Tactics Kill Arb Agreement

By Lori Phillips

In Roe v. SFBSC Management, LLC, No. 14-cv-03616 (N.D. Cal. Mar. 2, 2015), a federal district court in California rejected a night club’s attempt to compel arbitration by a class of performers who claimed they were misclassified as independent contractors. The court rejected the terms of the arbitration agreement as “substantively unconscionable” because they were too one sided: the performers (but not the night club and its affiliates) were restricted from bringing class actions and the parties had to bear costs equally. The court also found the agreement to be “procedurally unconscionable;” the employer presented the agreement to the performers while they were “mostly naked,” “rushed” them into signing, and told them they could not take the agreement home to review. Because the agreement was both substantively and procedurally unconscionable, the court declared it unenforceable. As the court stated, “arbitration, however valuable and strongly preferred, is meant only to provide an alternative forum to litigation, not to overstuff one party’s quiver . . . .” Moreover, the night club set an example of what not to do when presenting an arbitration agreement to one’s employees or independent contractors. Employers should give workers an opportunity to review and decline the arbitration agreement, and, at least, wait until the workers are wearing clothes.