Arbitration agreement found void

An employer’s arbitration agreement was unenforceable because of unconscionable terms in a confidentiality agreement that was executed simultaneously during employee onboarding, the California Court of Appeal has decided.

In effect, one bad agreement invalidated them all.

In the case of Alberto v. Cambrian Homecare, the court reasoned that the employer’s arbitration agreement and the confidentiality agreement were presented to the employee at the time of hire and related to the employee’s employment, and therefore must be read together. The court then determined that unconscionable terms in the confidentiality agreement (specifically, prohibitions on discussing wages) permeated the arbitration agreement, rendering it unenforceable.

The case involved Jennifer Playu Alberto, who joined Cambrian Homecare in 2019 as an administrative employee. As part of her onboarding documents, Alberto signed both an arbitration agreement and a confidentiality agreement. The latter included a prohibition against discussing compensation and salary information, under the “threat of litigation, including potential liability for attorneys’ fees.”

In 2020, Alberto filed a wage-and-hour claim against Cambrian, and Cambrian subsequently petitioned for the matter to be moved to arbitration. California courts refused the request, finding that the confidentiality agreement contained unconscionable terms and that because the confidentiality and arbitration agreements had been executed in conjunction with each other, they could not be separated.

Cambrian acknowledged that the confidentiality agreement was unconscionable but argued that had no bearing on the arbitration agreement.

The court disagreed. According to California Civil Code, “several papers relating to the same subject matter and executed as parts of substantially one transaction, are to be construed together as one contract.”

“Here, we have no difficulty concluding that the Arbitration Agreement and the Confidentiality Agreement should be read together. They were executed on the same day. They were both separate aspects of a single primary transaction—Alberto’s hiring,” the court said.

Of note, the arbitration agreement contained a severability clause, but the appellate court upheld the trial court’s decision not to sever the unconscionable provisions.