194 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com waivers in arbitration agreements were inherently unconscionable, these arbitration agreements could still be found to be unconscionable on other grounds. However, a number of these cases reached differing conclusions on similar facts, which created uncertainty as to the correct standard for unconscionability. In 2015, the California Supreme Court clarified the standard of unconscionability as applied to arbitration agreements in Sanchez v. Valencia Holding Co., which concerned a contract to purchase a used car.945 Sanchez 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.946 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.947 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.948 In 2023, however, the California Court of Appeal recognized additional grounds to attack arbitration agreements on conscionability grounds. In Alberto v. Cambrian Homecare, the Court held that separate arbitration and confidentiality agreements that were executed simultaneously during initial hiring should be read together, such that the unconscionability of the confidentiality agreement rendered the arbitration agreement unenforceable.949 In Alberto, the trial court denied a motion to compel arbitration when the employee simultaneously signed the arbitration agreement and a separate, confidentiality agreement that contained several unlawful terms. The Court of Appeal affirmed, relying on the general rule under Civil Code § 1642 that “several papers relating to the same subject matter and executed as parts of substantially one transaction, are to be construed together as one contract.” The Court observed that the agreements (1) “were executed on the same day,” (2) “were both separate aspects of a single primary transaction – [the plaintiff’s] hiring,” and (3) “both governed … the same issue – how to resolve disputes arising between [the plaintiff] and [employer] concerning [the plaintiff’s] employment.” Consequently, the Court of Appeal further concluded that unconscionability in the confidentiality agreement affected whether the arbitration agreement was unconscionable. for the first time was enforceable and not unconscionable where employer provided 30-days’ notice to employees before enforcing revised agreement). 945 Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899 (2015). 946 Id. at 911. 947 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”). 948 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). 949 91 Cal.App.5th 482 (2023).
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