Martinez v. Master Protection Corp

In Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, the arbitration agreement contained a provision requiring the parties to split the arbitration cost and to post fees in advance of the arbitration hearing, which the employer acknowledged was defective. (Id. at p. 115.) Nonetheless, the employer argued that the defect was a "non-issue" on appeal because it was willing to modify the agreement and to bear the cost of arbitration. (Id. at p. 116.) The appellate court disagreed, noting that the "critical juncture for determining whether a contract is unconscionable is the moment when it is entered into by both parties" and that "the mere inclusion of the costs provision in the arbitration agreement produces an unacceptable chilling effect on the employee's exercise of due process rights, notwithstanding the employer's belated willingness to excise that portion of the agreement." (Id. at pp. 116-117.) The Court found unconscionable an agreement that exempted "from its terms any 'claims by employer for injunctive and/or other equitable relief for unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information.'" (Id. at p. 115.) The court explained that, as a result of the exemption, the agreement effectively "required employees to arbitrate the claims they are most likely to assert against the employer, while simultaneously permitting the employer to litigate in court the claims it is most likely to assert against its employees. Claims for unpaid wages, wrongful termination, employment discrimination and the like invariably are brought by employees, while claims involving trade secrets, misuse or disclosure of confidential information, and unfair competition typically are asserted only by employers." (Ibid.)