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Ninth Circuit holds Arbitration Agreement in Job Application Unconscionable

Posted Thursday, October 31, 2013 8:40 pm

A grocery company cannot compel a deli clerk to arbitrate claims brought under California labor law on the basis of a mandatory arbitration agreement in her job application, according to the United States Court of Appeals for the Ninth Circuit.Affirming a district court decision denying the employer's motion to compel arbitration, the court concluded that the arbitration agreement was procedurally unconscionable because it was made a condition of applying for employment, it was presented on a "take it or leave it" basis in the job application, and the actual terms of the agreement were not provided to the employee until new employee orientation three weeks after she signed the application agreeing to them. The court also concluded that the arbitration agreement was substantively unconscionable under California law because it was unjustifiably one-sided in several ways. The arbitrator selection clause was drafted to ensure that an arbitrator proposed by the grocery company would always be selected to decide employee-initiated disputes. The cost allocation clause required the apportionment of the arbitrator's fees between the parties up front in all cases, before any resolution on the merits. These provisions tilted the scale so far in the employer's favor that the court concluded it "shocks the conscience" and is therefore unenforceable. The court also concluded that the Federal Arbitration Act does not preempt state law in this case because California law on unconscionable contracts is not unfavorable to arbitration but instead reflects a generally-applicable policy against abuse of bargaining power. Chavarria v. Ralph's Grocery Company

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