In 2018, the US Supreme Court issued its case in Epic. It involved 3 Consolidated federal circuit court cases on the question whether arbitration agreements signed by employees allowed waiver of class action lawsuits. Epic decided that employers nationwide, can now prevent its employees in employment disputes from litigating class-action lawsuits if there is an arbitration agreement prohibiting same.
That was a decided victory for employers. But what about individual employee claims? For example, wage and hour, discrimination, sexual harassment, retaliation, over time, missed meal and rest breaks, FEHA claims, or in the California context, the provisions of the labor code? In essence, can all employee disputes now be forced into arbitration? In other words, does this now allowing employer to make a motion to compel all state claims? If that is the case, it would have an almost monumental effect: essentially barring employees from ever going to court to litigate all their claims—instead, only through such tribunals as the American arbitration Association and JAMS.
To answer this question, a more detailed analysis of Epic is in order. It began with the acknowledgment of the “liberal federal policy favoring arbitration agreements . . . the plain meaning of the statute and the unmistakably clear congressional purpose that the arbitration procedure, when selected by the parties to a contract, the speedy and not subject to delay and obstruction in the courts”.
In light of this unwavering public policy in favor of arbitration, the court then queried whether there were any exceptions after parties voluntarily entered into an arbitration agreement. It cited to what is called the “saving clause” which “allows courts to refuse to enforce arbitration agreements upon such grounds as exist at law or in equity for the revocation of any contract” (section 2 of the FAA). In turn, the court held that clause “permits agreements to arbitrate to be invalidated by generally act applicable contract offenses, such as fraud, duress, or unconscionability” citing Conception.
In most cases, it would be hard to prove fraud or coercion. But an unconscionable contract would be a different matter. California courts are very liberal in this regard and lean toward this if they find a contract is one of adhesion. Namely, forcing an employee, as a condition for employment, to sign the arbitration provision or else. So it can be expected the California courts, even in light of epic, will still invalidate these provisions.
In Epic, as to its specific facts, found that the contract was not unconscionable. But it did so without much analysis. It might be possible for it to change its mind if other facts are presented in a later matter. But based upon the other language of epic, this will probably not be the case.
This is because epic found in the battle between voiding a contract for unconscionability and the public policy in favor of arbitration, the latter will win out: “This fundamental change to the traditional arbitration process, the court said, would sacrifice the principal advantage of arbitration– it’s informality– and make the process slower, more costly, and more likely to generate procedural morass than final judgment.”
Going even further, the court emphasized being wary for state courts invalidating arbitration on general public policy grounds: “Just as judicial antagonism toward arbitration before the arbitration Act’s enactment manifested itself variety of devices and formulas declaring arbitration against public policy, Conception teaches that we must be alert to new devices and formulas that would achieve much the same result today.” Ergo, California’s decided, almost uncontrolled bias to protect employee rights and place them in a jury trial.
If the court continues to emphasize this public policy, then it will strike down California’s future attempts to invalidate based upon unconscionability.
In fact, a head-on collision between California’s liberality and Epic will shortly be the case. This is based on the recent California Supreme Court case of Lawson v. ZB N.A., 18 Cal.App.5th 705 (2017) which held an employee does have the right to ignore an arbitration provision and go directly into court to enforce lost wages and civil penalties under the labor code.
In the meantime, arguments can be made by both sides and we will have to await not only the California Supreme Court decision, but a follow-up US Supreme Court decision.
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