California Supreme Court Clarifies When Workplace Arbitration Agreements Are Unenforceable

Arbitration agreements have become routine in many California job applications and onboarding materials. Employees frequently find themselves signing these agreements quickly, often without sufficient explanation, as a condition for getting or keeping a job. A recent ruling by the California Supreme Court provided important guidance on when arbitration agreements may cross the line and when the court should step in to protect employees’ rights.

Background of the Case

In this case, the plaintiff and respondent, whom, for purposes of this article, we will refer to as E.F., applied for a job at Empire Nissan and, as part of her application, was given a packet of documents to sign. Among these documents was a mandatory arbitration clause requiring that all employment-related disputes be resolved through private arbitration rather than in court.

The issue? The arbitration clause was hidden in tiny, blurry text and was filled with complex legal jargon. E.F. was given only a few minutes to review the documents, was not informed that she was consenting to arbitration, and didn’t get a copy after signing.

Years later, after taking medical leave for cancer treatment, she was let go. She filed a lawsuit alleging wrongful termination and related claims. Empire Nissan responded by asking the court to compel E.F. into arbitration.

What the Supreme Court Examined

To determine whether an arbitration agreement is enforceable, California courts analyze unconscionability, which has two parts:

• Procedural unconscionability: How the agreement was presented and if the employee had a meaningful choice.
• Substantive unconscionability: Whether the terms are inherently unfair or biased.

Both elements must be present, but they don’t need to be present to the same degree. The more substantively oppressive a term, the less evidence of procedural unconscionability is required in order to invalidate the agreement.

How Do Illegible Prints Affect Arbitration Agreements?

The Supreme Court made an important clarification: tiny or illegible print supports only a finding of procedural unconscionability, not substantive unconscionability. In other words, an agreement cannot be deemed unfair just because it is hard to read. However, when an employer presents a “visually impenetrable” document, gives the worker hardly any time to review it, and fails to explain what rights are being waived, that creates serious procedural unfairness.

What the Court Said About One-Sided Agreements

The court also examined whether the arbitration agreement was biased in favor of the employer. E.F. argued that the separate confidentiality agreements allow Empire Nissan to take its own claims to court while forcing employees to arbitrate any claims they might have. If true, such a one-sided arrangement would run counter to the fundamental principle that arbitration agreements should be fair and mutual.

The California Supreme Court rejected the idea that courts should automatically resolve unclear contract language in favor of arbitration. Instead, it emphasized that arbitration agreements must be evaluated like any other contract. When an agreement is imposed under highly oppressive circumstances, courts must closely scrutinize whether its terms genuinely treat both sides equally. Because there were unresolved factual questions about how the agreements worked together, the Supreme Court remanded the case to the trial court for further review.

This ruling sends a clear message: employers cannot rely on fine print, confusing documents, or high-pressure tactics to force employees into arbitration. While arbitration agreements are not automatically invalid, they must be clearly presented and fair.

Contact a California Employment Lawyer

If your employer is asking you to sign an arbitration agreement—or telling you it’s “standard”—it’s normal to feel unsure about what you’re giving up. You don’t have to figure it out alone. The Finkel Firm represents California employees on a contingency basis, meaning you pay nothing unless we recover for you. Contact us to review your agreement and discuss your options.