In Carmona v. Lincoln Millennium Car Wash (No. B248143 – 4/21/2014, certified for publication 5/9/2014), the Second District Court of Appeal affirmed the trial court’s order denying a petition to compel arbitration filed by defendant car wash companies Lincoln Millennium Car Wash, Inc. (d.b.a. Millennium Car Wash), and Silver Wash, Inc. (d.b.a. Santa Monica Car Wash and Detailing) in a wage and hour action. The Court of Appeal agreed with the trial court that the arbitration agreement at issue was permeated with unconscionability and should not be enforced. Plaintiffs, employees of the car wash companies, are all native Spanish speakers who spoke and read little to no English when they began working for the companies. At or around this time, they were presented with a four to six page document that they believed was a “work application” (the “employment agreement”). The document, which contained an arbitration provision, was written partially in Spanish and partially in English. The managers never explained the documents to the employees, nor did they inform them they were waiving their right to appear before a court. The employees later testified they did not understand what an “arbitration proceeding” meant. They also testified they understood they must sign the document as a prerequisite for working at the car wash.
The employment agreement contained the following provisions: an arbitration clause requiring any dispute regarding any aspect of the employee’s employment to be resolved exclusively through final and binding arbitration under the rules of the American Arbitration Association without providing a copy or explanation of the rules; a confidentiality clause requiring the employees to discuss “any problems or concerns” they had with their employment with management and ownership prior to disclosing any information to “any persons, firms, corporations, media agency, governmental entities or agencies …”; and a “confidentiality subagreement” containing an “enforceability” provision, which stated in part, “any disclosure or breach of this Agreement will cause immediate, irreparable harm to [the car wash],” the car wash may present claims against the employee for violation of confidentiality to a court or binding arbitrator, and in the event the car wash institutes litigation or arbitration to enforce the agreement, the car wash will be entitled to attorney fees. The Court found these separate clauses collectively constituted the “arbitration agreement.”
The Court of Appeal agreed with the trial court’s denial of the car wash companies’ petition to compel arbitration holding the agreement to arbitrate was unconscionable. The Court explained that an agreement to arbitrate, like any other contract, is subject to revocation if the agreement is both “procedurally” and “substantively” unconscionable. With regard to the procedural element, which focuses on “oppression” or “surprise,” the Court found the agreement was presented on a “take it or leave it basis,” the companies failed to provide the applicable rules of the AAA, they gave plaintiffs insufficient time to review the agreement, and the companies failed to translate key provisions of the agreement into Spanish, such as the “enforceability” provision. The Court held this amounted to a “high” degree of procedural unconscionability.
The Court also found the agreement was substantively unconscionable for lack of “mutuality.” It explained the enforceability clause allowed the companies to bring claims against the plaintiffs in court, but plaintiffs were restricted to arbitration. The clause also stated breach of the confidentiality subagreement would result in immediate, irreparable harm to the companies, but plaintiffs were not given a parallel presumption on their claims. The car wash companies were also permitted to recover their attorney fees while the plaintiffs were not. Finally, only the employees were required to sign the agreement.
An employment agreement is a contract, and is subject to the same unconsionability requirements as other types of contracts. In order for an employer to decrease the risk that an arbitration provision will be deemed unconscionable, the provision must be as neutral and mutual as possible. A straight forward, well-drafted, and clearly presented employment agreement is imperative.
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