Farrar v. Direct Commerce, Inc.

An arbitration clause in a high executive’s employment contract was enforceable after severance of its single unconscionable provision exempting from arbitration any claim for breach by the employee of the employer’s confidentiality agreement.  A high level sales executive sought to avoid arbitration of her wrongful termination claim, arguing that the arbitration provision was unconscionable.  The plaintiff had negotiated other terms of her employment agreement, but claimed that the arbitration clause and a confidentiality agreement had been presented as non-negotiable items.  So there was some, but a very low level of procedural unconscionability.  The arbitration clause exempted all claims under the confidentiality agreement from arbitration, not just claims for provisional relief.  This, the court held was substantively unconscionable as lacking mutuality.  However, as it was the only unconscionable part of the arbitration clause, the exemption of confidentiality claims, could be severed and the arbitration agreement enforced without it.  On a late-raised claim about arbitration expenses, the court held that the clause could be construed to require the employer to pay the cost of the arbitration.

California Court of Appeal, First District, Division 1 (Banke, J.); March 23, 2017; 2017 WL 1090483

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