Arbitration Agreement Withstands Challenge For Lack of Notice of Arbitration Rules or Mutuality

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In Peng v. First Republic Bank, a former employee asserting discrimination and other claims challenged the enforceability of the arbitration agreement she signed as a condition of employment. Specifically, she asserted that the employer’s failure to notify her of the content of the applicable arbitration rules and its reservation of the right to modify the agreement were unconscionable and rendered it unenforceable. Although the trial court agreed and refused to compel arbitration, a California appeals court reversed and upheld the arbitration agreement. While the court acknowledged that there will be some degree of procedural one-sidedness in an arbitration agreement imposed as a condition of employment, it rejected the notion that failing to provide the applicable rules (which it noted were available on the Internet) so “shocked the conscience” to make the agreement unenforceable. Further, the court observed that the employer’s duty of good faith applied to (and limited) the employer’s right to modify the arbitration agreement, so the agreement was neither illusory nor unfairly one-sided. Thus, the appellate court ordered the claims to arbitration.

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