By now, most are familiar with AT&T Mobility v. Concepcion, in which the United States Supreme Court affirmed class action waivers in contracts containing arbitration agreements. The Court did, however, caution that arbitration agreements may be invalidated under the Federal Arbitration Act by traditional contract defenses such as fraud, duress, or unconscionability. Yet, these defenses rarely succeed.

That said, in Samaniego v. Empire Today, LLC, a California appellate court recently held that a flooring company's employment contract with its carpet installers was unconscionable. The plaintiffs brought a putative class action claiming that the company misclassified its installers as independent contractors rather than employees and failed to pay minimum wage and overtime compensation among other allegations. The unconscionability finding allowed the installers to litigate in court rather than individually arbitrate their claims in accordance with the arbitration provision in the contract.

Several facts supported the unconsicionability finding:

Although the plaintiffs requested Spanish contracts because they couldn't read English, the company provided only English versions because Spanish versions were unavailable.

  • The company did not give the plaintiffs time to have the contracts reviewed and also told them they could not continue employment if they did not sign the contracts.
  • The arbitration provision was near the end of the contract, which was 11 pages long with single-spaced text in small typeface.
  • While the contracts referenced arbitration rules, none were provided to the plaintiffs.
  • The arbitration agreement had one-sided provisions such as the company's right to attorneys' fees if it prevailed in arbitration, but none for plaintiffs if they prevailed.
  • The company did not point out that plaintiffs would be giving up their right to court if they signed the contracts.

Even though courts rarely find unconscionability, employers should consider, at a minimum:

  1. giving employees a reasonable amount of time to review employment contracts
  2. providing translated agreements for non-English speakers
  3. ensuring that the arbitration provision is conspicuous within the contract and acknowledges that employees give up their right to court if they sign the agreement
  4. attaching arbitration rules to the contract or identifying within the contract where the rules can be found (such as a website reference)

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