Fenwick Employment Brief - May 2013: Substantive Fairness Overcomes Elements of Procedural Unconscionability in Mandatory Arbitration Agreement

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In yet another case addressing the enforceability of mandatory arbitration agreements in California, a Southern California federal district court in Williams v. Department of Fair Employment and Housing recently held that despite some elements of procedural unconscionability, a mandatory arbitration agreement entered into at the inception of employment would be enforced because the substantive terms of the agreement were fair. 

Under California law, an arbitration agreement must be both procedurally (i.e., fairness in the formation of the contract) and substantively (i.e., fairness in the terms) unconscionable to be unenforceable.  In Williams, the court found elements of procedural unconscionability because the contract was presented on a "take it or leave it" basis by a party of superior bargaining power and the arbitration rules referred to in the agreement were never provided to the employee.  However, there was no substantive unconscionability because the terms of the agreement were fair.  Therefore, the agreement to arbitrate was enforceable.

 

Topics:  Mandatory Arbitration Clauses, Unconscionable Contracts

Published In: Alternative Dispute Resolution (ADR) Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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