Hunton Employment & Labor Perspectives

The California Supreme Court is poised to address a fundamental question in employment law: Can an arbitration agreement be enforced when its operative terms are illegible?

The issue arose in a case involving an arbitration agreement that had been photocopied so many times that its text became blurred and difficult, if not impossible, to read. The Court recently heard oral argument in an appeal brought by former auto sales agent Evangelina Yanez Fuentes, whose discrimination and wrongful termination lawsuit was ordered to arbitration by a divided Court of Appeals.

The case, Evangelina Yanez Fuentes v. Empire Nissan Inc., No. S280256 (Cal. Sup. Ct.), stems from Fuentes’s employment with Empire Nissan. Following her termination, Fuentes filed suit alleging discrimination, wrongful termination, and related statutory violations. The employer moved to compel arbitration based on a one-page “Applicant Statement and Agreement” that purportedly contained an arbitration provision in extremely small, blurred print.

At the trial court level, the court denied the motion to compel arbitration, finding the agreement unconscionable due to its microscopic and barely legible text.

The Court of Appeal reversed. While acknowledging that the agreement was procedurally unconscionable because of its format and presentation, the appellate court concluded that the agreement lacked substantively unfair terms. Applying California’s two-part unconscionability test, the court held that procedural unconscionability alone was insufficient to invalidate the arbitration agreement.

The California Supreme Court granted review to consider how far procedural defects such as illegibility may go in rendering an arbitration clause unenforceable. During oral argument, several justices expressed skepticism that an agreement no one can read can meaningfully bind an employee, raising questions about whether the appellate court’s analysis unduly minimized the practical impact of an unreadable contract.

Based on the justices’ questioning, the Court may be inclined to reverse the Court of Appeal’s decision and clarify whether extreme procedural flaws, such as illegible text, can independently support a finding of unconscionability.

Implications for Employers

The Court’s eventual ruling could have significant implications for employers and human resources professionals. If the appellate decision is reversed, employers may face increased scrutiny over the form and presentation of arbitration agreements and other employment contracts. Agreements that are poorly reproduced, excessively dense, or difficult to read may be vulnerable to challenge even if their substantive terms are otherwise lawful.

As a best practice, employers should ensure that arbitration agreements and other employment-related documents are:

• clearly legible,
• written in readable font size and format, and
• presented in a manner that allows employees a meaningful opportunity to review them.

Regardless of how the Court rules, this case underscores the importance of maintaining clear, accessible, and well-drafted employment agreements to minimize litigation risk. Employers and counsel should continue to monitor this case closely as it may reshape how California courts evaluate the enforceability of arbitration agreements going forward.