Employer Unable To Enforce Arbitration Agreement

Published date13 January 2022
Subject MatterEmployment and HR, Litigation, Mediation & Arbitration, Employee Rights/ Labour Relations, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
Law FirmWood, Smith, Henning & Berman LLP
AuthorMr Samuel L. McDermott and Ahllam H. Berri

An employee who brought suit against his employer for multiple Labor Code violations was not held to the provisions of an arbitration agreement as several terms were skewed in favor of the employer. The court found that an agreement signed as a condition as employment as well as containing multiple unfair terms that were stacked against Plaintiff, rendered the contract as a whole unconscionable and unenforceable.

Relevant Background

Plaintiff, De Leon, applied for employment with Pinnacle Property in 2016. As part of the application process he was required to sign a separate document entitled the "Issue Resolution Agreement" (IRA), as a precondition of employment.

The IRA provided that the parties "agreed to settle any and all previously unasserted claims, disputes, or controversies arising out of Plaintiff's application or candidacy for employment, employment and/or cessation of employment with Pinnacle.. exclusively by final and binding arbitration before a neutral arbitrator." The IRA indicated to the reader in bold that signing the agreement affected their legal rights and encouraged consultation with an attorney.

The terms at issue were (1) a statute of limitations clause that required the Arbitration Request Form to be submitted no later than one year after which the employee knew, or should have known through "reasonable diligence" of the existence of a claim and (2) a discovery clause that allowed only one set of twenty interrogatories, including a request for all documents upon which the party responding relies on when answering the interrogatories, three depositions for each side, and provided that the arbitrator could allow additional discovery if a party showed "substantial need" and the additional discovery is not "overly burdensome and will not unduly delay arbitration."

In 2020, Plaintiff filed a complaint against Pinnacle and his supervisor alleging violations of the Fair Employment and Housing Act ("FEHA") and the California Labor Code, among other related claims. The Defendant moved to compel arbitration based upon the IRA, but Plaintiff opposed the motion on the basis that that the IRA was unconscionable due to the provision shortening the statute of limitations to one year and the limited discovery options, arguing that the limited discovery denied him the opportunity to gather basic information about defendant's policies and procedures, as well as obtain information from relevant parties who were privy to the circumstances surrounding...

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