Navigating the Fine Print: California Court Clarifies Small Print in Arbitration Agreements as Procedural Issues

Arbitration agreements have become increasingly popular in California and other states as a means of resolving disputes between employers and employees. However, the enforceability of these agreements has recently come under scrutiny by courts, particularly in instances where the agreement is signed by an employee without fully understanding its terms. In a recent decision, the California Court of Appeal held that small and unreadable print in an arbitration agreement renders the agreement unenforceable. This decision came in the case of Fuentes v. Empire Nissan, Inc. et al., where the plaintiff signed an arbitration agreement with Empire Nissan, Inc.

Small font and unreadable print are affecting arbitration agreements

In recent years, there has been a growing concern among employees and employee advocacy groups about the use of arbitration agreements by employers. These agreements require employees to waive their right to sue in court in the event of a dispute with their employer and instead require them to submit to binding arbitration. The concern stems from the fact that employees may not fully understand the implications of signing such an agreement, particularly if the agreement is written in small font and difficult to read.

The problem with small fonts and unreadable print in arbitration agreements is that it affects procedural unconscionability. Procedural unconscionability refers to the circumstances surrounding the formation of a contract, including the process by which the parties enter into the agreement. If an agreement is signed without the employee fully understanding its terms, it can be deemed procedurally unconscionable and, therefore, unenforceable.

In the case of Fuentes v. Empire Nissan, Inc. et al., the plaintiff applied to work for Empire Nissan, Inc. and signed an arbitration agreement. Later, Nissan terminated the plaintiff, and she filed a lawsuit alleging discrimination and wrongful termination against three defendants – Nissan, Romero Motors Corporation, and Oremor Management & Investment Company.

California Court of Appeal’s Decision

The trial court ruled that the arbitration agreement was unenforceable based on the plaintiff’s argument that the print was too small, and the agreement was therefore procedurally unconscionable. The California Court of Appeal for the Second District disagreed with the trial court’s decision and ordered it to compel arbitration. However, the appellate court noted that the small and unreadable font used during the contract formation stage was problematic for procedural reasons.

Procedural concerns with tiny and unreadable fonts

The use of small and unreadable fonts during the contract formation stage is problematic for several reasons. For one, an employee may not be able to read the agreement or understand its provisions, which can have serious consequences if the agreement waives or limits the employee’s legal rights. Additionally, an employee who is unable to read the agreement may be coerced or forced into signing it, especially if they are in a position of vulnerability, such as in the case of a job applicant.

Assessment of Mutual and Fair Agreement by the California Court of Appeal

The appellate court held that the arbitration agreement was mutual and even-handed, and therefore not substantively unconscionable. The plaintiff had argued that the agreement was unfair since it did not explain how to initiate arbitration. However, the court found that this was not a sufficient ground to render the agreement unenforceable. Ultimately, the court held that the agreement was enforceable, but noted that the small and unreadable font used during the contract formation stage cast procedural unconscionability on its enforceability.

Rejection of the Plaintiff’s Claim of Unfairness

The court’s decision to compel arbitration meant that the plaintiff’s claims would be heard in arbitration rather than in court. The plaintiff’s argument that the agreement was unfair, and therefore unenforceable, was rejected by the court, which found that the agreement was fair and did not violate public policy.

The decision in Fuentes v. Empire Nissan, Inc. et al. highlights the importance of ensuring that arbitration agreements are readable and understandable. Employees who sign such agreements should be fully aware of their legal rights and the implications of any provisions in the agreement. Employers who use such agreements should take care to ensure that they are not procedurally or substantively unconscionable. Ultimately, the enforceability of an arbitration agreement may depend on the specific circumstances surrounding its formation and whether it is fair and even-handed, regardless of the font size.

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