The Ninth Circuit reversed a district court's finding that a dispute resolution provision ("the Provision") of an employment agreement was substantively and procedurally unconscionable, upholding the provision as not tainted by illegality and severing the few problematic sections. The dispute arose when Lorrie Poublon claimed her former employer misclassified her as exempt from overtime pay requirements and demanded mediation. After mediation failed, Poublon filed a putative class action complaint, and the employer moved to compel arbitration under the Provision. The federal district court denied the employer's motion on the grounds that the Provision was procedurally and substantively unconscionable and thus unenforceable.

On appeal, the Ninth Circuit rejected most of Poublon's arguments that the Provision was unconscionable. First, the court dismissed her contentions regarding procedural unconscionability. Although the employer conceded it was a contract of adhesion, the Provision did not contain sufficient other indications of oppression or surprise to render it procedurally unconscionable.

Second, the court systematically considered each of Poublon's arguments that specific parts of the Provision was substantively unconscionable. One specific clause—a requirement that employees submit all claims to arbitration, even though the employer maintained a right to seek judicial resolution of certain claims—was classified by the court as substantively unconscionable, on the grounds that the employer waived the argument. The court, however, held that six of the remaining seven challenged parts of the Provision were not substantively unconscionable. The upheld clauses included a waiver of representative claims, a choice of venue, a confidentiality clause, a provision governing sanctions, a provision allegedly granting the employer unilateral rights to modification, and clause limiting discovery. The court also held that the arbitrator, not the court, was the appropriate entity to decide whether the reaffirmation clause rendered the contract unenforceable.

Finally, because the employer waived its argument regarding the enforceability of the judicial carve-out exception in the Provision, the court analyzed whether that made the entire Provision unenforceable. The court found it did not, severing the unconscionable aspect of the Provision, concluding that they did not so taint the contract with illegality to render it unenforceable as a whole and relying in part on language in the Provision allowing for modifications to make it enforceable.

Poublon v. C.H. Robinson Co., No. 15-55143 (9th Cir. Feb. 3, 2017).

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