California court enforces arbitration agreement
U-Haul and one of its managers recently faced a complaint alleging retaliation; discrimination; harassment based on race, color, or national origin; and failure to prevent the retaliation, discrimination, and harassment under California’s Fair Employment and Housing Act (FEHA).
U-Haul Co. of California – the defendant in the case of Rocha et al. v. U-Haul Co. of California et al. – hired two brothers as mechanics. U-Haul required all its employees to sign an arbitration agreement as a term of continued employment.
U-Haul revised its employee dispute resolution policy in 2007 and 2013. It made the brothers sign an updated arbitration agreement both times.
The brothers filed administrative complaints with the federal Equal Employment Opportunity Commission. They alleged that their manager, another defendant in this case, harassed and discriminated against them.
Several weeks later, the manager terminated the brothers. With the former Department of Fair Employment and Housing, the brothers filed administrative complaints alleging retaliatory terminations.
The brothers then brought a complaint with the Fresno County Superior Court against U-Haul and its manager. They alleged the four FEHA claims plus a retaliation claim under California’s Labor Code against U-Haul and a defamation claim against U-Haul and its manager.
U-Haul and its manager filed a motion to compel arbitration. The brothers wanted to amend their complaint to add a claim under section 1194 of the Labor Code against the manager for his failure to pay minimum wages for work that they allegedly performed at his residence for his sole benefit.
The trial court did not allow the brothers to amend their complaint. It granted the motions to compel arbitration. It found the arbitration agreement procedurally unconscionable but not substantively unconscionable. It concluded that the agreement was valid and enforceable since both procedural and substantive unconscionability should be present to declare the agreement unenforceable.
The arbitrator issued an award in U-Haul’s favor on all claims. The brothers filed a motion to vacate the arbitrator’s award. The trial court confirmed the arbitration award. The brothers appealed.
Arbitration agreement is enforceable
The California Court of Appeal for the Second District agreed with the trial court’s decision to grant the motion to compel arbitration. The appellate court reversed the judgment as it applied to the manager since the trial court had no basis to deny the brothers’ request to sue the manager for unpaid wages. The appellate court affirmed the judgment in other respects.
The trial court properly compelled the dispute to arbitration, given that the arbitration agreement was enforceable since it was not unconscionable, the appellate court said.
Procedural unconscionability
The arbitration agreement had limited procedural unconscionability, the appellate court ruled. It was a stand-alone document that was not buried in a lengthy employment agreement.
The agreement stressed the importance of reviewing the document and disclosed that it was a term of continued employment, the appellate court said.
Substantive unconscionability
The brothers argued that the arbitration agreement was substantively unconscionable because it:
- prevented employees from bringing certain claims in any judicial or arbitral forum
- required them to pay more for arbitration than they would have paid for a court proceeding
- denied employees the right to appeal
- banned employees from seeking relief from governmental agencies
- required employees to waive the right to seek relief under California’s Private Attorney General Act
The appellate court disagreed. None of these arguments made the agreement as a whole substantively unconscionable, the appellate court said.
