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The California Court of Appeals disallowed an employer's attempt to amend an arbitration agreement and reconcile its terms with the requirements set forth in Armendariz v. Foundation Health Psychare Services, Inc., 6 P.3d 669 (Cal. 2000), because the employer did not reserve the right to modify the agreement, and the amendments did not go into effect until after the employee was terminated.
In Tibbs v. Automobile Club of Southern California, No. B189149, 2006 WL 3719422 (Cal. Ct. App. Dec. 19, 2006), Tibbs sued the Automobile Club of Southern California (ACSC), her former employer, for wrongful termination.
ACSC moved to compel arbitration pursuant to an arbitration agreement that Tibbs signed at the inception her employment. In opposing the motion, Tibbs argued that the arbitration agreement was unenforceable under Armendariz. ACSC countered this argument by highlighting amendments to the agreement that were announced during Tibbs' employment but did not go into effect until after her employment was terminated.
The trial court refused to consider the amendments and denied ACSC's motion to compel on the ground that the arbitration agreement was unenforceable under Armendariz.
On appeal, the Court rejected ACSC's argument that the trial court had abused its discretion by refusing to consider the amendments that allegedly cured "the elements of the 1998 version that violated Armendariz." In rejecting this argument, the Court noted that Tibbs never agreed to the amendments and the amendments did not go in effect until two days after Tibbs was fired. Moreover, as the Court noted, ACSC did not reserve the right to modify the original agreement.
Limiting its analysis to the original arbitration agreement, the Court concluded that the agreement was unconscionable and unenforceable because it limited discovery and required Tibbs to pay more costs than she would have to pay in court in violation of Armendariz. The Court also concluded that the arbitration agreement could not be saved by severing the offending provisions.
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