Employment Law

In June of 2003, El Pollo Loco sent out documents that set out their dispute resolution policies. The documents contained large texts, in both English and Spanish, along with a drawing that required “the employee and the company use a mediator…” for unresolved conflicts. There was no mention of arbitration.

A later section in smaller print, in English only, and without a drawing, stated, “all employment-related disputes must be resolved through binding arbitration.” This created a conflict in that this was the only form of resolving the dispute permitted and a class action would not be allowed.

A class action suit was filed alleging employment law violations. El Pollo Loco wanted to compel arbitration. However, this was denied based on the fact that the judge deemed that the arbitration clause was unconscionable. El Pollo Loco argued that the provision was not unconscionable.

There are two kinds of unconscionability that were dismissed by the court. Procedural unconscionability looks to “oppression or unfair surprise” and substantive unconscionability looks to “harsh or one-sided terms.” The courts looked at both sides and then chose the one that they believed to be more reasonable.

The court in this case determined that the degree of procedural unconscionability was high, showing the obvious unequal bargaining power between El Pollo Loco and its low-paid employees created some “pressure to sign…and agree.” Making it worse, the court determined that this was without a clear understanding of the terms.

With that said, there appeared to be a lack of informed decision and workers were mislead in the manner in which information was relayed to its people. Therefore the employees won. The court found the arbitration agreement was unenforceable.