Key Points

  • The Second Appellate District, Division Eight, affirmed 2-1 the denial of VXI Global Solutions' motion to compel arbitration of a former employee's wage-and-hour class action.
  • The majority held the arbitration agreement substantively unconscionable because it covered claims unrelated to employment, had unlimited duration, and let a broad class of third-party beneficiaries compel arbitration without a reciprocal obligation.
  • Under Civil Code section 1642, the court read the arbitration agreement with a same-day confidentiality agreement whose injunctive-relief and one-year nonsolicitation clauses were also unconscionable.
  • The court held the defects permeated the agreement and could not be cured by severance without rewriting its terms.
  • Justice Wiley dissented, arguing the majority's arbitration-specific unconscionability analysis is preempted by the Federal Arbitration Act and citing his survey finding California courts aimed the doctrine at arbitration 79 to 90 percent of the time from 2021 to 2025.

A divided California appeals court on Nov. 13 refused to send a call-center worker's wage-and-hour class action to arbitration, holding that her employer's arbitration agreement reached so far beyond her job, and tilted so heavily toward the company, that it could not be enforced.

The Second Appellate District, Division Eight, voted 2-1 to affirm a Los Angeles County Superior Court order denying VXI Global Solutions LLC's motion to compel arbitration of claims brought by former account associate Tracie Bennett. Justice Viramontes wrote for the majority, joined by Presiding Justice Stratton. Justice Wiley dissented, arguing that the Federal Arbitration Act preempts the majority's approach.

Unconscionability is a contract defense that lets a court refuse to enforce terms when one party lacked a meaningful choice and the terms unreasonably favor the other side. The published decision holds that an arbitration agreement must be read together with a confidentiality agreement signed in the same hiring packet, so flaws in the second document count against the first. It also holds that a court cannot cure an agreement covering claims unrelated to employment by striking a few words.

VXI, which the opinion calls Global, runs customer service call centers nationwide. It hired Bennett, who has a high school education, in February 2023, and she worked there until April 2023. Her roughly 100-page new-hire packet contained both agreements. In October 2023 she filed a class action alleging unpaid minimum wages and overtime and missed meal and rest breaks, among other claims.

The arbitration agreement covered "all individual claims or controversies" involving the company "whether or not those claims or controversies arise out of my employment." It survived the end of employment and could be revoked only by a writing signed by Bennett and all of the company's partners. It also defined the company to include its past and present partners, officers, directors, employees, affiliates and benefit plans.

Read together, those terms meant "the agreement requires Bennett to arbitrate nearly any claim she could have against the company for the rest of her life, until she and Global agree to terminate the agreement," Justice Viramontes wrote. The majority rejected Global's argument that a call-center operator and a former worker were unlikely ever to have claims against each other outside her job, saying that reading ignored the agreement's text.

The broad definition of the company also made its officers, employees and agents third-party beneficiaries, the court held. They could compel Bennett to arbitrate any claim she brought against them, but she could not force them to arbitrate their claims against her without first showing they had accepted some benefit under the agreement.

Under Civil Code section 1642, the court read the confidentiality agreement with the arbitration pact. The confidentiality agreement entitled Global to injunctions without proving irreparable harm, one of the elements a court ordinarily weighs before issuing an injunction. It also barred Bennett from soliciting Global's employees for a year after she left, a clause the court held void under Business and Professions Code section 16600 because it was not limited to illegal means of solicitation.

The majority found only a low degree of procedural unfairness. The agreement was a contract of adhesion, a standardized form offered on a take-it-or-leave-it basis, but nothing showed Bennett was rushed. Under California's sliding scale, that required a high degree of substantive unfairness, which the court found in at least five provisions.

The panel also rejected Global's proposal to strike the "whether or not" language. "That language, on its face, would still include any claims involving Global, including those unrelated to Bennett's employment," the majority wrote, and courts cannot add terms to a contract to fix it.

"The majority opinion invites preemption—again," Justice Wiley wrote in dissent. "The majority takes apart this arbitration contract using a 20-pound sledgehammer found nowhere else in general contract law." Justice Wiley argued that the scope, duration and mutuality objections the majority relied on appear nowhere in contract law outside arbitration.

The dissent included a survey of 713 California cases from 2021 through 2025 that mention unconscionability. Of the 100 that invalidated a contract in whole or in part, Justice Wiley counted 79 involving arbitration, or 90 percent once 12 cases applying specialty statutes were excluded. By that count, "California courts used the unconscionability doctrine to interfere with arbitration 79 percent to 90 percent of the time."

The dissent also listed eight U.S. Supreme Court decisions since 1984 that preempted California arbitration law and noted the last came in 2022, "so a believer in simple averages might predict another one soon." Justice Wiley would have severed the nonsolicitation clause and remanded for the trial court to send the case to arbitration. "This slice of the knife would be straight, clean, and easy," the dissent said.

The majority answered that it was bound by the California Supreme Court's 2013 decision in Sonic-Calabasas A v. Moreno, which said unconscionability remained a valid defense to arbitration after the U.S. Supreme Court's 2011 ruling in AT&T Mobility v. Concepcion. It attributed the dissent's numbers to the frequency of arbitration clauses in adhesion contracts and to a statute making orders denying arbitration immediately appealable. "California's courts, therefore, are not singling out arbitration for disfavored treatment under the unconscionability doctrine," Justice Viramontes wrote.

Justice Wiley replied that the appeals statute explains why appellate courts see so many arbitration cases, but not why they invalidate so many agreements. "The procedural quirk cannot explain that," the dissent said, adding that the relevant passage of Sonic-Calabasas "cannot be valid" under the U.S. Supreme Court's 2017 decision in Kindred Nursing Centers v. Clark.

Lawyers for VXI Global Solutions included Laura Reathaford of Lathrop GPM. Bennett was represented by Joseph Lavi of Lavi & Ebrahimian.

The panel affirmed the order of Los Angeles County Superior Court Judge David S. Cunningham III and awarded Bennett her costs on appeal, leaving her class action in court rather than arbitration. The opinion was certified for publication.