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OTO, LLC v. Kho (August 29, 2019)

Articles Discussing Case:

Easily “Shocked”? At Least for Wage Claims, California Supreme Court Lowers Standard for Unconscionability in Arbitration Agreements

Littler Mendelson, P.C. • September 20, 2019
In OTO, L.L.C. v. Kho, the California Supreme Court refused to enforce an employee’s arbitration agreement on the basis that it was unconscionable. Unconscionability has long been a common-law defense to contract enforcement. What makes OTO v. Kho problematic for employers is the court’s weakening of the traditional “Does the agreement shock the conscience?” standard. The court in this case invalidated the agreement because arbitration was a less affordable and less accessible dispute resolution mechanism than other potentially applicable state law mechanisms. Specifically, the court found the parties’ arbitration procedure to be less advantageous to the employee in the resolution of his wage claims than the “Berman” procedure, an administrative process through which an employee can receive substantial assistance in taking his wage claims before the state Labor Commissioner.

Lessons in Drafting and Implementing an Enforceable Mandatory Arbitration Agreement

FordHarrison LLP • September 16, 2019
Recently, the California Supreme Court invalidated a mandatory arbitration agreement in OTO, LLC v. Kho (August 29, 2019) finding the agreement was both procedurally and substantively unconscionable. The case involved arbitration of a former employee’s wage claims. Under California law, employees have access to an inexpensive administrative process to pursue wage disputes. The Court previously had ruled that an arbitration agreement is not categorically unconscionable solely because it entails a waiver of that administrative process. An agreement to arbitrate wage claims can be enforceable so long as it provides an accessible and affordable process for resolving those disputes.
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