Daily Blast - August 26, 2020 - Lewis Brisbois Bisgaard & Smith LLP

Today in Conyer v. Hula Media Services LLC (August 26, 2020) No. B296738, __Cal.App.5th__, Division Eight of the Second Appellate District Court of Appeal held that an employer has “no obligation to point out” to its employees that an arbitration agreement had been added to a revised employee handbook. (Slip opn., p. 9.)

The plaintiff in Conyer signed a receipt and acknowledgment for a revised employee handbook containing an arbitration agreement 10 months into his employment. After the defendant terminated his employment, the plaintiff filed a lawsuit under California’s Fair Housing and Employment Act. He claimed he did not agree to arbitration because the employer did not call the arbitration agreement to his attention and he never received a copy of the revised employee handbook. Plaintiff also claimed the arbitration agreement was procedurally unconscionable and so permeated with substantively unconscionable fee and cost provisions that the unenforceable provisions could not be severed. The trial court recognized the general rule that a party’s failure to read a contract before signing it constitutes a lack of reasonable diligence, but found that it would be “fundamentally unfair” to presume plaintiff was aware of the arbitration clause because the employer did not inform plaintiff that an arbitration agreement had been added to the employee handbook—either orally or in the receipt and acknowledgment for the handbook. Accordingly, the trial court found a lack of mutual assent and denied arbitration without reaching the plaintiff’s unconscionability defense.

The Court of Appeal reversed the order denying arbitration and directed the trial court to sever the unenforceable fee and cost provisions from the arbitration agreement. The court held the employer “had no obligation to point out to plaintiff that an arbitration clause had been added to the [revised] employee handbook. It has long been the rule in California that a party is bound by a contract even if he did not read the contract before signing it. That rule applies to all contracts, including arbitration agreements.” (Slip opn., p. 9.) Even though the trial court did not reach the issue of unconscionability, the Court of Appeal agreed with appellants that it could decide the issue in the first instance and found that the arbitration agreement was not so permeated with unconscionability that the unenforceable provisions could not be severed, “leaving a fully mutual and enforceable arbitration agreement.” (Id. at p. 12.)