In OTO, L.L.C. v. Kho, the Supreme Court today finds “oppressive circumstances” surrounding the formation of an agreement to arbitrate a wage dispute, which make the agreement unconscionable and therefore unenforceable.  It’s not unanimous.  There’s a 40-page, 6-justice majority opinion by Justice Carol Corrigan, and a 55-page dissent by Justice Ming Chin.

The majority focuses on the way the employer obtained its employee’s consent to arbitrate, and not as much on the fairness of the agreed-to arbitration system.  The opinion thus doesn’t address the issue that the court granted review to resolve — “whether an arbitral scheme resembling civil litigation can constitute a sufficiently accessible and affordable process.”  Instead, it is dispositive that there was “an unusually high degree of procedural unconscionability” (among other things, the majority says that the arbitration agreement itself “is a paragon of prolixity”), which leads the majority to conclude that “an employee may not be coerced or misled into accepting” arbitration.  “Had [the employer] set out the terms of its agreement in a legible format and fairly understandable language, or had it given [the employee] a reasonable opportunity to seek clarification or advice,” the majority says, “this would be a different case.”

Justice Chin, on the other hand, touts the substantive fairness of the arbitration procedure required by the agreement and claims that such fairness should not be outweighed by procedural unconscionability, which he says the majority exaggerates in any event.  He warns that, “[b]ecause of the economic pressures faced by prospective and existing employees, the majority’s finding of unconscionability will surely be the rule in the vast majority of cases in the employment context.”  He asserts the majority opinion is wrong both under state law and under the Federal Arbitration Act “as authoritatively construed in binding United States Supreme Court decisions.”

The court reverses the First District, Division One, Court of Appeal.

[June 8, 2020 updateSCOTUS won’t review decision voiding wage dispute arbitration agreement.]