Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour and Labor Code Class Actions (22nd Edition) 159 acknowledged that Concepcion requires enforcement of class action waivers contained in arbitration agreements, but confirmed that such agreements could still be found unconscionable for other reasons. Sanchez noted that an arbitration agreement must be substantially more than a “simple old-fashioned bad bargain” to be deemed unconscionable.897 It upheld the arbitration agreement at issue as not being unreasonably one-sided, even though it was a contract of adhesion that contained some provisions that favored the drafting party, the consumer had no opportunity to negotiate the arbitration provisions, these provisions were not specifically pointed out to him and he was unaware of their existence when he signed the contract.898 Overall, Sanchez found that the terms of the agreement were reasonably balanced and therefore not unconscionable. While Sanchez centered on a car sales contract, its reasoning should also apply to arbitration agreements in the employment context.899 H. California Legislative Attacks on Employee Arbitration Agreements On October 10, 2019, Governor Newsom signed AB 51, which adds Section 432.6 to the Labor Code and Section 12953 to the Government Code. The new law, manifesting California’s continuing aversion to arbitration provisions, forbids employers to require prospective or current employees to “waive any right, forum, or procedure for a violation of any provision” of the FEHA or the California Labor Code. The law prohibits employers from requiring employees to enter arbitration agreements as a condition of employment, continued employment, or the receipt of any employment-related benefit. To pass muster under the law, arbitration agreements with employees must be entirely voluntary. The bill that became this new law is similar to a bill Governor Brown vetoed in 2018 on the basis that it was preempted by the Federal Arbitration Act. And on February 7, 2020, Chief Judge Kimberly Mueller of the United States District Court for the Eastern District of California confirmed Governor Brown’s concern. Judge Mueller enjoined the State of California from enforcing the new law, because it both interferes with the FAA’s goal of promoting arbitration, and places arbitration agreements on unequal footing with other contracts.900 The State appealed the ruling to the Ninth Circuit and in September 2021 the Ninth Circuit issued its opinion in a 2-1 decision, which vacated the injunction preventing the State enforcing the law but finding that the civil and criminal penalties were incompatible the FAA.901 The majority found that the law does not conflict with FAA because it focuses on conduct which takes place prior to the formation of the arbitration agreement and does not invalidate the arbitration agreement itself. Regarding the criminal and civil penalties, the panel held they violated 897 Id. at 911. 898 Id. at 914-15; see, e.g., Farrar v. Direct Commerce, Inc., 9 Cal. App. 5th 1257 (2017) (holding that arbitration provision exception for “any claim” based on confidentiality agreement was substantively unconscionable, but could be severed, so that arbitration agreement could be upheld despite being “one sided”). 899 See Baltazar v. Forever 21, Inc., 62 Cal. 4th 1237 (2016) (holding that “sign it or no job” employment arbitration agreement was not unconscionable where, among other factors, the arbitration rules were not provided to the employee along with the agreement); but see Ali v. Daylight Transport, LLC, 59 Cal. App. 5th 462 (2020) (distinguishing Baltazar and invalidating arbitration agreement because it incorporated by reference but did not attach the AAA rules). 900 Chamber of Commerce of United States v. Becerra, 438 F.Supp.3d 1078 (E.D. Cal. 2020). 901 Chamber of Com. of United States v. Bonta, 13 F.4th 766 (9th Cir. 2021)
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