Hasty v. AAA and Unconscionable Arbitration Agreements  

Arbitration agreements may be invalidated if they are found to be unfair or oppressive towards a disadvantaged party. The determination of whether an arbitration agreement is unconscionable is based on both procedural factors (how the agreement was made) and substantive factors (the terms of the agreement itself). To be valid, employment arbitration agreements should include voluntary and informed consent, adequate notification, clear and easily understandable language, and other essential elements. A recent case heard by the California Court of Appeal suggests that employers should take particular care with the presentation of arbitration agreements to their employees, especially considering the possibility that these agreements may be viewed and signed on electronic devices of various sizes and formats.

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Aljarice Hasty was hired by the American Automobile Association (“AAA”) as an insurance sales agent in March 2019.  Hasty’s verbal offer did not include any reference to an arbitration agreement, but she later received an offer letter which stated that she would need to sign an arbitration agreement the “first day of her employment.”  Prior to starting her job with AAA, Hasty received an email with a link to a Workday, a “new hire onboarding portal,” containing electronic forms, including an arbitration agreement. Because Hasty did not have a desktop or laptop computer, she used her phone to view and sign the Workday documents in the application.

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When Hasty later sued AAA for discrimination, harassment, retaliation, and wrongful discharge, AAA moved to compel arbitration pursuant to the arbitration agreement that Hasty had electronically signed in Workday. The trial court found the arbitration agreement was valid, but also that it was unconscionable and therefore unenforceable.  AAA appealed. The Court of Appeal affirmed the trial court’s ruling.

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The Court of Appeal found that Hasty had plenty of time to review the agreement and consult with an attorney before filing. Because of this, the court ruled the arbitration agreement did not contain elements of oppression. However, the arbitration agreement did contain elements of surprise, largely due to the manner in which it was presented to Hasty. The court found the that the arbitration agreement—when viewed through the Workday platform on a mobile phone—was dense, difficult to read, and contained an excess of legal jargon.

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A handful of elements were cited by the court as examples of the agreement’s procedural unconscionability. Firstly, no alternative means of presentation was presented to Hasty for viewing and signing the arbitration agreement—whether physically, or through a different device. Additionally, the presentation of the documents through the Workday platform lacked instructions on how to view the agreement and allowed for an employee to click “I Agree” without first viewing the arbitration agreement. Finally, the signature statement in Workday simply refers to a “document” without mentioning the arbitration agreement specifically, therefore creating ambiguity as to what document is being signed.

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The court also found that the arbitration agreement was substantively unconscionable. The court found several one-sided provisions, including a hidden waiver of remedies and relief from a charge filed with a governmental administrative agency. It also required a confidential arbitration, which may prevent employees using previous findings to prove a pattern of discrimination and discourage employees to pursue claims in the first place. The arbitration agreement also contained a waiver of representative claims, which is unconscionable because it requires an employee to waive what is an unwaivable claim in California.

Key Takeaways

Hasty has several implications for businesses employing personnel in California. In order to ensure an arbitration agreement is enforceable, employers should seek to maintain consistency and transparency in all stages of employee onboarding. Other areas of concern for California employers:

• The elements of all offers should be consistent regarding deadlines and requirements for viewing and signing an arbitration agreement.
• Electronically delivered arbitration agreements must be handled with particular care, and employers should ask employees ahead of time if they have access to a computer or, if not, if they will be viewing the arbitration agreement on a mobile phone. In the absence of an available computer, alternative arrangements for viewing and signing the arbitration agreement should be made (either by physical examination or through the use of another device).
• Third party vendors of software that will be used for processing employee paperwork should be checked to determine if it complies to the presentation and transparency requirements of California law.
• Employers should not depend upon third party vendors to be up to date on the nuances of arbitration agreement conscionability under California law
• Employers must check and review all employee paperwork on a variety of screens to ensure the legibility of documents is of good quality before sending to an employee.
• Employers should consider offering alternative options for the viewing and signing of employment agreements.

To ensure the enforceability of arbitration agreements, California employers must consider the craft of the agreement as being of equal importance to the clarity of its presentation.

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