Court Opinion

ID: 2788592
Source: CourtListenerOpinion
Date Created: 2015-03-23 21:02:04.9285+00
Date Added: 2024-06-11T11:28:47.163867
License: Public Domain

Filed 3/23/15 Valdez v. Santa Lucia Preserve Co. CA6
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      SIXTH APPELLATE DISTRICT

MARICELA VALDEZ et al.,                                              H040685
                                                                    (Monterey County
         Plaintiffs and Respondents,                                 Super. Ct. No. M124666)

         v.

SANTA LUCIA PRESERVE COMPANY,

         Defendant and Appellant.

                                              I. INTRODUCTION
         Plaintiffs Maricela Valdez, Maria Lupita Leon, Daniella R. Ibarra, and Victor
Viorato filed a putative class action complaint alleging wage and other claims against
their former employer, defendant Santa Lucia Preserve Company. Defendant filed a
motion to compel arbitration based on an arbitration agreement each plaintiff separately
signed while employed. The trial court denied the motion after determining that the
parties’ arbitration agreements, which were identical, were unconscionable.
         On appeal, defendant contends that the arbitration agreements are not
substantively unconscionable and that any unconscionable provision may be severed. For
reasons that we will explain, we determine that the arbitration agreements are not
substantively unconscionable, and therefore we will reverse the trial court’s order
denying the motion to compel arbitration.
                   II. FACTUAL AND PROCEDURAL BACKGROUND
       A. The Complaint
       Plaintiffs filed a putative class action complaint against defendant alleging
violations of the Labor Code and California wage orders, including the failure to pay
overtime compensation (Lab. Code, §§ 510, 1194). Plaintiffs also allege that defendant’s
conduct violated Business and Professions Code section 17200. Plaintiffs seek, among
other relief, civil penalties under the Private Attorneys General Act of 2004 (Lab. Code,
§ 2698 et seq.).
       B. The Motion to Compel Arbitration
       Defendant filed a motion to compel arbitration and to stay the action. In the
motion, defendant contended that each plaintiff executed an arbitration agreement in
connection with their employment, that all their claims were subject to arbitration, and
that the arbitration agreements were not unconscionable. Defendant also contended that
the arbitration agreements complied with the requirements set forth in Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (Armendariz).
       In a supporting declaration, defendant’s human resources manager described the
company’s new hire process and orientation during which the arbitration agreement and
other employment policies are presented to employees. She stated that each employee
meets with a human resources manager during a new hire orientation. Each document is
explained to the employee before the employee signs it, and “key” policies from the
employee handbook are addressed. For Spanish-speaking employees, another Spanish-
speaking employee or supervisor attends the orientation and translates for the employee.
According to the human resources manager, plaintiffs Valdez, Ibarra, and Viorato are
“fluent English speakers.” Regarding plaintiff Leon, who speaks “some English,”
another employee attended her orientation and translated for her. The human resources
manager further stated that all documents signed by an employee are also signed by a

                                             2
witness. In the case of plaintiffs’ arbitration agreements, an assistant human resources
manager signed each agreement.
       In support of the motion to compel arbitration, defendant also provided copies of
the two-page arbitration agreement signed by each plaintiff. The agreements are
identical.
                     1. The first page of the arbitration agreement
       The first page of the agreement states in relevant part:
       “Any dispute or claim arising out of or relating to your employment with The
Santa Lucia Preserve Company shall be decided by neutral binding arbitration under the
Rules of the Judicial Arbitration and Mediation Services (‘JAMS’) in effect at the time
the claim or dispute arose, and not by court action. . . .
       “By entering into and continuing employment with The Santa Lucia Preserve
Company, you are agreeing to have any dispute arising out of your employment with
The Santa Lucia Preserve Company decided by binding neutral arbitration, and you are
thereby waiving your right to have the dispute litigated in a public court or by jury trial.
You also understand that the award of the arbitrator(s) is subject only to limited review
and may not be altered or overturned even if it is incorrect legally or factually. These
aspects of arbitration apply to The Santa Lucia Preserve Company as they do to you.
       “However, arbitration does not apply to or cover claims for Workers’
Compensation benefits, or unemployment insurance. Furthermore, either the Employee
or The Santa Lucia Preserve Company shall have the right to seek immediate injunctive
relief, including but not limited to a temporary restraining order or a preliminary
injunction, from a court of competent jurisdiction where such relief is appropriate, and
either party’s attempt to attain such relief will have no effect on the arbitrability of the
remainder of the claim upon which such relief is sought.
       “All expenses and costs which are specific to the arbitration, including the
arbitrator’s fees and any costs of conducting an arbitration which would not occur

                                               3
otherwise, shall be paid by The Santa Lucia Preserve Company except that each party
shall bear his, her or its own attorneys’ fees and costs unless the arbitrator awards
attorneys’ fees and costs in accordance with applicable law.”
                    2. The second page of the arbitration agreement
        The second page of the arbitration agreement states in relevant part:
        “I expressly agree that I will submit any dispute related to my employment,
including but not limited to . . . any alleged violation of any State and Federal law to final
and binding arbitration under the provisions of this Arbitration Agreement. I also
acknowledge that those arbitration provisions will survive the termination of my
employment relationship with The Santa Lucia Preserve Company and will apply to all
disputes which may arise between me and The Santa Lucia Preserve Company, excepting
for claims for Workers’ Compensation benefits, unemployment insurance benefits, and
claims for immediate injunctive or relief as set forth in the arbitration provisions. The
arbitrator shall be a retired judge selected by both parties from a panel provided by
JAMS. Each party will be entitled to serve document requests and take two depositions.
The arbitrator may order further discovery by either party upon a showing of substantive
need.
        “I further understand and agree that The Santa Lucia Preserve Company will pay
the fees and costs of the arbitrator. Each party shall pay for its own costs and attorney’s
fee, if any. However, if any party prevails on a statutory claim which affords the
prevailing party attorney’s fees, then the arbitrator may award reasonable attorneys’ fees
and costs to the prevailing party.
        “I understand and agree that this agreement to arbitrate constitutes a waiver of my
right to a trial by jury of any matters subject to arbitration under this agreement. I have
read and reviewed this agreement and enter into it voluntarily.”

                                              4
       C. Opposition to the Motion to Compel Arbitration
       In opposition, plaintiffs contended that the arbitration agreements were
procedurally and substantively unconscionable. Regarding procedural unconscionability,
plaintiffs contended, among other arguments, that defendant never pointed out to them
that the documents they were signing contained an arbitration agreement. Further,
although they spoke Spanish as their first language and their supervisors communicated
with them primarily or exclusively in Spanish, they were not provided with an
explanation or translation of the arbitration agreement. They were also not provided with
a copy of the JAMS rules referenced in the arbitration agreement. Plaintiffs further
contended that they were not given the choice to opt out of the agreement, and they
believed they had to sign the agreement in order to work for defendant.
       Regarding substantive unconscionability, plaintiffs contended that the arbitration
agreement lacked mutuality and applied only to claims asserted by an employee.
Plaintiffs also argued that the arbitration agreement did not comply with the requirement
in Armendariz that an arbitration agreement provide for a written award to enable judicial
review. Plaintiffs contended that the unconscionable terms could not be severed from the
arbitration agreement in order to cure the defective agreement.
       Plaintiffs submitted declarations in opposition to defendant’s motion to compel
arbitration. According to the declarations, plaintiff Viorato was formerly employed by
defendant as a maintenance worker, while plaintiffs Valdez, Leon, and Ibarra were
formerly employed as housekeepers. Plaintiff Valdez was also a supervisor during part
of her employment although she continued to perform the same housekeeping tasks.
       According to plaintiffs’ declarations, Spanish was the first language for each of
them. Plaintiff Valdez also spoke and understood some English, but her ability to read or
write was extremely limited. Plaintiffs Ibarra and Viorato also spoke and understood
English. Plaintiff Leon did not speak, read, or write in English.

                                             5
       Plaintiffs’ declarations indicated that each of them executed the arbitration
agreement under similar circumstances. Defendant’s human resources representative told
each plaintiff that he or she had to sign documents in order to continue working for
defendant. The documents were all in English, and the human resources representative,
who spoke very limited Spanish, did not translate any of the documents into Spanish.
The human resources representative lifted each page just enough for the plaintiff to see
the signature space and sign it. Three of the plaintiffs recalled the human resources
representative signing at least one page on a “witness” line. After each plaintiff signed
approximately 20 pages, the human resources representative explained some of
defendant’s employment policies but not the arbitration agreement. Plaintiffs were not
offered a copy of the JAMS rules. None of the plaintiffs knew what an arbitration
agreement was, or that he or she had signed one, until counsel in this matter told them.
       Plaintiff Valdez, who was a supervisor for part of her employment, was present
when the human resources representative met with plaintiff Leon, who did not speak,
read, or write in English. According to Leon, Valdez did not translate or explain any of
the documents to Leon before Leon signed them.
       D. Reply in Support of the Motion to Compel Arbitration
       In reply, defendant contended that the arbitration agreements were enforceable
against plaintiffs. Defendant argued that plaintiffs were given an opportunity to ask
questions about the agreement, and that in the exercise of reasonable diligence plaintiffs
should have read the agreement before signing it. Defendant also contended that it was
bound by the same terms of the agreement as plaintiffs.
       E. The Trial Court’s Order
       On November 22, 2013, a hearing was held on defendants’ motion to compel
arbitration. At the outset of the hearing the trial court expressed its belief that there was a
mutual obligation to arbitrate under the arbitration agreement but that the agreement was
nevertheless unconscionable. In particular, the court believed the agreement was

                                               6
procedurally unconscionable because defendant did not translate or explain the agreement
to “plaintiff” and did not provide a copy of the JAMS rules that were referenced in the
agreement. Regarding substantive unconscionability, the court observed that Armendariz
requires a written arbitration award in order to enable judicial review. The court believed
the arbitration agreement at issue “dispense[d] with any meaningful review,” because it
provided only “limited review” and did not allow an arbitration award to be “overturned”
even if it was “incorrect legally or factually.” After hearing argument from counsel, the
court stated that it was going to deny the motion.
       In a written order filed January 7, 2014, the trial court denied defendant’s motion
to compel arbitration and to stay the proceedings. The court determined that the
arbitration agreements were procedurally and substantively unconscionable, and that the
unconscionability could not be cured by severance.
                                   III. DISCUSSION
       Defendant contends that the trial court erred in denying its motion to compel
arbitration and to stay the action. Defendant “does not contest the lower court’s
determination that there was some amount of procedural unconscionability.” Defendant
argues, however, that there was no evidence of substantive unconscionability. In
particular, defendant contends that the arbitration agreements contain a mutual obligation
to arbitrate, the arbitration agreements do not preclude a written award or findings, and
the arbitration agreements do not impermissibly limit judicial review of an arbitration
award. Defendant also contends that, to the extent the arbitration agreements contain an
unconscionable provision, it may be severed and the arbitration agreements should be
enforced.
       Plaintiffs contend that the arbitration agreements are both procedurally
unconscionable and substantively unconscionable, and that the trial court did not err in
refusing to sever the unconscionable terms. In particular, regarding substantive
unconscionability, plaintiffs argue that the arbitration agreements make “no mention of a

                                             7
requirement of a written award,” and the arbitration agreements impermissibly state that
the arbitrator’s award “is subject only to limited review and may not be altered or
overturned even if it is incorrect legally or factually.”
       We will begin our evaluation with an overview of the general legal principles
governing arbitration agreements, the defense of unconscionability, and the applicable
standard of review. We will then consider the issue of substantive unconscionability
because we find that issue dispositive. We do not reach the question of procedural
unconscionability or severance.
       A. Legal Principles Regarding Arbitration Agreements, Unconscionability, and
the Standard of Review
       The California Arbitration Act (CAA) (Code Civ. Proc., § 1280 et seq.)1
“represents a comprehensive statutory scheme regulating private arbitration in this state.
[Citation.] Through this detailed statutory scheme, the Legislature has expressed a
‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means
of dispute resolution.’ [Citations.] Consequently, courts will ‘ “indulge every
intendment to give effect to such proceedings.” ’ [Citations.]” (Moncharsh v. Heily &
Blase (1992) 3 Cal.4th 1, 9.)
       Section 1281.2 provides for trial court enforcement of private arbitration
agreements. In the trial court, the party seeking arbitration bears the burden of proving
the existence of an arbitration agreement by a preponderance of the evidence, and the
party opposing arbitration bears the burden of proving by a preponderance of the
evidence any defense, such as unconscionability. (Engalla v. Permanente Medical
Group, Inc. (1997) 15 Cal.4th 951, 972; accord Pinnacle Museum Tower Assn. v.
Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle).)

       1
        All statutory references hereafter are to the Code of Civil Procedure unless
otherwise indicated.

                                               8
       A court may refuse to enforce a contract found “to have been unconscionable at
the time it was made.” (Civ. Code, § 1670.5, subd. (a).) “Unconscionability consists of
both procedural and substantive elements. The procedural element addresses the
circumstances of contract negotiation and formation, focusing on oppression or surprise
due to unequal bargaining power. [Citations.] Substantive unconscionability pertains to
the fairness of an agreement’s actual terms and to assessments of whether they are overly
harsh or one-sided. [Citations.]” (Pinnacle, supra, 55 Cal.4th at p. 246.) “Both
procedural unconscionability and substantive unconscionability must be shown” in order
for an agreement to be unenforceable. (Id. at p. 247; accord, Mission Viejo Emergency
Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1158-1160
(Mission Viejo); Crippen v. Central Valley RV Outlet (2004) 124 Cal.App.4th 1159,
1165, 1167 (Crippen).)
       An order denying a petition to compel arbitration is an appealable order. (§ 1294,
subd. (a).) On appeal, “ ‘we review the correctness of the order, and not the court’s
reasons . . . .’ ” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193,
1201.) “If the appealed judgment or order is correct on any theory, then it must be
affirmed regardless of the trial court’s reasoning . . . .” (Ibid.) “ ‘[W]here an
unconscionability determination “is based upon the trial court’s resolution of conflicts in
the evidence, or on the factual inferences which may be drawn therefrom, we consider the
evidence in the light most favorable to the court’s determination and review those aspects
of the determination for substantial evidence.” [Citation.]’ ” (Lhotka v. Geographic
Expeditions, Inc. (2010) 181 Cal.App.4th 816, 820-821.) However, where, as here, the
relevant “evidence is not in conflict, we review the trial court’s denial of arbitration de
novo. [Citation.]” (Pinnacle, supra, 55 Cal.4th at p. 236.)

                                              9
       B. Absence of Substantive Unconscionability
                            1. Mutual obligation to arbitrate
       Plaintiffs argued below that the arbitration agreements are substantively
unconscionable because the agreements lack mutuality. Plaintiffs contended that the only
claims subject to arbitration are “those arising out of or relating to the employees’
employment, and not affirmative claims brought by the employer.” Plaintiffs also argued
that defendant’s representative had only signed the arbitration agreement as a witness
“and not as a party bound to the contract.”
       Defendant contends, as it did below, that the arbitration agreements contain a
bilateral or mutual obligation to arbitrate. Defendant also argued below that it was bound
by the arbitration agreements because its human resources manager had signed the
agreements and the agreements were provided to plaintiffs as part of a new hire packet.
       Generally, an arbitration agreement must be in writing but “[a] signed agreement
is not necessary.” (Pinnacle, supra, 55 Cal.4th at p. 236.) Further, “arbitration clauses
may be limited to a specific subject or subjects and . . . such clauses are not required to
‘mandate the arbitration of all claims between [the parties] in order to avoid invalidation
on grounds of unconscionability.’ [Citation.]” (Id. at p. 248.) However, “[a]n arbitration
agreement is substantively unconscionable if it requires the employee but not the
employer to arbitrate claims. [Citation.]” (McManus v. CIBC World Markets Corp.
(2003) 109 Cal.App.4th 76, 100 (McManus).) In McManus, the arbitration clause at issue
provided, “ ‘All disputes arising out of your employment or the termination of your
employment . . . will be submitted to and resolved exclusively by a panel of arbitrators
from the NASD Dispute Resolution, Inc. or the New York Stock Exchange.’ ” (Ibid.)
The appellate court determined that “[t]his language creates a mutual obligation to
compel [the employer] to arbitrate any claims against the employee.” (Ibid.)
       In the present case, defendant presented to plaintiffs written arbitration agreements
containing language similar to the arbitration clause in McManus. Specifically, each

                                              10
plaintiff’s arbitration agreement states, “Any dispute or claim arising out of or relating to
your employment with The Santa Lucia Preserve Company shall be decided by neutral
binding arbitration under the Rules of the Judicial Arbitration and Mediation Services
(‘JAMS’) in effect at the time the claim or dispute arose, and not by court action.” As in
McManus, “[t]his language creates a mutual obligation to compel [the employer] to
arbitrate any claims against the employee.” (McManus, supra, 109 Cal.App.4th at
p. 100.)
       Other provisions in the parties’ arbitration agreements also indicate a mutual
obligation to arbitrate. The arbitration agreements refer to the waiver of a court or jury
trial and state that “[t]hese aspects of arbitration apply to The Santa Lucia Preserve
Company as they do to you.” The parties’ arbitration agreements also refer to the right of
“either the Employee or The Santa Lucia Preserve Company” to seek injunctive relief
from a court and state that “either party’s attempt to attain such relief will have no effect
on the arbitrability of the remainder of the claim upon which such relief is sought.” This
reference to affirmative claims for injunctive relief by an employee or defendant, and the
arbitrabililty of such claims, necessarily contemplates that both the employee and
defendant are required to arbitrate claims arising out of the employment relationship.
       Accordingly, we determine that the parties’ arbitration agreements impose a
mutual obligation to arbitrate on the plaintiff employees and the defendant employer.
                     2. Written award and limited judicial review
       The parties’ arbitration agreements do not expressly address whether the
arbitration award must be in writing. The arbitration agreements state that the rules of
JAMS apply to the arbitration. Regarding review of the arbitration award, the
agreements state: “You also understand that the award of the arbitrator(s) is subject only
to limited review and may not be altered or overturned even if it is incorrect legally or
factually.”

                                              11
       Plaintiffs argued below that the arbitration agreements were substantively
unconscionable because they “dispense with a written award” and “with any meaningful
review” of the arbitration award. Plaintiffs now acknowledge that the JAMS rules
“provide for a written award in this case.”2 Plaintiffs continue to assert, however, that the
arbitration agreements are substantively unconscionable because they do “not provide for
the level of judicial review required in the employment context.” In contending that
greater judicial review is required in the employment context, plaintiffs primarily rely on
Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665 (Pearson).
       Defendant contends that the language referring to limited review of an arbitration
award is “informational” and a “statement of law,” and not a condition or term of the
arbitration agreements. Defendant also contends that nothing in the arbitration
agreements precludes the judicial review described in Pearson.
       a. limited judicial review of arbitration awards in general
       “Generally, an arbitrator’s decision in a dispute between parties to an arbitration
agreement is subject to only limited judicial review. This is why: An ‘arbitration
decision is final and conclusive because the parties have agreed that it be so.’ [Citation.]
Arbitration by agreement is often a ‘process in which parties voluntarily trade the
safeguards and formalities of court litigation for an expeditious, sometimes roughshod
means of resolving their dispute.’ [Citation.] Because ‘arbitral finality is a core
component of the parties’ agreement to submit to arbitration’ [citation] and because
arbitrators are not required to make decisions according to the rule of law, parties to an

       2
         We note that where an arbitration agreement is silent on whether a written
arbitration award is required, that term may be “implied as a matter of law as part of the
agreement. [Citation.]” (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172
Cal.App.4th 154, 177.) We observe that plaintiffs now argue in this court that “the lack
of mention of the written award in the Agreement” contributes to the procedural
unconscionability of the agreement. (Italics added.) As we explain, we need not reach
the issue of procedural unconscionability in this case.

                                             12
arbitration agreement accept the risk of arbitrator errors [citation], and arbitrator
decisions cannot be judicially reviewed for errors of fact or law even if the error is
apparent and causes substantial injustice [citations]. ‘ “As a consequence, arbitration
awards are generally immune from judicial review.” ’ [Citation.]” (Berglund v.
Arthroscopic & Laser Surgery Center of San Diego, L.P. (2008) 44 Cal.4th 528, 534,
fn. & original italics omitted, italics added (Berglund).) By statute, a court has the
authority to vacate or correct an arbitration award under limited circumstances (see
§§ 1286.2, subd. (a), 1286.6),3 such as when the “[t]he arbitrators exceeded their powers
and the award cannot be corrected without affecting the merits of the decision upon the
controversy submitted” (§ 1286.2, subd. (a)(4)).
       b. judicial review of arbitration awards involving unwaivable rights
       “[T]he scope of judicial review may be somewhat greater in the case of a
mandatory employment arbitration agreement that encompasses an employee’s

       3
         Section 1286.2, subdivision (a) provides that an arbitration award may be
vacated if: “(1) The award was procured by corruption, fraud or other undue means. [¶]
(2) There was corruption in any of the arbitrators. [¶] (3) The rights of the party were
substantially prejudiced by misconduct of a neutral arbitrator. [¶] (4) The arbitrators
exceeded their powers and the award cannot be corrected without affecting the merits of
the decision upon the controversy submitted. [¶] (5) The rights of the party were
substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon
sufficient cause being shown therefor or by the refusal of the arbitrators to hear evidence
material to the controversy or by other conduct of the arbitrators contrary to the
provisions of this title. [¶] (6) An arbitrator making the award either: (A) failed to
disclose within the time required for disclosure a ground for disqualification of which the
arbitrator was then aware; or (B) was subject to disqualification upon grounds specified
in Section 1281.91 but failed upon receipt of timely demand to disqualify himself or
herself as required by that provision. . . .”
        Section 1286.6 provides that an arbitration award may be corrected if: “(a) There
was an evident miscalculation of figures or an evident mistake in the description of any
person, thing or property referred to in the award; [¶] (b) The arbitrators exceeded their
powers but the award may be corrected without affecting the merits of the decision upon
the controversy submitted; or [¶] (c) The award is imperfect in a matter of form, not
affecting the merits of the controversy.”

                                             13
unwaivable statutory rights. [Citation.]” (Pearson, supra, 48 Cal.4th at p. 669.) “With
respect to arbitrations involving unwaivable statutory rights, they are subject to judicial
review ‘ “sufficient to ensure that arbitrators comply with the requirements of the statute”
at issue.’ [Citation.]” (Berglund, supra, 44 Cal.4th at p. 534, fn. 2.)
       In Armendariz, the California Supreme Court considered the validity of an
arbitration agreement imposed as a condition of employment where the plaintiff
employees alleged antidiscrimination claims under the California Fair Employment and
Housing Act (FEHA) (Gov. Code, § 12900 et seq.). (Armendariz, supra, 24 Cal.4th at
p. 90.) The court determined that “ ‘an arbitration agreement cannot be made to serve as
a vehicle for the waiver of statutory rights created by the FEHA’ [citation], because the
enforcement of such rights was for the public benefit and was not waivable [citation].
[The court] concluded that a party to such an arbitration agreement must be able to fully
vindicate his or her statutory cause of action in the arbitral forum. [Citation.]” (Pearson,
supra, 48 Cal.4th at p. 677 [explaining Armendariz].) In order to ensure such
vindication, the court determined that an arbitration involving a FEHA claim is subject to
certain minimal requirements, including “ ‘a written arbitration decision and judicial
review “ ‘sufficient to ensure the arbitrators comply with the requirements of the
statute’ ” [citation].’ ” (Ibid., italics added.)
       Armendariz involved a petition to compel arbitration, and not an actual arbitration
award. The California Supreme Court explained that because it was “not faced . . . with a
petition to confirm an arbitration award,” it had “no occasion to articulate precisely what
standard of judicial review is ‘sufficient to ensure that arbitrators comply with the
requirements of [a] statute.’ [Citation.]” (Armendariz, supra, 24 Cal.4th at p. 107.) The
court stated, “All we hold today is that in order for such judicial review to be successfully
accomplished, an arbitrator in a FEHA case must issue a written arbitration decision that
will reveal, however briefly, the essential findings and conclusions on which the award is
based.” (Ibid.)

                                                14
       The California Supreme Court was subsequently “faced precisely with the
question that was prematurely posed in Armendariz, i.e., the proper standard of judicial
review of arbitration awards arising from mandatory arbitration employment agreements
that arbitrate claims asserting the employee’s unwaivable statutory rights.” (Pearson,
supra, 48 Cal.4th at p. 679.) In Pearson, an employee alleged discrimination under
FEHA. (Id. at p. 670.) The employer successfully petitioned to compel arbitration, and
the arbitrator decided in favor of the employer on the ground that the FEHA claim was
time-barred under a contractual deadline for requesting arbitration. (Id. at pp. 671-672.)
       After determining that the arbitrator misapplied a tolling provision under the CAA
(see § 1281.12) and therefore erroneously found in favor of the employer, the California
Supreme Court turned to the question of whether this legal error was a proper basis for
vacating the arbitration award. (Pearson, supra, 48 Cal.4th at p. 675.) The court
explained that, “as a result of the arbitrator’s clear legal error, plaintiff’s claim was
incorrectly determined to be time-barred. Indeed, the legal error misconstrued the
procedural framework under which the parties agreed the arbitration was to be conducted,
rather than misinterpreting the law governing the claim itself.” (Id. at pp. 679-680,
fn. omitted.) The court found this to be a “paradigmatic example of when ‘granting
finality to an arbitrator’s decision would be inconsistent with the protection of a party’s
statutory rights’ [citation],” where, “as a result of allowing the procedural error to stand,
and through no fault of the employee or his attorney, the employee will be unable to
receive a hearing on the merits of his FEHA claims in any forum.” (Id. at p. 680, italics
omitted.)
       The Pearson court thus held that “when . . . an employee subject to a mandatory
employment arbitration agreement is unable to obtain a hearing on the merits of his
FEHA claims, or claims based on other unwaivable statutory rights, because of an
arbitration award based on legal error, the trial court does not err in vacating the award.
Stated in other terms, construing the CAA in light of the Legislature’s intent that

                                               15
employees be able to enforce their right to be free of unlawful discrimination under
FEHA, an arbitrator whose legal error has barred an employee subject to a mandatory
arbitration agreement from obtaining a hearing on the merits of a claim based on such
right has exceeded his or her powers within the meaning of Code of Civil Procedure
section 1286.2, subdivision (a)(4), and the arbitrator’s award may properly be vacated.
[Citation.]” (Pearson, supra, 48 Cal.4th at p. 680.)
       The Pearson court cautioned that it was not deciding whether “all legal errors are
reviewable in this context, or . . . all errors involving the arbitration statute itself are
reviewable.” (Pearson, supra, 48 Cal.4th at p. 679.) Rather, the court addressed “only
the case before [the court], and a narrower rule [was] sufficient for its resolution.” (Ibid.)
       c. limited review in this case
       In this case, at a minimum, plaintiffs’ claim for overtime compensation (Lab.
Code, §§ 510, 1194) involves an unwaivable statutory right (Sullivan v. Oracle Corp.
(2011) 51 Cal.4th 1191, 1198). Consequently, the parties’ arbitration of that claim is
subject to the minimal requirements set forth in Armendariz, including “ ‘a written
arbitration decision and judicial review “ ‘sufficient to ensure the arbitrators comply with
the requirements of the statute.’ ” ’ ” (Pearson, supra, 48 Cal.4th at p. 677.) Moreover,
to the extent plaintiffs are “unable to obtain a hearing on the merits” of their claim
involving this unwaivable statutory right “because of an arbitration award based on legal
error,” pursuant to Pearson a “trial court does not err in vacating the award.” (Id. at
p. 680.)
       The language at issue in the parties’ arbitration agreements states: “You also
understand that the award of the arbitrator(s) is subject only to limited review and may
not be altered or overturned even if it is incorrect legally or factually.” This is an
accurate general statement of the law regarding arbitration awards. (See Berglund, supra,
44 Cal.4th at p. 534 [an arbitrator’s decision is generally subject to only “limited judicial
review” and “cannot be judicially reviewed for errors of fact or law even if the error is

                                                16
apparent and causes substantial injustice”].) Although an arbitration award arising from a
mandatory employment arbitration agreement and involving an unwaivable statutory
right is subject to “ ‘judicial review “ ‘sufficient to ensure the arbitrators comply with the
requirements of the statute’ ” ’ ” (Pearson, supra, 48 Cal.4th at p. 677), the California
Supreme Court has not articulated which errors are reviewable beyond the particular legal
error arising in the specific context set forth in Pearson (see id. at pp. 679-680).
       We believe that the parties’ arbitration agreements do not limit judicial review in
violation of Pearson or the legal authorities upon which Pearson relies. Rather, we
believe the sentence at issue, regarding “limited review” of an arbitration award and
regarding an award not being “overturned even if it is incorrect legally or factually,”
merely attempts to inform the employee about the legal effect of the arbitration
agreement in general, without attempting to unlawfully limit the judicial review available
or otherwise set forth the narrow circumstances under which an award may be subject to
judicial review and vacated or corrected. (See, e.g., §§ 1286.2, subd. (a), 1286.6;
Berglund, supra, 44 Cal.4th at p. 534 & fn. 2; Pearson, supra, 48 Cal.4th at pp. 669, 675-
680.) In this regard, the sentence at issue begins with the phrase, “You also understand,”
and then correctly sets forth the general legal principle concerning limited review of an
arbitrator’s award even if there is legal or factual error (see Berglund, supra, 44 Cal.4th at
p. 534).
       Even assuming the sentence itself operates to preclude judicial review of certain
types of error in arbitration awards, it would not be unlawful in all circumstances and
consequently its inclusion does not render the parties’ arbitration agreements
substantively unconscionable. The California Supreme Court addressed an analogous
situation in Pearson, and we find the court’s analysis instructive.
       In Pearson, the mandatory employment arbitration agreement contained language
stating that it was the parties’ intent to avoid the inconvenience of formal administrative
proceedings. (Pearson, supra, 48 Cal.4th at p. 680.) The plaintiff argued that the

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arbitration agreement was unconscionable based on this and another provision. The
California Supreme Court determined that, to the extent the agreement could be
understood to preclude formal administrative proceedings, “it would not be unlawful in
all possible applications.” (Id. at p. 681.)
       The California Supreme Court further explained, “When an arbitration provision is
ambiguous, we will interpret that provision, if reasonable, in a manner that renders it
lawful, both because of our public policy in favor of arbitration as a speedy and relatively
inexpensive means of dispute resolution, and because of the general principle that we
interpret a contractual provision in a manner that renders it enforceable rather than void.
[Citations.]” (Pearson, supra, 48 Cal.4th at p. 682.) The court construed the arbitration
provision at issue as stating an intention by the parties to lawfully preclude submission of
their claims for adjudication to an administrative entity to the extent permitted by case
law. Based on this construction of the arbitration agreement, the court concluded that
“the inclusion of a provision limiting resort to an administrative forum [did] not render
the arbitration agreement unconscionable or unenforceable.” (Ibid., fn. omitted.)
       In this case, the sentence at issue in the parties’ arbitration agreements, regarding
an employee “understand[ing] that the award of the arbitrator(s) is subject only to limited
review and may not be altered or overturned even if it is incorrect legally or factually,”
may reasonably be construed as lawfully restricting judicial review of an arbitration
award, including for legal or factual errors, but only to the extent permitted by statutory
and case law. (See, e.g., §§ 1286.2, subd. (a), 1286.6; Berglund, supra, 44 Cal.4th at
p. 534 & fn. 2; Pearson, supra, 48 Cal.4th at pp. 669, 675-680.) As so construed,
plaintiffs would not be precluded from obtaining the “somewhat greater” scope of
judicial review that is available in an arbitration involving an employee’s unwaivable
rights, as set forth in Pearson for example. (Pearson, supra, 48 Cal.4th at p. 669; see id.
at pp. 679-680.) We therefore conclude that the inclusion of the sentence regarding

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limited review and regarding legally or factually incorrect arbitration awards in each of
the arbitration agreements does not render the agreements substantively unconscionable.
                                       3. Conclusion
       Plaintiffs have contended that the arbitration agreements are substantively
unconscionable because of a purported lack of mutuality regarding the requirement to
arbitrate, the absence of a requirement regarding a written arbitration award, and the
inclusion of a sentence regarding limited judicial review. We have determined that these
arguments lack merit. Because plaintiffs have not established substantive
unconscionability, and because both procedural unconscionability and substantive
unconscionability must be shown in order to invalidate an arbitration agreement,
plaintiffs have not established a valid defense to enforceability of the parties’ arbitration
agreements. (See Pinnacle, supra, 55 Cal.4th at pp. 246-247; Mission Viejo, supra, 197
Cal.App.4th at pp. 1158-1160; Crippen, supra, 124 Cal.App.4th at pp. 1165, 1167.) We
therefore conclude that the trial court erred in denying defendant’s motion to compel
arbitration.
                                    IV. DISPOSITION
       The order denying defendant Santa Lucia Preserve Company’s motion to compel
arbitration is reversed. The court is directed to enter an order granting the motion. The
parties shall bear their own costs on appeal.

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                             ___________________________________________
                             BAMATTRE-MANOUKIAN, ACTING P.J.

WE CONCUR:

__________________________
MIHARA, J.

__________________________
GROVER, J.