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While conceding that the question was “exceptionally close,” the California First District Court of Appeal held that an employment arbitration agreement was not substantively unconscionable under California’s Armendariz standard.
In Reynolds v. Cornerstone Staffing Solutions, Inc., No. A110952, 2006 WL 2536712 (Cal. App. 1 Dist. Sept. 5, 2006), the Court considered whether an arbitration clause singling out actions “brought by the employee” was sufficiently one-sided to be invalidated as unconscionable. California law requires a showing of both procedural and substantive unconscionability. Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000).
Cornerstone Staffing Solutions, the employer, first objected to the trial court’s analysis of Reynolds’ employment agreement as a whole. Recently, the U.S. Supreme Court held that arbitration provisions are severable from the remainder of a contract, and that challenges to validity of a contract are generally considered by the arbitrator. Buckeye Check Cashing, Inc. v. Cardegna, No. 04-1264, 2006 WL 386362 (2006). Yet, Reynolds’ objections were limited to the fairness of the arbitration agreement itself. Therefore, the lower court had not exceeded its jurisdiction in reviewing the arbitration agreement.
While both courts agreed that the agreement was procedurally unconscionable, the Court of Appeal reversed on the issue substantive unconscionability. Reynolds cited Higgins v. Superior Court, 140 Cal.App.4th 1238 (Cal. App. 2 Dist. July 10, 2006), which involved similar contractual language that resulted in a finding that the arbitration agreement lacked mutuality.
In the present case, however, auxiliary documents suggested that both “the employee and the company” agreed that arbitration should be the exclusive means of resolving dispute. As a result, the Court upheld the validity of the arbitration clause, and Cornerstone escaped with a mere reprimand for a poorly drafted, ambiguous contract.
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