Fired employee sues Empire Nissan and others, alleges discrimination and wrongful termination
Small and unreadable print makes it hard or impossible for employees to read and understand an arbitration agreement, the California Court of Appeal recently said. This problem affects procedural unconscionability since it involves the contract formation process, the court added.
The plaintiff in the case of Fuentes v. Empire Nissan, Inc. et al. applied to work for Empire Nissan, Inc. She signed an arbitration agreement. Nissan later made her sign a second agreement about trade secrets, then a third agreement similar to the second one.
Nissan terminated the plaintiff. She filed a lawsuit alleging discrimination and wrongful termination against three defendants – Nissan, Romero Motors Corporation, and Oremor Management & Investment Company.
Nissan filed a motion to compel arbitration. The trial court denied the motion upon finding the arbitration agreement unconscionable. This prompted Nissan to appeal.
Arbitration is proper
The California Court of Appeal for the Second District disagreed with the trial court’s decision and ordered it to compel arbitration. This dispute should proceed via arbitration because the arbitration agreement’s substance was fair, the appellate court said.
First, the appellate court ruled that the font size was not a problem of substantive unconscionability. Regardless of font size, the substance of a contract’s terms could be fair or unfair.
Using a tiny and unreadable font during the contract formation stage was problematic for procedural reasons, the appellate court explained. Using a small font size created the same possibility for surprise as was caused by practices such as using confusing legalese, imposing coercive time pressure, or preventing employees from consulting lawyers.
“All deceptive and coercive procedures by employers can make it more likely employees do not fully understand, or do not understand at all, the arrangement to which they supposedly are assenting,” the ruling stated. If an employee could not read the agreement, then it would be impossible for them to understand it, the appellate court said.
However, after the contract formation stage was over, the question of whether the agreement’s substantive result was unconscionable was a separate issue, the appellate court concluded.
Second, the appellate court held that the arbitration agreement was mutual and even-handed. The appellate court, reading all the contracts together, interpreted them as giving Nissan the right to seek injunctions relating to trade secrets only in arbitration.
Third, the appellate court tackled the issue of multiplicity or the contract’s convoluted language. This was also a problem of procedural unconscionability, given that it would make an arbitration agreement confusing to a layperson, the appellate court said.
Fourth, the appellate court decided that the absence of Nissan’s signature was irrelevant to the issue of whether the contract’s substance was fair. While the presence of a signature could be relevant to answer the question of whether a contract existed at all, the contract’s fairness and not its existence was the issue in this case, the appellate court said.
Finally, the appellate court determined that the arbitration agreement’s failure to include instructions did not make it substantively unconscionable. Thus, the appellate court rejected the plaintiff’s argument that the agreement was unfair since it did not explain how to initiate arbitration.