In an employment dispute involving exotic dancers suing their former employer, a federal magistrate judge recently found the arbitration agreements to be unconscionable and unenforceable. Roe v. SFBSC Management, No. 14-cv-03616-LB (N.D. Cal. Mar. 2, 2015) (click here for a copy of the court’s decision).
The court’s decision provides an interesting argument to invalidate arbitration agreements with class action waivers. The arbitration agreements at issue contained waivers prohibiting the exotic dancers from proceeding collectively, but the waivers did not similarly prohibit employers or clubs from collective action. The court found that this “one-way” ban on collective action was substantively unconscionable. Additionally, the court suggested employers using such “one-way” bans are not really using arbitration as a forum for neutral decision-making and instead are using arbitration to maximize employer advantage. I hope this argument gains more traction with other courts.
Also, in terms of fees, the arbitration agreement provided that the dancer and employer would generally split the arbitration fees, and the court found such fee provisions to be unconscionable.
Because both the “one-way” class action waiver and fee provisions were unconscionable, the court held that the entire arbitration agreement was not enforceable. Hence, the court denied the employer’s motion to compel arbitration.