86 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com compared with the Labor Commissioner’s employee-friendly Berman hearing process. Three years into his employment, the plaintiff was approached at his desk and asked to sign the arbitration agreement, which featured procedures mirroring those found in litigation. Kho found a high degree of procedural unconscionability because the plaintiff had to sign the agreement without having a real chance to review it, because the agreement was lengthy and legalistic, and because no one was available to explain it to him. 5.2.4 California’s broad view of substantive unconscionability Berman hearings. Kho struck down an arbitration agreement waiving a Berman hearing, in part because the high court felt that Berman hearings are more favorable to the employee than judicial proceedings. Although the parties’ arbitration agreement might suffice for wrongful-termination claims, Kho found the agreement substantively unconscionable for wage claims because its litigation-like procedures were unduly complex and lengthy, in unfavorable contrast to a Berman hearing. Kho also found the agreement substantively unconscionable because the complex and time-consuming civil litigation-type process the agreement entailed was a barrier to plaintiff’s right to the expedient, largely cost-free Berman hearing process. The waiver of Berman procedures does not, in itself, render an arbitration agreement unconscionable, but where, as here, that waiver was imposed in an unconscionable fashion, Kho concluded that the agreement was unenforceable.55 Requiring an odd form of “mutuality.” Armendariz held that any arbitration agreement imposed on an employee is substantively unconscionable if it lacks a “modicum of bilaterality.” One example of unconscionability, California style, is an arbitration agreement carving out certain claims that only an employer would be likely to bring, absent reasonable justification for such a carve-out. The agreement in Armendariz was unconscionable because, while it generally subjected all claims to arbitration, it carved out claims for injunctive relief, which typically would be brought only by the employer (to restrain unfair competition).56 Through this expansive anti-arbitration reasoning, some California courts thus have held that an arbitration agreement is substantively unconscionable if it permits the parties to pursue court claims that would likely be more valuable to employers than to employees.57 (Of course, there is nothing inherently “unfair” about reserving certain claims for litigation if, as the public policy favoring arbitration implies, arbitration is an acceptable substitute for litigation. So by saying that it is unfairly one-sided for agreements to leave certain claims unaffected by the agreement to arbitrate, California courts reveal their bias against arbitration.) Inventing special requirements for statutory claims. Armendariz created certain minimum requirements that mandatory arbitration agreements must meet to be substantively conscionable as to statutory claims: (1) providing for neutral arbitrators, (2) providing for discovery sufficient for the employee to secure information needed to present the claim, (3) requiring a written decision to permit limited judicial review, (4) providing for all relief that would be available in court, and (5) requiring the employer to pay all of the costs unique to arbitration, such as the arbitrator’s fees. A court may save an arbitration agreement by interpreting it as implicitly requiring these conditions, unless the agreement itself states expressly to the contrary. Courts following Armendariz have struck down arbitration agreements as substantively unconscionable when they provide employers with greater rights than they would have in court. One provision disfavored on this ground has been a clause providing for prevailing-party attorney fees on a FEHA claim, without limiting the defendant’s right to fees to those cases where the employee’s claims were “frivolous, unreasonable, without foundation, or brought in bad faith.”58 Other provisions found to be substantively unconscionable have included neutrally worded arbitrator selection provisions that, as a practical matter, would result in an arbitrator of the employer’s choosing, and fee provisions that apportion arbitrator’s fees equally among parties at the outset of the arbitration.59 Although Armendariz arose in the context of statutory employment discrimination claims, courts have applied its special requirements to other statutory claims as well.60 These rulings—which ultimately rely on a judicial
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