Question the 'Enforceability' of Arbitration Agreements

By Flynn, Gillian | Workforce, September 1999 | Go to article overview

Question the 'Enforceability' of Arbitration Agreements


Flynn, Gillian, Workforce


Oh, the difference a year can make. It wasn't long ago that mandatory arbitration agreements were being hailed as the panacea for all employment disputes. They saved a company time, money and headaches. Suddenly none of that is necessarily true, as cases questioning the enforceability of arbitration agreements are sprouting up all over. Carole Ross, an associate with San Diego law firm Sheppard, Mullin, Richter & Hampton LLP, discusses recent lawsuits and how your company can avoid one.

Let's talk about the recent cases that will affect the atmosphere for mandatory arbitration.

In Gonzalez vs. Hughes Aircraft Employees Federal Credit Union, Diana Gonzalez was hired by Hughes Aircraft Federal Credit Union, and two months after she was hired, the company presented her with a standardized arbitration agreement. The arbitration agreement required all issues to be submitted through an internal grievance process. So all employees who had a problem were required to use that grievance process, and then if they weren't satisfied, if the decision didn't go their way, they had 20 working days to notify the company that they were going to arbitrate the matter. If they didn't follow through in 20 days, according to the policy, they could not arbitrate the matter or sue; all revenues were lost.

What happened?

Diana Gonzalez signed the agreement and had a dispute with her company. She tried to sue for wrongful discharge due to sexual harassment and national origin, and the company filed a petition to compel arbitration. It's important to note that the arbitration agreement said employees were required to sign it as a condition of employment, so Gonzalez was already an employee and her choice was-or appeared to be in the text-sign this or you will no longer have a job.

What did the court rule?

There are different reasons for arbitration agreements to be considered invalid or unenforceable, but the common way is for them to be considered unconscionable. There are two ways to be considered unconscionable--one is procedural and the other is substantive.

What do those terms cover?

Procedural unconscionability relates to the employee's ability to negotiate the terms of a contract. Something is procedurally unconscionable if one party, or in this case an employee, has no real bargaining power, no chance to negotiate the terms.

Here's the line: If the market is so great for an employee and he or she has three job offers and one includes signing an arbitration agreement, the court may not find that's procedurally unconscionable-- that may be fine because this person does have the opportunity to negotiate, or can take another job offer. But the Gonzalez case centered on someone already in a job, who does not have equal bargaining power, who really can't negotiate.

And what is substantive unconscionability?

Substantive unconscionability talks about the terms of a contract-the courts use the phrase "shocks the conscience." The contract's terms are so unfair they shock the conscience. They're unfair, often one-sided or oppressive.

In the case of arbitration agreements, they're one-sided against the employee. For a court to rule against an agreement, it must be both procedurally and substantively unconscionable. Also, the courts tend to use a sliding scale, where if something is amazingly substantively unconscionable, they'll allow lesser amounts of procedural unconscionable and vice versa.

So, for example, how were these proven in the Gonzalez case?

Take procedural unconscionability first-she worked there two months and then they presented her with an arbitration agreement that they forced her to sign. What could she do? She had no negotiating power. So procedural unconscionability was shown. Then the court looked to see if it was substantively unconscionable.

And what did they decide?

One of the issues with the agreement was the short statute of limitations-the 20-day period in which Diana Gonzalez had to notify the company of her intent to arbitrate. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Question the 'Enforceability' of Arbitration Agreements
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.