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An arbitration agreement in an employment contract that requires arbitration of common law and statutory claims is enforceable if both parties are required to arbitrate all claims and the agreement provides for certain other safeguards, a California Court of Appeal held.
In Minassian v. Shoe City, Inc., No. B184622, 2006 WL 2664275 (Cal.App. 2 Dist. Sept. 18, 2006), Minassian brought employment discrimination and wrongful termination claims against Shoe City. Pursuant to an arbitration agreement in the employment contract, the parties proceeded to arbitration. The arbitrator found in Shoe City’s favor, and Minassian then proceeded to challenge the enforceability of the arbitration agreement.
In determining the enforceability of the arbitration agreement, the Court applied a three-step test from Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000). According to the standards set out in Armendariz, the Court first “determine[s] whether the agreement implicates public or private rights” because “different enforceability standards apply to different claims.” Abramson v. Juniper Networks, Inc., 115 Cal.App.4th 638, 651-652 (2004).
Then, the Court “appl[ies] the enforceability standards relevant to the rights at stake.” Id. at 652. Finally, the Court “evaluate[s] all arbitration contracts against general standards of procedural unconscionability.” Id.
The Court held that the parties’ arbitration agreement satisfied all the requirements of Armendariz and was therefore enforceable. Minassian’s complaint included both public and private rights, so the Court applied the higher public rights standard.
Public or statutory rights are arbitrable as long as the agreement provides for a neutral arbitrator, adequate discovery, limitations of arbitration costs, and a requirement of a written arbitration decision allowing for judicial review. Armendariz, 24 Cal.4th at 90-91. The parties’ agreement met all of these requirements.
The Court then found that the agreement was not unconscionable. Although employment contracts are sometimes held to be procedurally unconscionable because few employees are offered a legitimate chance to negotiate, the Court found that this arbitration agreement was not sufficiently substantively unconscionable because it required both parties to arbitrate all common law and statutory claims.
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