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.
Home > State Law Articles > California > Human Resources (CA) > Easily “Shocked”? At Least for Wage Claims, California Supreme Court Lowers Standard for Unconscionability in Arbitration Agreements