Employee Won Substantive Unconscionability Argument Based on Absence of Frivolousness Requirement for Employer FEHA Fee Recovery.
Normally under FEHA, a prevailing defendant (usually, an employer) can only recoup fees if it proves that plaintiff employee’s claims were frivolous, unreasonable, without foundation, or brought in bad faith. What happens when an employer inserts an arbitration clause into a contract with an employee allowing the arbitrator to award the prevailing party fees as to FEHA claims sans the elevated requirements for a winning defendant? Short answer: it is a factor which can lead to judicial nonenforcement of the arbitration clause.
Mayers v. Volt Management Corp., Case No. G045036 (4th Dist., Div. 3 Feb. 2, 2012) (unpublished) is an illustration of this, where a 3-0 panel (author: Justice Fybel) affirmed a lower court’s denial of a motion to compel arbitration under a fees clause with just such a provision. Such a clause did manifest a degree of substantive unconscionability when, combined with other factors, led to it not being honored. As far as the prevailing party fees clause, the appellate court found that it was too pro-employer and weakened the frivolous-based protections normally available under FEHA to losing employees. (Trivedi v. Curexo Technology Corp., 189 Cal.App.4th 387, 394-395 (2010).)
So, employers, consult Trivedi and Mayers on this issue, not to mention the California Supreme Court’s seminal decision of Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000) when drafting arbitration clauses.