Can Your Employer Force You Into Arbitration If the Agreement Was Too Small and Blurry to Read When You Signed It?

The California Supreme Court addressed that question directly in a case involving a car dealership employee whose arbitration agreement was printed in font so small and blurry it was described as "nearly unreadable." The answer: not automatically — and the ruling reshapes how California courts evaluate the enforceability of arbitration agreements signed under rushed, high-pressure conditions.

Case: Fuentes v. Empire Nissan, Inc.
Court: Supreme Court of California
Case No.: S280256 (Los Angeles County Superior Court No. 20STCV35350)

Get to Know the Plaintiff: Fuentes v. Empire Nissan

Evangelina Yanez Fuentes applied for a job at Empire Nissan and, as part of the onboarding process, was handed an employment application packet. She was given approximately five minutes to review the entire packet before being sent to take a drug test. The packet included an "Applicant Statement and Agreement" containing a mandatory arbitration provision — approximately 900 words compressed into a few vertical inches of text in very small, blurry font, including one sentence that ran 214 words long. She was not given an opportunity to ask questions and did not receive a copy of the document after signing it. She also signed two confidentiality agreements that appeared to allow Empire Nissan to seek court remedies for certain claims, without mentioning arbitration.

After working at the dealership for approximately two and a half years, Fuentes requested an extension of her medical leave for cancer treatment. Empire Nissan terminated her employment. She filed suit for wrongful discharge and related claims. Empire Nissan moved to compel her into private arbitration based on the barely legible agreement she had signed on her first day.

Get to Know the Defendant: Fuentes v. Empire Nissan

Empire Nissan, Inc. is a California car dealership that required job applicants and employees to sign a mandatory arbitration agreement as a condition of employment. The arbitration provision at the center of this case was embedded in a multi-page onboarding packet, presented to Fuentes under time pressure, and formatted in text so small and broken that it was, in the California Supreme Court's words, "nearly unreadable." The accompanying confidentiality agreements also appeared to carve out certain claims — specifically those involving unfair competition and trade secrets — in a way that favored Empire Nissan's ability to seek judicial remedies while requiring employees to arbitrate.

What Are the Allegations in the Complaint?

Fuentes's lawsuit arose from her termination following her request for extended medical leave for cancer treatment. According to the complaint and subsequent proceedings:

• Fuentes was terminated after requesting extended medical leave to continue cancer treatment, and alleges her termination constituted wrongful discharge and related violations of California law

• She argued the arbitration agreement was unenforceable both because it was procedurally unconscionable — presented in an illegible format under severe time pressure with no opportunity to review or negotiate — and because its terms were substantively unconscionable, particularly the confidentiality agreements' apparent one-sided carve-out allowing Empire Nissan to seek judicial remedies for its own claims while requiring employees to arbitrate theirs

• The trial court found a high degree of procedural unconscionability and a low-to-moderate degree of substantive unconscionability, and denied the motion to compel arbitration

• The Court of Appeal reversed, finding illegibility only affects procedural — not substantive — unconscionability, and finding no substantive unconscionability at all

• The California Supreme Court reversed the Court of Appeal and sent the case back to the trial court for re-evaluation

• What Was the Main Question in the Case?

The Supreme Court addressed two core questions. First: does a contract's illegibility or unreadable formatting affect substantive unconscionability — meaning, does it make the terms themselves unfair? The court answered no: illegibility generally affects how a contract was presented (procedural unconscionability), not the substance of its terms. Second — and more consequentially for employees — the court held that when a contract is marked by a high degree of procedural unconscionability, courts must closely scrutinize its terms for fairness or one-sidedness. The worse the conditions under which an employee was asked to sign, the more carefully a court must examine what that employee actually agreed to. The court also held that any ambiguities in the agreement must be construed against Empire Nissan as the drafting party. The case was remanded to the trial court to re-evaluate the agreement's enforceability under this correct framework.

Why Does the Case Matter to California Employees?

This is a landmark California Supreme Court ruling that directly affects the rights of the millions of California workers who have signed arbitration agreements as a condition of employment.

• The ruling confirms that employees who were handed an illegible, nearly unreadable arbitration agreement under time pressure — with no ability to review, negotiate, or ask questions — may have strong grounds to challenge it

• The higher the degree of procedural unconscionability (rushed presentation, fine print, no negotiation), the more carefully courts must examine whether the terms of the agreement are also one-sided or unfair

• Courts in California can no longer defer to a general presumption favoring arbitration when evaluating whether a rushed, illegible agreement is enforceable — fairness to the employee matters

• The decision is relevant to anyone who has signed an employment contract, arbitration agreement, or onboarding document in the car industry, retail, hospitality, or any other sector where take-it-or-leave-it agreements are common

A Brief Overview of the Case

• Application/onboarding: Fuentes is hired at Empire Nissan and given five minutes to review an onboarding packet containing a nearly unreadable mandatory arbitration clause; she signs without being able to review it and receives no copy

• After approximately 2.5 years: Fuentes requests extended medical leave for cancer treatment; Empire Nissan terminates her employment

• Fuentes files suit: Lawsuit filed in Los Angeles County Superior Court (Case No. 20STCV35350) for wrongful discharge and related claims; Empire Nissan moves to compel arbitration

• Trial court: Denies motion to compel arbitration, finding both procedural and substantive unconscionability

• Court of Appeal: Reverses, finding only procedural unconscionability (from illegibility) and no substantive unconscionability; orders arbitration

• February 2, 2026: California Supreme Court (Case No. S280256) reverses the Court of Appeal; holds that when there is a high degree of procedural unconscionability, courts must closely scrutinize the terms for substantive unfairness; ambiguities construed against the drafter; case remanded for re-evaluation under the correct framework

FAQs: Fuentes v. Empire Nissan

Q: What is unconscionability and how does it apply to arbitration agreements?
A: Unconscionability is a legal doctrine that allows courts to refuse to enforce a contract or a contract provision that is both procedurally unfair (in how it was presented) and substantively unfair (in its actual terms). California law requires both elements to be present to invalidate a contract as unconscionable.

Q: What is procedural unconscionability?
A: Procedural unconscionability focuses on how the contract was formed — specifically, whether the weaker party had a meaningful opportunity to understand and negotiate its terms. In employment contracts, this often involves high-pressure signing conditions, illegible formatting, no opportunity to ask questions, and the take-it-or-leave-it nature of a job offer.

Q: What is substantive unconscionability?
A: Substantive unconscionability focuses on the actual terms of the contract — whether they are unreasonably one-sided or unfair to one party. In employment arbitration agreements, this can include provisions that allow the employer to go to court for certain claims while requiring employees to arbitrate all of theirs.

Q: I signed an arbitration agreement without really reading it. Can I still challenge it?
A: Possibly, depending on the circumstances. The conditions under which you signed — including whether you had time to review it, whether it was legible, whether you had a chance to ask questions, and what the agreement's terms actually say — all factor into whether it can be challenged. A California employment attorney can evaluate your specific agreement.

Q: Does the Supreme Court's ruling mean Fuentes won her case?
A: Not yet. The ruling sent the case back to the trial court to re-evaluate the arbitration agreement under the correct legal framework. The ultimate question of whether she was wrongfully terminated has not been decided.

Q: What should I look for in an arbitration agreement before I sign it?
A: Key red flags include: one-sided provisions that allow the employer to go to court for its own claims while requiring you to arbitrate; very short review times; illegible or densely formatted text; no copy provided after signing; and class action waivers that prevent you from joining a group claim against the employer.

Did You Sign an Arbitration Agreement You Couldn't Read or Couldn't Fully Review?

Fuentes v. Empire Nissan is a powerful reminder that California courts will not simply rubber-stamp arbitration agreements that were rushed, illegible, or one-sided — and that employees have real rights to challenge those agreements. If you signed an employment agreement that you believe is unfair or unenforceable, contact Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Knowledgeable employment law attorneys are ready to assist you in law firm offices located in Riverside, San Francisco, Sacramento, San Diego, Los Angeles, and Chicago.

Tiny-Font Arbitration Upheld: Fuentes v. Empire Nissan

In Fuentes v. Empire Nissan, Inc. (California Supreme Court, 2024), the justices confronted whether an otherwise fair employment arbitration agreement printed in tiny, nearly unreadable font—and presented on a take-it-or-leave-it basis—can be invalidated as unconscionable. Their answer clarifies how California courts must balance procedural versus substantive unfairness when employees challenge arbitration pacts.

The Case: Fuentes v. Empire Nissan, Inc.

The Court: California Second Appellate District Division Eight/L.A. County Superior Court

The Case No.: Appellate Case No.: B314490 / Superior Court Case No.: 20STCV35350

The History of the Case: Fuentes v. Empire Nissan, Inc.

Employment & Dispute: Plaintiff Maribel Fuentes worked for Empire Nissan. After her termination, she sued, alleging wage-and-hour and other statutory violations.

Trial Court (L.A. Superior): Nissan moved to compel arbitration. The Court found the one-page arbitration agreement unconscionable—largely because of its microscopic, blurred print—and denied the motion.

Court of Appeal (2d Dist.): Reversed. While the agreement showed procedural unconscionability (tiny font, adhesion contract), it contained no substantively unfair terms, so arbitration had to proceed.

California Supreme Court (2024): Granted review to resolve how far procedural flaws alone can go in invalidating an arbitration clause and ultimately affirmed the appellate ruling, reinforcing the two-part unconscionability test.

The Arbitration Agreement: Fuentes v. Empire Nissan, Inc.

To make a determination in the case, the Court considered various details in the arbitration agreement Nissan presented to Fuentes. Consider a summary of the details they considered below:

• Format: Single one-page form, extremely small and blurry type, provided to all dealership hires on a take-it-or-leave-it basis.

• Key Clauses: Key clauses appeared fair; deemed no substantive unconscionability.

• Mutuality: Bound both the employee and the employer.

• Scope & Governing Law: Covered statutory claims; incorporated California Arbitration Act procedures.

• No Hidden Waivers: Did not waive EEOC/DFEH (now CRD) charges.

• Employer Signature: Absence of Nissan’s signature went to contract formation; not substantive fairness.

• Initiation Instructions: Reference to state arbitration rules was sufficient.

The procedural concerns identified included: 1) tiny, unreadable font, 2) presented as a condition of employment (adhesion), and 3) dense legalese.

The Main Issue: Fuentes v. Empire Nissan, Inc.

Does an employment arbitration agreement that is procedurally unconscionable—because of unreadable, tiny print and adhesive presentation—become unenforceable when its substantive terms are otherwise even-handed?

The Court said no. California’s “sliding-scale” test still demands some showing of substantive unconscionability; procedural flaws alone cannot be “double-counted” to tip the scale.

What Makes Fuentes v. Empire Nissan, Inc. a Landmark Case?

Fuentes cements the bright-line rule that both procedural and substantive unconscionability must be present to void an arbitration clause. Courts may not inflate procedural defects (e.g., illegible font, adhesion) into substantive ones simply to strike down agreements. In an era of rapidly evolving employment-arbitration law, Fuentes preserves a predictable framework, signaling that California workplaces must scrutinize not only how arbitration agreements are presented but also what they say; because only truly one-sided terms, combined with process flaws, will render them unenforceable.

FAQ: Fuentes v. Empire Nissan, Inc.

Q: What is the difference between procedural and substantive unconscionability?

A: Procedural unconscionability looks at how the contract was formed—e.g., tiny unreadable font or “take-it-or-leave-it” pressure. Substantive unconscionability examines what the contract says; checking if the content is unfairly skewed in favor of the employer. California requires both types to be present before a court can strike down an arbitration agreement.

Q: Does unreadable fine print, by itself, make an arbitration clause unenforceable?

A: No. Fuentes confirms that illegible or microscopic text is a procedural flaw only. Unless the agreement also contains substantively unfair terms—such as one-sided fee rules or damage caps—courts will still enforce it.

Q: My boss handed me a “sign-or-don’t-work” arbitration form. Is that automatically invalid?

A: Adhesion contracts (take-it-or-leave-it agreements) create procedural unconscionability, but California law still demands some substantive unfairness before voiding the clause. Review the substance for red flags (e.g., waiver of statutory rights) and consider seeking legal advice before refusing to sign.

Q: Does an arbitration agreement need the employer’s signature to bind both parties?

A: Not necessarily. Fuentes held that lack of an employer signature raises a formation question—whether a contract exists at all—but it is not evidence of substantive unconscionability. If both sides intended to be bound, courts generally treat the agreement as valid.

If you have questions about how to file a California employment law complaint, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Knowledgeable employment law attorneys are ready to help in various law firm offices in Riverside, San Francisco, Sacramento, San Diego, Los Angeles, and Chicago.

Negligent Credentialing Case Cites Landmark Elam v. College Park Hospital Case

A pending case in Santa Clara County Superior Court revisits a foundational legal question raised in the landmark Elam v. College Park Hospital ruling: Can a hospital be held directly liable for failing to properly screen and monitor the competence of its staff physicians?

Case: Marybeth Lakso v. HCA Healthcare, Inc. and Good Samaritan Hospital

Court: Santa Clara County Superior Court, Dept. 20 – Judge William J. Monahan

Hearing: Continued to June 6, 2025, at 9:00 AM in Dept. 20

Lakso v. HCA Healthcare: The Plaintiff's Allegations

Marybeth Lakso has filed a lawsuit in Santa Clara County Superior Court against HCA Healthcare, Inc. and Good Samaritan Hospital, alleging she was harmed due to the hospital's failure to uphold its legal duty to ensure the competency of its medical staff. While case-specific details remain limited, the suit aligns with a broader legal theory known as negligent credentialing, which holds hospitals accountable for failing to oversee independent physicians adequately granted admitting privileges.

More About the Defendant: Lakso v. HCA Healthcare

HCA Healthcare, Inc. is a national health system that operates numerous hospitals, including Good Samaritan Hospital in San Jose, California. These institutions are responsible not only for providing medical care but also for selecting and reviewing the doctors who treat patients within their facilities. The lawsuit challenges whether these responsibilities were met in Lakso's case.

Key Legal Question: Lakso v. HCA Healthcare

The primary legal question is whether HCA and Good Samaritan Hospital breached a duty of care by negligently credentialing or retaining a physician who caused patient harm, and whether that breach justifies hospital liability under the Elam precedent. This involves determining whether a hospital must actively investigate and monitor the qualifications and ongoing competency of non-employee medical staff.

The Allegations in the Case:

While the specific facts of Lakso's case have not yet been disclosed in public filings, the action centers on the hospital's alleged failure to properly screen, supervise, or reevaluate a staff physician whose care allegedly caused patient harm. The case explicitly references Elam v. College Park Hospital, a California Court of Appeal decision that established a precedent for holding hospitals liable under the doctrine of corporate negligence when they fail to ensure the competence of medical personnel operating under their roof.

Legal Implications: Lakso v. HCA Healthcare

The Elam decision was a turning point in California healthcare law. It held that hospitals owe a direct duty of care to their patients to exercise reasonable care in selecting and reviewing medical staff. If the court applies Elam in Lakso's case, it could reaffirm and even expand the doctrine of corporate hospital liability, holding institutions directly accountable when independent physicians provide substandard care. It also signals that hospitals may no longer be able to avoid liability simply because a doctor is classified as an independent contractor.

Lakso v. HCA Healthcare: The Employer's Position

As of now, HCA Healthcare and Good Samaritan Hospital have not publicly responded to the complaint. In past cases involving credentialing liability, hospitals often argue that they fulfilled all legal and professional obligations during the credentialing process and that the treating physician—not the institution—is solely liable for any malpractice.

Why This Case Matters: Lakso v. HCA Healthcare

This case could reaffirm or reshape how hospital accountability is viewed in California. The Elam ruling expanded the scope of hospital liability beyond direct employees to include independent physicians granted access to hospital facilities. A decision in Lakso's favor could further define the standards hospitals must meet when credentialing, re-appointing, and monitoring medical staff, with implications for medical malpractice litigation statewide.

What Comes Next for Lakso v. HCA Healthcare

A hearing in the Lakso v. HCA Healthcare case is currently scheduled for June 6, 2025, at 9:00 AM in Department 20 of Santa Clara County Superior Court before Judge William J. Monahan. The court may evaluate early motions or set a discovery schedule. If the Elam precedent plays a central role, this could become a closely watched test case on negligent credentialing and the evolving responsibilities of corporate hospitals.

FAQ: Lakso v. HCA Healthcare

Q: What is negligent credentialing?

A: Negligent credentialing refers to a hospital's failure to properly vet or monitor the qualifications and competence of physicians allowed to practice within its facility.

Q: What did Elam v. College Park Hospital establish?

A: It established that California hospitals can be held directly liable for patient harm if they fail to exercise reasonable care in selecting and overseeing their medical staff, even if those doctors are independent contractors.

Q: Why is this doctrine significant today?

A: As hospitals increasingly operate like healthcare corporations, this doctrine ensures they maintain active responsibility over the medical care provided under their supervision, not just over facility operations.

Q: Can hospitals be sued even if a doctor isn't their employee?

A: Yes. Under the Elam doctrine, hospitals may be held liable for negligent actions related to staffing decisions, regardless of whether the physician is an employee or an independent contractor.

Q: What might this case change?

A: If successful, it could strengthen legal protections for patients and increase pressure on hospitals to reform or reinforce staff credentialing and oversight procedures.

Do you have questions about filing a California employment law complaint? Please contact Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Knowledgeable employment law attorneys are ready to assist you in various law firm offices in Riverside, San Francisco, Sacramento, San Diego, Los Angeles, and Chicago.

California Model Alleges Agency Failed to Provide Payment In Accordance with Contract

After completing an assignment based on a contract with a California-based agency, a California model claimed that the company actually owed her significantly more due to “waiting time penalties.”

The Case: Brighton Collectibles, LLC v. Hockey

The Court: Super. Ct. No. 19CV06616, Santa Barbara County

The Case No.: 2d Civ. No. B307235

The Plaintiff: Brighton Collectibles, LLC v. Hockey

The plaintiff in the case is Natalie Hockey. Hockey was a model who directed her modeling agency to negotiate a contract on her behalf. The contract was with Defendant Brighton Collectibles, LLC, the defendant in the case. According to the contract, the agency agreed that Plaintiff would perform a one-day modeling shoot (a job estimated to last 10 hours) for Brighton Collectibles in exchange for $3,000, payable on receipt of the invoice. Hockey completed the 10 hour modeling job as described. After the job, Hockey sued the agency, alleging that the Defendant was her employer and violated Labor Code section 201 by not paying her the total amount due at the end of her modeling shoot day, and claiming that Brighton Collectibles actually owed her waiting time penalties totaling $90,000.

The Defendant: Brighton Collectibles, LLC v. Hockey

The defendant in the case, Brighton Collectibles, LLC, quickly cross-claimed for fraud. The cross-claim argued that the Plaintiff had represented that she would be paid $3,000 upon receipt of an invoice, and that the Defendant based their actions on that representation. The defendant further claimed that they were damaged by being subjected to the risk of liability to Hockey (amounting to the claimed $90,000). Hockey responded by filing an anti-SLAPP motion, seeking to strike Brighton Collectible’s cross-claim. The plaintiff’s motion was granted in trial court, but the defendant appealed.

The Case: Brighton Collectibles, LLC v. Hockey

The California Court of Appeal reversed the trial court's order granting the plaintiff’s anti-SLAPP motion attempting to strike Brighton's cross-claim for fraud. Even if the court assumed that Hockey met her burden of showing that the defendant’s cross-claim for fraud arose from protected conduct, the reversal was required based on the probability that the agency would prevail on its cross-claim. According to the evidence submitted, the court determined that the Defendant would likely be able to show that Hockey made a misrepresentation when she told the company to pay the agency for her modeling services upon receipt of an invoice, rather than immediately upon her “termination” as an employee at the end of the day (or the conclusion of the modeling shoot). Additionally, the court supposed it could be inferred that the plaintiff knew the misrepresentation was false based on her actions and intended for the agency to rely on her misrepresentation. The defendant did so - justifiably. And the plaintiff’s misrepresentation damaged the defendant by exposing the agency to $90,000 in waiting-time penalties (plus additional expenses due to attorney’s fees and costs associated with the case).

If you have questions about California labor law violations or contract negotiation, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

Is Kellogg the First of Many to Exploit Supreme Court Arbitration Victory?

A group of former Kellogg employees are suing the cereal giant claiming that the company shouldn’t have sued them earlier in 2018. Kellogg sued the employees for suing the company. It’s a bit confusing.

Kellogg targeted the group of former employees for defying their arbitration agreements and in doing so, they announced a clear warning to all their employees: not to sue the company. The complicated case has hearings scheduled for February and will be watched by many as one of the first instances when U.S. employees with grievances seek justice after the recent U.S. Supreme Court precedent that is making waves.

Last year a Kellogg employee out of Nevada filed suit against the company in federal court. The suit was filed on behalf of co-workers who were not provided with federally mandated overtime pay. Kellogg denied the accusations and they were able to successfully petition the judge to move the case to arbitration by bringing up the arbitration agreement signed by the employee that required disputes to be handled in arbitration rather than court.

This type of arbitration agreement usually ends up limiting the rights of employees in comparison to the legal rights they would have in the court system. Arbitration also promotes quick and efficient dispute resolution and discourages litigious lawyers’ fighting for plaintiffs. Others claim that the arbitration process limits transparency and removes the right to sue as a class and takes leverage away from employees seeking resolution.

What arbitration means for employees and employees depends on who you ask, but no one can argue that arbitration agreements have become more and more common at U.S. companies in recent years. Thanks to a series of U.S. Supreme Court rulings that quashed attempts to curb them, companies are embracing them more and more actively.

This past May, in a 5-4 ruling, the high court’s Republican-appointed majority held that arbitration agreements that require workers to sign away rights to file a lawsuit as part of a class can be enforced for workplace disputes. Proponents of arbitration insist that this is extremely detrimental to the enforcement of both federal minimum wage and overtime laws. Months later, Kellogg began filing breach of contract claims against former employees that signed onto the overtime lawsuit alleging violations of continued employment agreements that included an agreement that delayed the firing of workers during corporate restructuring in exchange for arbitration of claims.

Kellogg filed suit alleging that the original plaintiff was in breach of contract because he filed an employment claim in court against the company. Kellogg seeks punitive damages and legal costs. Former employees were shocked by Kellogg’s response and their attorneys have sued the company in return alleging that Kellogg’s claims against their former workers are actually illegal because they constitute retaliation as described in the Fair Labor Standards Act.

If you are a victim of retaliation in the workplace or if you need help obtaining overtime pay from your employer, please get in touch with one of the experienced California employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.

Is Uber Refusing to Honor the Arbitration Clause in its Terms in Conditions?

More than 12,000 Uber drivers filed a California lawsuit claiming that Uber purposefully delayed arbitration requests. Uber drivers are considered contractors by the company. The drivers claiming that Uber is delaying arbitration requests are making an assortment of complaints, including: minimum wage violations, failure to pay overtime, etc. At the rate the complaints are being processed by the company, it would be a decade before all the complaints were heard.

Uber, like thousands of other companies, requires their drivers to sign an arbitration agreement that limits dispute resolution to company-direct handling instead of going through the court system. Uber’s 21-page terms and conditions does include an option to opt-out of the clause, but it has to be done within 30 days of signing the original agreement and it must be done in writing.

Drivers dealing with the potentially decades long delay are getting fed up with decreasing pay and their questionable status as independent contractors (instead of employees who enjoy more protections through employment law). 12,501 of Uber’s drivers have filed a California lawsuit including allegations that Uber ignored requests for arbitration. According to the suit, there have been 300 pages of partners requesting arbitration and only 47 have been appointed arbiters. Of those appointed arbiters, only six have seen the arbitration process move forward.

Legal counsel involved in the case suggest that this is a typical trend amongst corporations in this situation and has been for decades in the U.S. They insert this type of clause in a mandatory arbitration agreement specifically to block class action lawsuits. When asked about the case, Uber declines to comment. Originally, the case was brought as a class action lawsuit in multiple states addressing driver status as independent contractors vs. employees. Complaints (in numerous states) range from failure to pay overtime, to minimum wage violations, to failure to provide sick leave, etc., which would all be required if the drivers were classified as employees.

If you need to discuss how to qualify for a California class action lawsuit or if you need to file a lawsuit due to overtime violations or minimum wage violations, please get in touch with one of the experienced California employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.

Did You Sign an Arbitration Agreement?

Did you know that millions of US workers are currently “barred” from the court system? Did you know that you may be one of them and not even realize it? Approximately 60 million American workers have signed arbitration agreements or arbitration clauses and they may not have even realized they were doing so.

Close to 50% of all non-unionized workers employed at companies in the United States are subject to arbitration agreements (according to the Economic Policy Institute). This number has more than doubled since the early 2000s. Major employers across the nation have adopted them as standard, including: Uber, Google, McDonald’s, Starbucks, Walmart, Macy’s, and more.

The increase in the use of mandatory arbitration agreements is making it increasingly difficult/impossible for employees to seek justice when they are victims of wage theft, discrimination in the workplace, retaliation, harassment, overtime violations, etc. The recent Supreme Court ruling allowing employers to prohibit class-action claims from workers in arbitration only increased the incentive for companies to include arbitration clauses right in their employment contracts for new hires.

The practice was once limited to business to business contract disputes, but it is now extending to legal disputes with employees and consumers. This change occurred after a significant Supreme Court ruling in 2001 related to sexual harassment. In Circuit City Stores Inc. v. Adams, an associate working at a Circuit City store in California sued the company for sexual harassment. The associate’s name was Saint Clair Adams. He said he was harassed by his co-workers because he was gay. He, like all the other employees of Circuit City, had signed an arbitration agreement stating that all disputes with the company must be resolved through private arbitration. The company argued their case in federal court, insisting that Adams was required to move his claim to arbitration due to the agreement.

The judge on the case sided with the plaintiff, Adams, and cited the Federal Arbitration Act. The Federal Arbitration Act allows companies to resolve contract disputes through arbitration but includes a provision that excludes employment contracts. The judge’s ruling was later upheld by the Ninth Circuit Court of Appeals.

The argument didn’t die with the appellate court though. Circuit City took the case to the Supreme Court where the lower court’s ruling was overturned – extending the reach of arbitration clauses to nearly all employment contracts. The justices based their decision on a close reading of the employment exclusion in the Federal Arbitration Act, which reads, “but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in interstate or foreign commerce.” The justices interpreted this to mean that “transportation workers” were exempt from mandatory agreements; and that non-transportation workers would be required to take their claims to arbitration.

Another Supreme Court ruling in May 2018 made it even more difficult for workers to seek justice or force a company to change working conditions. The case was Epic Systems Corp. v. Lewis and the court decided that it is legal for employers in the United States to prohibit employees from joining together to file suit against the company claiming discrimination, wage theft, or other common workplace violations.

Do you have questions about how to deal with workplace violations when there is an arbitration agreement in place? Call one of the experienced California employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.