bring were subject to arbitration while the claims PPG was most likely to bring were not.
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