The Supreme Court of California this week enforced the arbitration agreement between an employee and employer. Yes, you read that right. While reputed to be reliably anti-arbitration, California’s highest court continues to provide evidence that it is tired of being reversed by SCOTUS * and is ready to follow federal precedent on the FAA.
In Baltazar v. Forever 21, Inc., 2016 WL 1176599 (Cal. Mar. 28, 2016), the question was whether the employee’s arbitration agreement was unconscionable. The district court found it procedurally and substantively unconscionable, but the court of appeal reversed. The Supreme Court of California agreed with the court of appeal.
While the arbitration agreement was procedurally unconscionable because the employee lacked any choice, the court found it was not substantively unconscionable for any of the three reasons asserted by the employee. Most importantly, the court “disapproved” of a previous case from the courts of appeal (Trivedi). That case had held that if an arbitration agreement allows the parties to seek interim relief in court, it is substantively unconscionable because the employers are more likely to take advantage of interim relief. In Baltazar, the court noted that California statutes expressly allow parties to seek interim relief in court, therefore “simply reciting the parties’ rights under section 1281.8 does not place [the employee] at an unfair disadvantage.”
In addition, the court found the arbitration agreement was not one-sided either because it provided that the employer’s trade secrets would be kept confidential in the arbitration, or because it said all employment claims must be arbitrated, but then listed as examples only the types of claims that employees bring.
In my opinion, this arbitration agreement was not even close to the line of substantive unconscionability. So the decision on its own is not very newsworthy, except for its disapproval of the earlier case. But it is newsworthy in context, because this opinion is the third recent decision from the Supreme Court of California that enforces arbitration agreements even in consumer or employment contexts. (This is the first, this is the second.) (*The most recent California decision that got reversed by SCOTUS–DIRECTV–was actually a decision from the intermediate appellate court, not the Supreme Court of California.) This trend is significant, given California’s reputation.