Opinion ID: 178602
Heading Depth: 3
Heading Rank: 1

Heading: Armendariz Minimum Requirements

Text: In Armendariz, the California Supreme Court established minimum standards for employer-mandated arbitration agreements that require employees to waive their statutory rights. 6 P.3d at 682. Specifically, such arbitration agreements must: 6 (1) [P]rovide[] for neutral arbitrators, (2) provide[] for more than minimal discovery; (3) require[] a written award, (4) provide[] for all of the types of relief that would otherwise be available in court, and (5) . . . not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum. Id. at 682 & n.8 (quoting Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465, 1482 (D.C. Cir. 1997)). An arbitration agreement that fails to satisfy these minimum requirements contravenes public policy. See Armendariz, 6 P.3d at 674. As eBay required that Kepas execute an arbitration agreement that waived his statutory rights pursuant to Title VII and the Age Discrimination in Employment Act, the parties agree that the minimum requirements of Armendariz apply to the Arbitration Agreement. See id. at 680-81 (concluding that the minimum requirements of Cole extend beyond the context of Title VII). Pursuant to the requirement that employees not bear unreasonable costs or arbitrator fees, Armendariz explains that “the employee [cannot be required] to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” Id. at 687 (emphasis in original). Rather, “the employer [must] pay all types of costs that are unique to arbitration.” Id. at 689. Kepas alleges that the Arbitration Agreement impermissibly exposes him to arbitration expenses and to unreasonable witness travel costs.
Kepas asserts that the Arbitration Agreement violates Armendariz because arbitrator fees and American Arbitration Association (“AAA”) costs could be 7 imposed on employees pursuant to the arbitrator’s award. We agree. The Arbitration Agreement expressly allows an arbitrator to award “any type of legal or equitable relief that would be available in a court of competent jurisdiction, including but not limited to, the costs of arbitration.” App. at 59-60 (emphasis added). As the term “costs of arbitration” is undefined in the Arbitration Agreement, we look to the AAA Rules and Procedures for its meaning. See id. at 59 (requiring that, “wherever this Agreement is silent on the arbitration procedure,” the rules issued by the AAA control). The AAA Rules and Procedures define the term “costs of arbitration” as “[a]ll expenses of the arbitrator . . . and any AAA expenses.” Id. at 63. Thus, we conclude that the Arbitration Agreement impermissibly imposes a significant risk of these costs on employees. eBay’s arguments to the contrary are unavailing. First, eBay points to a provision in the Arbitration Agreement specifying that “the Employer will pay the arbitrator’s fee for the proceeding, as well as any room or other charges by AAA.” Id. at 59. However, this provision merely suggests that eBay will cover these costs initially. The employee nonetheless faces the risk that the arbitrator could shift the costs to him or her in the arbitration award. As a cost-shifting “system . . . poses a significant risk that employees will have to bear large costs to vindicate their statutory right against workplace discrimination,” this provision contravenes public policy pursuant to Armendariz. Mercuro v. Superior Court, 8 116 Cal. Rptr. 2d 671, 681-82 (Cal. Ct. App. 2002) (internal quotation marks omitted). Second, eBay asserts that the arbitrator has no ability to require the employee to pay arbitrator fees and other AAA expenses, as such relief would be unavailable “in a court of competent jurisdiction.” App. at 59-60. This argument ignores the language set forth in the Arbitration Agreement. The arbitrator is explicitly authorized by the Arbitration Agreement to impose the “costs of arbitration” on an employee. Id. at 60. Further, adopting eBay’s explanation would render the term “costs of arbitration” in the award provision inoperative and, pursuant to the California rules of contract interpretation, such result should be avoided. See Cal. Civ. Code § 1641 (specifying that, when interpreting the language of a contract, the court should give effect to every provision). As we have concluded that the award provision contravenes public policy, we must also evaluate whether the defect renders the Arbitration Agreement unenforceable in its entirety or whether this provision is severable. After addressing other alleged defects in the Arbitration Agreement, we will turn to the issue of severability.
Kepas argues that the requirements set forth in Armendariz are also violated by the forum selection clause’s effect on witness travel expenses. He asserts that the forum selection clause in the Arbitration Agreement could require 9 employees to incur unreasonable witness travel expenses in order for their witnesses to travel to distant arbitration proceedings. Specifically, he argues that the forum selection clause mandates that the arbitration proceedings for covered claims occur in Santa Clara County, California, while his relevant witnesses are located in Utah. As witness travel costs are not unique to arbitration, Kepas’s challenge to the forum selection clause and its related effect on witness travel expenses is not compelling. In fact, courts consider these costs when evaluating the reasonableness of forum selection clauses in conjunction with litigation in general. See Smith, Valentino & Smith, Inc. v. Superior Court, 551 P.2d 1206, 1209 (Cal. 1976). Thus, an employee’s potential to incur witness travel costs does not violate the Armendariz minimum requirements. Rather, Kepas’s argument implicates the reasonableness of the forum selection clause itself, which we will also address.