On May 24, 2024, the California Court of Appeal held that USC’s arbitration agreement with its employee, Pamela Cook, was unenforceable. USC requested that the court reconsider its decision, and on June 13, 2024, the Court of Appeal denied the request. The decision in Cook v. USC, 102 Cal.App.5th 312 (2024), reh’g denied (June 13, 2024), has therefore become binding law in California and may warrant employers reviewing their arbitration agreements to ensure they do not contain the provisions that rendered USC’s agreement unenforceable.
The Lower Court Finds Three of USC’s Arbitration Provisions Unconscionable
On July 1, 2022, Ms. Cook filed a lawsuit against USC for racial discrimination, retaliation for reporting discrimination, and failure to accommodate her disabilities and health-related time-off requests. Each of these claims arose out of Ms. Cook’s employment with USC. Because Ms. Cook agreed to arbitrate such claims, USC sought to compel the dispute to arbitration. The trial court denied USC’s motion and held that three provisions together rendered its arbitration agreement unenforceable:
- The first offending provision provided that USC’s arbitration agreement “shall survive the termination of Employee’s employment, and may only be revoked or modified in a written document that expressly refers to the ‘Agreement to Arbitrate Claims’ and is signed by the President of the University.” The court found that this provision gave the agreement an “infinite duration” and was thus unconscionable.
- The second provision provided that the parties “agree to the resolution by arbitration of all claims, whether or not arising out of Employee’s University employment, remuneration or termination, that Employee may have against the University . . . .” The court found that this provision was unconscionable because it gave near-infinite scope to the agreement—for example, Ms. Cook could be forced to arbitrate a botched surgery she received at USC’s hospital in the future, or an injury she sustained attending a college football game.
- The third and final provision provided that Ms. Cook agreed to arbitrate her claims “against the University or any of its related entities, including but not limited to faculty practice plans, or its or their officers, trustees, administrators, employees or agents, in their capacity as such or otherwise [USC ‘related entities’]; and all claims that the University may have against Employee.” This provision was unconscionable according to the court, because it was too one-sided: Ms. Cook was required to arbitrate all of her claims against USC and its related entities, but only USC—not its related entities—must arbitrate against Ms. Cook.
