The Stones, the Dalai Lama, and Arbitration: How Not to Get What You Need in an Arbitration Agreement

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Not Mick Jagger

You can’t always get what you want, said a wise English sage in 1969. This advice still holds true. For example, Chinese Foreign Ministry spokesman Lu Kang recently declared that the reincarnation of the Dalai Lama must comply with Chinese law.  Good luck with that.

The enforcement mechanism for Lu’s edict is unclear, but the Chinese Communist Party knows what it wants. (Allow me a brief diversion. My favorite sentence in the cnn.com story: “It isn’t completely clear whether the Dalai Lama will allow himself to be reincarnated after he dies.”  You and me both, brother!)

Another example arose in a recent court case, in which a messenger service required its independent contractor messengers to sign an arbitration agreement. Like spokesman Lu, the messenger service may have demanded a bit too much. A California Court of Appeal declared the arbitration agreement invalid, ruling that it was both procedural and substantively unconscionable.

What makes an arbitration agreement so one-sided that it’s unconscionable?

Here are the terms that, taken together, the court said rendered the agreement procedurally unconscionable:

  1. The agreement was presented as a take-it-or-leave it proposition, not subject to negotiation;
  2. The contractor’s native language was Portuguese; he spoke very little English; and no one offered to translate or explain to him the meaning of the document;
  3. He was asked to sign on the spot, with no opportunity to review it, translate it, or seek legal advice;
  4. The agreement said that the rules of the American Arbitration Association (AAA) would apply, but did not specify which of the many AAA rules would govern; and
  5. He was not given a copy of the rules.

The court also ruled that the agreement was substantively unconscionable — in other words, so unfair it could not be enforced. The court focused on these defects in the agreement:

  1. The individual was barred from bringing any claims with an administrative agency (he tried to bring a claim with before the Commissioner of Labor);
  2. The agreement barred representative claims from being brought under California’s Private Attorneys General Act (PAGA);
  3. The agreement prohibited any recovery of punitive damages, statutory penalties, equitable relief, or attorneys’ fees; and
  4. The agreement required any dispute to be heard before a panel of three arbitrators, each of whom must have transportation industry experience and a legal background. (The court ruled that it would be very expensive to find and pay three people with these required credentials, which would make it prohibitively expensive for the individual to bring any claim since the agreement also required the parties to split all arbitrator fees.)

This case is a good reminder to check the terms of any arbitration agreements you have with independent contractors. The messenger service will not get what it wants (nor what it needs). The court invalidated the arbitration provision as a whole, finding it so defective that it the invalid portions could not be severed in a way that would otherwise save the agreement.

Arbitration agreements with independent contractors can be a valuable tool for resolving disputes, but only if they are enforceable. Not even the all-powerful Chinese Communist Party can impose terms that are unfair. But they get points for trying. So far, I have found no truth to the rumor that spokesman Lu has asked the Dalai Lama to sign a pledge to arbitrate any disputes over his reincarnation. Maybe Jagger, Richards, and Wood could serve as the three arbitrators.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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