Ninth Circuit Finds Poor Circumstances Do Not Invalidate Employer Arbitration Agreement

  • Home
  • Blog
  • News
  • Ninth Circuit Finds Poor Circumstances Do Not Invalidate Employer Arbitration Agreement
Ninth Circuit Finds Poor Circumstances Do Not Invalidate Employer Arbitration Agreement

The Ninth Circuit Court of Appeals has taken a sudden change of course and ruled that an arbitration agreement that a temporary farm worker with an H-2A visa signed is valid and can be enforced. Employers in California should find this decision helpful in forming their own arbitration agreements in a way that will stand up in court.

This case involved a farmworker that was in the United States on an H-2A visa. He was a guest worker for a packing company that provides workers for harvesting crops as well as workers for nurseries and vineyards. The plaintiff quit his job and then sued his former employer for allegedly violating both federal and state labor and wage laws. The packing company tried to have the arbitration agreement that the plaintiff had signed as a part of his orientation enforced. However, the lower court held the arbitration agreement invalid due to the economic duress and undue influence he was under at the time of the signing.

The critical issue, in this case, is the circumstances under which the plaintiff signed the agreement. The plaintiff was presented the agreement a few days after starting the job after being transported from Mexico. This was performed in a hotel parking lot at the end of the workday when 150 workers were presented all of their employment paperwork at once. This required the workers to form long lines and wait their turn. Once reaching the front of the line, employees were shown where to sign and urged to do so as quickly as possible so that others would have their turn. In addition to the hastiness of the situation, the agreements were never explained to the employees, nor were employees informed that they could consult an attorney before signing the contract.

These circumstances led the lower courts to find that the employee, in this case, had suffered economic duress due to the employer’s actions. Specifically, the court found that asking the employee to sign an arbitration agreement after making the trip from Mexico created a dependence upon them for housing and support. Though the Ninth Circuit accepted a considerable degree of dependence upon the employer, there are other factors to consider an agreement coerced.

California’s law considers whether an individual has a reasonable alternative to avoid signing a coercive agreement. If other options are available to prevent coercive pressure, then an individual will be unable to establish economic duress. But, In this case, the employee was never informed that the agreement was necessary to avoid dismissal. Further, the employee had the opportunity to revoke the arbitration agreement within a ten-day period.

As for the accusation of undue influence, California’s law establishes that an individual must possess undue susceptibility, and the dominating individual must exert excessive pressure. For the undue exposure, the employee possessed a secondary education, could read and write, and thus demonstrated no signs of undue susceptibility. The Ninth Circuit acknowledged that the situation under which the employer presented the agreement was less than ideal but did not demonstrate oppressive pressure. As a result, the court held that the agreement was valid and enforceable.

Employer Takeaways

This decision is a victory for employers that provides a solid roadmap on establishing a valid arbitration agreement. However, this should also remind employers the importance of how an arbitration agreement is executed which is as important as what it contains to avoid years of litigation.