## Facts

- Carpet installers sued a national flooring company in a putative class action, alleging they were misclassified as independent contractors and denied wage-and-hour and related Labor Code protections.
- As a condition of obtaining and keeping work, installers were required to sign nonnegotiable form agreements presented on a “take it or leave it” basis with little or no time for review.
- The operative agreement was an 11-page, single-spaced document in small font with complex legal terminology; the arbitration clause appeared near the end of the document.
- The agreement was provided only in English even though some installers had limited English proficiency or could not read English.
- The arbitration clause included (1) a shortened limitations period for bringing claims, (2) a one-sided attorney-fee provision favoring the company, and (3) carve-outs that allowed court litigation for claims commonly brought by employers (e.g., enforcement of restrictive covenants).

## Issues

1. Whether the arbitration provision was procedurally and substantively unconscionable under California law and therefore unenforceable.
2. Whether any unconscionable terms could or should be severed to enforce the remainder of the arbitration agreement.
3. Whether an Illinois choice-of-law clause displaced California law for purposes of evaluating enforceability.
4. Whether the Federal Arbitration Act, after *AT&T Mobility LLC v. Concepcion*, preempted the application of California unconscionability doctrine to invalidate the arbitration provision.

## Decision

- The Court of Appeal affirmed the order denying the motion to compel arbitration.
- The court held the arbitration provision was unconscionable under California law as applied to mandatory employment-related arbitration of statutory claims.
- The court held the trial court did not abuse its discretion in refusing to sever terms because the arbitration provision was permeated with unconscionability; the severance argument was also not adequately raised in the trial court.
- The court held California law governed the enforceability analysis despite the contract’s Illinois choice-of-law clause.
- The court held the FAA and *Concepcion* did not require enforcement because the invalidation rested on a generally applicable contract defense rather than a rule disfavoring arbitration.

## Legal Principles

- Unconscionability under California law has procedural and substantive components evaluated on a sliding scale; both may render an arbitration clause unenforceable.
- High procedural unconscionability may be shown by adhesion contracting, lack of meaningful choice, surprise placement of key terms in dense documentation, limited opportunity to review, and presentation in a language the worker cannot read.
- Substantive unconscionability is supported by terms that materially skew dispute resolution, including shortened claim-filing periods, unilateral fee-shifting, and employer-favorable carve-outs from arbitration.
- Courts may refuse severance and decline to enforce an arbitration clause in its entirety when multiple unfair provisions indicate a systematic effort to impose a one-sided arbitral forum.
- A choice-of-law clause will not be applied when doing so would defeat strong California public policy interests in enforcing worker protections and would produce substantial injustice.
- The FAA permits invalidation of arbitration agreements using generally applicable contract defenses (including unconscionability), and such applications are not preempted when they do not single out arbitration for disfavored treatment.

## Conclusion

The court affirmed denial of arbitration because the installers’ agreement was imposed through oppressive procedures and contained strongly one-sided terms; California law applied notwithstanding an Illinois choice-of-law clause, severance was properly denied due to pervasive unfairness, and the FAA did not preempt the unconscionability determination.


Samaniego v. Empire Today, LLC, 205 Cal. App. 4th 1138 (Ct. App. 2012)