In this guide7 sections
Employees First Labor Law won a published California Court of Appeal decision holding that an employer’s mandatory arbitration agreement could not be enforced because it was unconscionable. The court found that the agreement, which every new hire had to sign, cut the time to bring claims to one year and limited discovery too tightly for the employee’s claims. Because the decision is published, California trial courts generally must follow it.
Key takeaways
- The Court of Appeal (Fourth Appellate District, Division Three) affirmed an order refusing to send the employee’s case to arbitration.
- Shortening the deadline to file all claims to one year was held unconscionable, because many employment claims have longer deadlines by law.
- Limiting each side to 20 interrogatories and three depositions was too restrictive for a case with 13 claims.
- With more than one unfair term, the court refused to cut out the bad parts and enforce the rest.
- The opinion was certified for publication at the Labor Commissioner’s request, making it binding precedent for trial courts.
What the court decided
The employee sued his former employer, a property management company, in Orange County Superior Court. The employer moved to compel arbitration under an agreement he had signed as a condition of starting work. The trial court denied the motion, and the employer appealed. In an opinion filed in November 2021, the Court of Appeal affirmed. In December 2021 it certified the opinion for publication at the request of the California Labor Commissioner.
Employees First Labor Law attorneys, including Jonathan P. LaCour, represented the employee on appeal.
Past results do not guarantee a similar outcome in any other case.
Why the agreement failed
California courts refuse to enforce an unconscionable contract or clause (Civil Code §1670.5). That requires both procedural unconscionability, meaning unfairness in how the agreement was presented, and substantive unconscionability, meaning unfair terms. The more one-sided the terms, the less procedural unfairness is needed.
| Issue | What the court found |
|---|---|
| How the agreement was presented | A contract of adhesion that had to be signed to begin work: some procedural unconscionability, even though the agreement was a separate document with “arbitration” in bold. |
| One-year deadline for all claims | Substantively unconscionable, because many of the employee’s claims carry longer limitations periods under California law. |
| Discovery limits | Each side got 20 interrogatories and three depositions, with no express right to document requests, and more only on a showing of “substantial need.” The court held this was inadequate for the employee’s 13 causes of action. |
| Severing the bad terms | Refused. With multiple unconscionable provisions, the agreement was “permeated” by unconscionability, and the court declined to rewrite the discovery rules for the employer. |
The court did not accept every argument. It found some other terms, including the cost provisions and limits on class and consolidated proceedings, were not unconscionable. The result turned on the shortened deadline and the discovery limits together.
What this means if you signed an arbitration agreement
Signing an arbitration agreement does not always mean you are stuck with it. The California Supreme Court has held since 2000 that an agreement requiring arbitration of statutory employment claims, such as discrimination claims under FEHA, must at minimum:
- provide a neutral arbitrator,
- allow more than minimal discovery,
- require a written decision,
- allow all the remedies you could get in court, and
- not make you pay arbitrator fees or unreasonable costs you would not face in court.
Terms that may make an agreement unenforceable include a shortened deadline to file, tight discovery caps, one-sided rules that only bind the worker, limits on damages or attorney’s fees, and a requirement that you share the arbitrator’s fees. For sexual harassment and sexual assault disputes, federal law also lets you choose to go to court even if you signed a pre-dispute arbitration agreement (9 U.S.C. §402).
Example (hypothetical): Ana signed a stack of onboarding forms, including an arbitration agreement that gives her six months to bring any claim. When she is fired a year later and sues for unpaid overtime, the shortened deadline is a red flag that a court may find substantively unconscionable.
Steps to take
- Get a copy of every arbitration agreement or handbook acknowledgment you signed. See how to request your personnel file and records.
- Note how it was presented: whether you had time to read it, whether anyone explained it, and whether you could start work without signing.
- Don’t miss your legal deadlines while the arbitration question is sorted out. For example, most overtime claims must be brought within three years.
- Have a lawyer review the terms before the employer files a motion to compel arbitration.
Read more in our guides to mandatory arbitration clauses, mediation and arbitration, and a 2025 decision rejecting a misleading arbitration agreement.
Frequently asked questions
Can my employer require me to sign an arbitration agreement?
Many employers do, and courts often enforce these agreements. But a court can refuse to enforce an agreement that is unconscionable or that does not meet California’s minimum fairness requirements.
Can an arbitration agreement shorten my deadline to sue?
A clause that cuts statutory deadlines for employment claims, such as a one-year limit for all claims, may be found unconscionable, as it was here.
Will a court just strike the unfair parts?
Sometimes. If there is one unfair term, a court may sever it and enforce the rest. If the agreement has several, a court may refuse to enforce it entirely.
Does this decision apply to my case?
It is binding precedent on California trial courts, but every agreement and set of facts is different. Your agreement’s specific terms and how it was presented will control the outcome.
Talk to a California employment lawyer
Employees First Labor Law represents workers exclusively. If your employer is pushing your claim into arbitration, we offer free virtual consultations to review the agreement. Contact us or call (310) 853-3461.
This article is general information about California law as of 2026, not legal advice for your situation. Reading it does not create an attorney-client relationship.
