In Galen v. Redfin Corp., ___ Cal.App.4th ___ (July 21, 2014), the California Court of Appeal (First Appellate District, Division One) reversed the order of the Alameda County Superior Court (Judge Brick) denying defendant’s motion to compel arbitration.
Plaintiff was a real estate agent who entered into an independent contractor agreement with defendant in which he was designated as a “contract field agent.” That agreement also contained a provision whereby plaintiff agreed to arbitrate in the state of Washington (where defendant is headquartered) any dispute that may arise from his relationship with defendant. Nevertheless, plaintiff subsequently filed a class action against defendant, alleging that defendant improperly classified him and other contract field agents as independent contractors when they were actually serving as employees. Consequently, Plaintiff asserted claims of unpaid overtime, penalties for missed meal and rest periods, and other related claims. Defendant filed a motion to compel arbitration, which the trial court denied, finding that the arbitration clause did not apply to plaintiff’s statutory claims because those claims were based on statutes and not on the parties’ contract. The trial court also found that the arbitration agreement unconscionable due to “unrebutted evidence of substantial procedural unconscionability,” and “some (albeit less) substantive unconscionability.” Defendant appealed.
The appellate court disagreed. First, the court noted that the independent contractor agreement that contained the arbitration provision also governed his relationship with defendant, including the services he was to provide and the method by which those services would be compensated. Therefore, his claims regarding his contractual employment status necessarily arose out of the agreement, even though they were brought pursuant to the California Labor Code. Moreover, the court held, the agreement was not unconscionable, as the mutual attorney fee provision it contained did not “shock the conscience.” Finally, the court held that the forum-selection clause was valid, despite the inconvenience and additional expense of arbitrating the action in Washington. California public policy favors enforcement of such clauses and places the burden on the objecting party to establish that the clause is unreasonable.