Filed 6/18/26 Barnes v. LRS Healthcare CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
WILLIAM BARNES, H053238
(Santa Clara County
Plaintiff and Respondent, Super. Ct. No. 23CV424794)
v.
LRS HEALTHCARE, LLC,
Defendant and Appellant.
This appeal is from the denial of a motion to compel arbitration. William Barnes
sued his former employer LRS Healthcare, LLC (LRS) claiming, on behalf of himself
and a putative class of current and former LRS employees, various Labor Code and wage
order violations. LRS moved to compel arbitration and to dismiss the class action claims.
The trial court denied the motion on the ground that the agreements upon which the
motion was based were unconscionable and unenforceable. As explained below, we
conclude that the trial court correctly held multiple provisions in the agreements
unconscionable and did not abuse its discretion in refusing to sever these provisions.
Accordingly, we affirm the denial of LRS’s motion to compel arbitration and to dismiss
class action claims.
I. BACKGROUND
LRS is an employment staffing agency that places medical professionals in
temporary assignments at facilities throughout the country, including California. Barnes,
a licensed nurse, worked for LRS as an hourly travel nurse starting in 2021. He
performed assignments at several Bay Area hospitals before resigning in
September 2023.
A. The 2021-2022 Agreements
In November 2021, shortly before Barnes started his first assignment, LRS
required him to review and sign numerous on-boarding documents, including new-hire
documents, tax forms, LRS’s employee handbook, paystubs, and an Agreement to
Arbitrate (the 2021 Agreement to Arbitrate). LRS gave employees such as Barnes access
to the onboarding documents via an online portal. The 2021 Agreement to Arbitrate
accessible on that LRS portal was a standardized, pre-printed form, which Barnes had no
opportunity to negotiate. In March 2022, Barnes also signed a document entitled
“Traveling Medical Professional Services Agreement” (the 2022 Services Agreement).
1. The 2021 Agreement to Arbitrate
The 2021 Agreement to Arbitrate is four, single-spaced pages. In it, LRS and
employees such as Barnes agreed to arbitrate all disputes “arising out of or in any manner
related to your employment relationship,” which “LRS may have against you [Barnes] or
you may have against LRS, its affiliates, subsidiaries, divisions, predecessors, successors,
assigns and their current and former employees, officers, directors, and agents.” The
agreement lists examples of claims covered by the arbitration requirement, all related to
employment, and another list of matters not covered by the agreement. The agreement,
however, states that it does not limit Barnes’ ability to file charges with federal, state, or
local administrative agencies or restrict the relief those agencies may seek in court.
2
The 2021 Arbitration Agreement also contains a waiver for class, collective, and
representative actions. This provision states that “all disputes covered by the agreement
must be pursued on an individual basis only” and that “you and LRS waive the right to
commence, be a party to, participate in, receive money or any other relief from, or amend
any existing lawsuit to include, any representative, collective or class proceeding or
claims or to bring jointly any claim covered by this agreement.” The provision further
states that “neither you nor LRS may bring a claim covered by this agreement on behalf
of other individuals or entities . . . .”
On its fourth and final page, the 2021 Agreement to Arbitrate contains a section
entitled “Consideration,” which states that, “[u]nless otherwise provided by applicable
law, your employment or continued employment with LRS shall constitute consideration
and acceptance by you of the terms and conditions set forth in this agreement.”
(Boldface omitted.) However, the next section, which is entitled “Opt Out,” states that
“[a]rbitration is not a mandatory condition of employment” and “[y]ou may opt out by
mailing . . . written notice of the intent to opt out within 30 calendar days of signing this
Agreement . . . .” (Boldface omitted.)
2. The 2022 Services Agreement
The 2022 Services Agreement is a five page, single-spaced document. Section 14
of this agreement required Barnes to abide by the 2021 Agreement to Arbitrate:
“Professional hereby agrees that any potential disputes arising under this Agreement or
any other aspect of Professional’s employment with the Company, will be governed by
and subject to the Company’s Agreement to Arbitrate executed by Professional and
Professional waives any right to object to same.” Section 14 makes no provision for
employees who may have opted out of the 2021 Agreement to Arbitrate.
The 2022 Services Agreement also contains a confidentiality provision and an
injunctive relief provision. The confidentiality provision states that LRS will provide
3
Barnes with access to certain “Confidential Information,” which is defined to include
trade secrets, confidential and proprietary information owned by LRS as well as third-
party information that LRS is required to maintain in confidence. The confidentiality
provision also states that Barnes agrees not to disclose any Confidential Information.
Finally, the 2022 Services Agreement contains an injunctive relief provision. This
provision allows LRS to seek injunctive relief as well as other remedies in court to
enforce the confidentiality provision, and it requires Barnes to waive a key defense
against injunctive relief. Specifically, the services agreement states that “Professional
acknowledges there is no adequate remedy at law to redress a breach of the covenants
contained in this Agreement and therefore agrees the Company shall be entitled to an
injunction or other equitable relief against Professional restraining Professional from any
such breach.” The injunctive relief provision also states that Barnes “waives [his] right to
pursue any claim or defense alleging that [LRS] has an adequate remedy at law for any
breach.” The provision additionally allows LRS to pursue damages and other remedies in
court: “The Parties agree that nothing contained in this Agreement shall prohibit the
Company from pursuing any other remedies including damages, through judicial
proceedings or otherwise.”
B. The 2023 Agreements
In January 2023 Barnes signed two new agreements superseding the 2021-2022
agreements: the “Mutual Dispute Resolution Agreement” (2023 Dispute Resolution
Agreement) and another “Traveling Medical Professional Services Agreement” (2023
Services Agreement). Like the 2021 Agreement to Arbitrate, the 2023 Dispute
Resolution Agreement was accessible on the LRS portal as a standardized, pre-printed
form.
4
1. 2023 Dispute Resolution Agreement
The 2023 Dispute Resolution Agreement is six pages, two pages longer than the
2021 Agreement to Arbitrate. In addition, unlike the 2021 agreement, the 2023
agreement does not contain an opt-out provision. Instead, the first paragraph of the 2023
agreement states that “[t]his Agreement is a condition of employment,” and “[i]f you
accept or continue employment with LRS, both you and LRS will be bound by its terms.”
The scope of the 2023 agreement to arbitrate is slightly broader than the 2021
agreement. While the 2021 agreement covers all disputes “arising out of or in any
relationship to your employment relationship,” the 2023 agreement covers “any
controversy, dispute, or claim . . . relating to your employment or association.” (Italics
added.) Much like the 2021 agreement, the 2023 agreement requires arbitration of
covered claims that (i) LRS has against Barnes, (ii) Barnes has against LRS, and
(iii) Barnes has against “LRS’ current or former affiliates, subsidiaries, divisions,
predecessors, successors, assigns, parents, partners, members, vendors, clients,
customers, or any entity alleged to be a joint employer with LRS, and LRS and/or their
current and former employees, officers, directors, and agents.” Like the 2021 agreement,
the 2023 agreement also provides a long list of disputes covered by the agreement. One
type of dispute listed is “individual claims under state private attorneys general laws (e.g.,
California Private Attorney General Act, California Labor Code §§ 2689, et seq.).”
Like the 2021 agreement, the 2023 agreement does not limit Barnes’ ability to
“file a charge with a federal, state or local administrative agency.” However, in sharp
contrast to the earlier agreement, the 2023 agreement imposes a limit on the monetary
relief Barnes may recover in administrative proceedings: “[U]nless otherwise provided
by applicable law, you shall not be entitled to seek or receive any monetary compensation
as a result of any proceeding arising from the filing of any such charge and/or
5
participating in an investigation resulting from the filing of a charge with the EEOC
and/or state or local human rights agency.”
Like the 2021 agreement, the 2023 arbitration agreement contains a class,
collective, and representative action waiver. However, this waiver recognizes that
individual, or personal, representative claims may be brought: It states that claims
covered by the 2023 agreement “must be pursued on an individual basis only and there is
no right or authority for any Covered Claim to be brought, heard, or adjudicated as a
multi-plaintiff, multi-claimant, class, collective, or representative action . . . .”
The 2023 Dispute Resolution Agreement also contains a severability provision
stating that, “[i]f any part of this Agreement is held to be invalid void, or unenforceable,
the remainder of the Agreement will still be enforceable.” In addition, the 2023
agreement contains an integration clause, which states that the agreement “sets forth the
final agreement of the parties and supersedes all prior negotiations, representations or
agreements, whether written or oral, pertaining to arbitration of Covered Claims and
waiver of jury trials.” Finally, the agreement states that it “shall survive any termination
of Employee’s employment with the Company.”
2. The 2023 Services Agreement
Several days after signing the 2023 Dispute Resolution Agreement, Barnes signed
the 2023 Services Agreement. Like the 2022 Services Agreement, the 2023 agreement
requires Barnes to arbitrate any dispute arising under the agreement or any other aspect of
his employment with LRS. The agreement also prohibits Barnes from disclosing LRS
trade secrets and other “Confidential Information.” In addition, the agreement requires
Barnes to acknowledge that “there is no adequate remedy at law to redress a breach of the
covenants contained in this Agreement,” that LRS is “entitled to an injunction or other
equitable relief against Professional restraining Professional from any such breach,” and
that “nothing contained in this Agreement shall prohibit the Company from pursuing any
6
other remedies including damages, through judicial proceedings or otherwise.” Finally,
the 2023 Services Agreement states that “Professional hereby waives their right to pursue
any claim or defense alleging that the Company has an adequate remedy at law for any
breach.”
C. The Proceedings Below
1. The Claims
In October 2023, Barnes sued LRS. He asserted ten claims, including failure to
pay for hours worked, to pay minimum wage, to pay overtime, to authorize or permit
meal and rest breaks, and to reimburse necessary business expenditures. The meal and
rest break claims seek civil penalties under California’s Private Attorney General Act of
2004 (Lab. Code, § 2698 et seq.) (PAGA). Barnes also sought to certify a class of current
and former employees.
2. LRS’ Motion
LRS moved to compel Barnes to arbitrate his claims and to dismiss his class action
claims. The motion was based on the 2023 Dispute Resolution Agreement, but LRS
requested in the alternative, if that agreement is unenforceable, enforcement of the 2021
Agreement to Arbitrate. In opposition, Barnes argued that both agreements are
unconscionable and unenforceable.
3. The Trial Court’s Order
The trial court denied LRS’s motion. Agreeing with Barnes, the court ruled that
both the 2023 agreements and the 2021-2022 agreements are procedurally
unconscionable and that they contain multiple substantively unconscionable provisions.
The court also declined to sever the unconscionable provisions.
The trial court ruled that the 2023 Dispute Resolution Agreement had a “modest
degree of procedurally unconscionability” because it is a contract of adhesion. The court
also ruled that the 2023 agreements have a “considerable degree of substantive
7
unconscionability.” In particular, the court held that the injunction provisions in the 2023
Services Agreement, which it held should be construed with the 2023 Dispute Resolution
Agreement, are substantively unconscionable because they permit LRS to seek injunctive
relief outside of arbitration to enforce the agreement’s confidentiality provision and
require Barnes to waive any defense that LRS had an adequate remedy at law. The trial
court also found that the waivers of representative PAGA claims and monetary relief in
administrative proceedings are substantively unconscionable. Finally, although the court
did not find it problematic that the 2023 Dispute Resolution Agreement covered claims
arising out of Barnes’ “association” with LRS, it held the agreement’s infinite duration
substantively unconscionable. The trial court rejected LRS’ request to sever the
unconscionable provisions on the ground that these provisions “permeate” the 2023
agreements.
The trial court then considered the 2021-2022 agreements, reasoning that under
the doctrine of novation those agreements become operative if the 2023 agreements
superseding them are unenforceable. In light of the opt out provision in the 2021
Agreement to Arbitrate, the court found that the 2021-2022 agreements had “a slight
degree of procedural unconscionability.” In addition, concluding that the 2022 Services
Agreement should be considered together with the 2021 Agreement to Arbitrate, the court
held that the injunction provisions in the 2022 agreement are substantively
unconscionable. It also held that the PAGA waiver in the 2021 agreement, which unlike
the 2023 agreement waives all representative PAGA claims, whether individual or not, is
substantively unconscionable. The court further held that the 2021 Agreement to
Arbitrate’s third-party provision, which it had not considered in connection with the 2023
agreements, is substantively unconscionable because it confers a benefit on LRS without
conferring a similar one on Barnes. The trial court also once again declined to sever the
unconscionable provisions.
8
Finally, the trial court declined to dismiss Barnes’ class action claims.
LRS filed a timely notice of appeal from the trial court’s order. We have
jurisdiction over this appeal under Code of Civil Procedure section 1294, subdivision (a).
II. DISCUSSION
“Federal and California law treat valid arbitration agreements like any other
contract and favor their enforcement.” (Ramirez v. Charter Communications, Inc. (2024)
16 Cal.5th 478, 492 (Ramirez).) Indeed, “ ‘the Legislature has expressed a “strong public
policy” in favor of arbitration as a speedy and relatively inexpensive means of dispute
resolution.” ’ ” (OTO, LLC v. Kho (2019) 8 Cal.5th 111, 125 (OTO).) Accordingly, under
California as well as federal law, “[a]n agreement to submit disputes to arbitration ‘is
valid and irrevocable, save upon such grounds as exist for revocation of any contract.’ ”
(Ibid; see 9 U.S.C. § 2.) “Unconscionability provides such grounds.” (Ramirez, at
p. 492.)
Where evidence is not in conflict, unconscionability rulings are reviewed de novo.
(See, e.g., Ramirez, supra, 16 Cal.5th at p. 493.) However, a trial court’s determination
whether to sever unconscionable provisions from an agreement is reviewed for abuse of
discretion. (Id. at p. 513.) Before applying these standards to the order on appeal, we
briefly review the law governing unconscionability and severance.
A. Relevant Legal Principles
“A contract is unconscionable if one of the parties lacked a meaningful choice in
deciding whether to agree and the contract contains terms that are unreasonably favorable
to the other party.” (OTO, supra, 8 Cal.5th at p. 125.) “[U]nconscionability doctrine
‘ “has both a procedural and a substantive element.” ’ ” (Ibid.) Both elements must be
shown to establish the defense, but they do not need to be present in the same degree; to
the contrary, procedural and substantive unconscionability operate on a “ ‘sliding scale’ ”:
9
The more one is shown, the less the other is required. (Armendariz v. Foundation Health
Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).)
1. Procedural Unconscionability
Procedural unconscionability examines “ ‘the circumstances of contract
negotiation and formation, focusing on oppression or surprise due to unequal bargaining
power.’ ” (Ramirez, supra, 16 Cal.5th at p. 492.) “ ‘ “ ‘Oppression’ ” ’ ” exists where a
contract “ ‘ “ ‘involves lack of negotiation and meaningful choice . . . .’ ” ’ ” (OTO,
supra, 8 Cal.5th at p. 126.) “ ‘ “ ‘[S]urprise’ ” ’ ” occurs when the allegedly
unconscionable provision is “ ‘ “ ‘hidden within a prolix printed form.’ ” ’ ” (Id. at
p. 126.)
Analysis of procedural unconscionability “ ‘begins with an inquiry into whether
the contract is one of adhesion.’ ” (OTO, supra, 8 Cal.5th at p. 126.) “An adhesive
contract is standardized, generally on a preprinted form, and offered by the party with
superior bargaining power ‘on a take-it-or-leave-it basis.’ ” (Id. at p. 126.) Because of
the economic pressure that employers exert on most employees (id. at p. 127),
“[a]rbitration contracts imposed as a condition of employment are typically adhesive” (id.
at p. 126), and “[a]n arbitration agreement that is an essential part of a ‘take it or leave it’
employment condition, without more, is procedurally unconscionable” (Martinez v.
Master Protection Corp. (2004) 118 Cal.App.4th 107, 114).
While, by itself, a contract of adhesion concerning employment establishes “ ‘a
modest degree of procedural unconscionability’ ” (Nguyen v. Applied Medical Resources
Corp. (2016) 4 Cal.App.5th 232, 248 (Nguyen)), other factors may increase the degree of
unconscionability. For example, the pressure on an employee to sign an agreement can
be substantial if the employee must do so to keep a job because “ ‘the sudden loss of a
job may create major disruptions . . . .’ ” (Beco v. Fast Auto Loans, Inc. (2022) 86
Cal.App.5th 292, 309 (Beco).) Procedural unconscionability also may be increased by
10
factors such as the length of a contract, the length and complexity of the contract’s
provisions, the education and experience of a party, and the absence of legal assistance.
(Id. at p. 308.)
2. Substantive Unconscionability
Substantive unconscionability “considers ‘the fairness of an agreement's actual
terms’ [citation], focusing on whether the contract will create unfair or one-sided results
[citation].” (Ramirez, supra, 16 Cal.5th at p. 493.) Contractual provisions are
substantively unconscionable if they are “ ‘overly harsh,’ ” “ ‘ “unduly oppressive,” ’ ” or
“ ‘ “ ‘so one-sided as to “shock the conscience.” ’ ” ’ ” (Baltazar v. Forever 21, Inc.
(2016) 62 Cal.4th 1237, 1244 (Baltazar).) Unconscionability doctrine is not concerned
with bad bargains, “ ‘but with terms that are “unreasonably favorable to the more
powerful party.” ’ ” (Id. at p. 1244.) Consequently, with respect to substantive
unconscionability, “ ‘[t]he ultimate . . . issue is whether the terms of the contract are
sufficiently unfair, in view of all the circumstances, that a court should withhold
enforcement.’ ” (Ibid.)
A contract may be unreasonably favorable to the more powerful party, and
therefore substantively unconscionable, if it lacks “mutuality.” Mutuality is absent, for
example, when a party with stronger bargaining power requires a weaker party to
arbitrate claims but does not require the stronger party to arbitrate the claims that party is
likely to bring against the weaker party. (Ramirez, supra, 16 Cal.5th at pp. 495-496.)
Provisions lacking mutuality are substantively unconscionable unless the stronger party
provides “some reasonable justification for such one-sidedness based on ‘business
realities.’ ” (Id. at p. 495.)
3. Severance
When a contractual provision is held unconscionable, a trial court has to choose to
do one of the three things: “(1) refuse to enforce the contract; (2) sever any
11
unconscionable clause; or (3) limit the application of any clause to avoid unconscionable
results.” (Ramirez, supra, 16 Cal.5th at p. 513 [discussing Civ. Code, § 1670.5].)
However, “[t]he ‘strong legislative and judicial preference is to sever the offending term
and enforce the balance of the agreement’ ” (ibid.), especially when the contract in
question contains a severance clause expressing an intent that the contract should be
enforced where its invalidity may be cured by removing terms (id. at p. 517).
In determining whether unconscionable contractual terms should be severed,
courts first determine whether the unconscionability can be cured by removing or limiting
terms. (Ramirez, supra, 16 Cal.5th at p. 516.) If not, severance should be denied. (Ibid.)
If the unconscionability is curable, courts consider whether “ ‘ “ ‘the interests of
justice . . . would be furthered’ by severance.’ ”’ ’ ” (Id. at p. 514.)
In determining whether the interests of justice favor severance, several competing
factors should be considered. On the one hand, the interests of justice may favor
severance of unconscionable terms “ ‘to conserve a contractual relationship’ ”or “ ‘to
prevent parties from gaining undeserved benefit or suffering undeserved detriment’ ”
caused by voiding the entire contract. (Ramirez, supra, 16 Cal.5th at p. 514.) On the
other hand, the interests of justice may disfavor severance if an arbitration agreement is
“ ‘permeated by an unlawful purpose,’ ” for example, because multiple defects in the
agreement evidence a “ ‘systematic effort’ ” to gain an unfair advantage. (Id. at p. 515.)
In that situation, severance does not further the interests of justice because preserving the
arbitration agreement would “ ‘create an incentive for an employer to draft a one-sided
arbitration agreement in the hope employees would not challenge the unlawful
provisions, but if they do, the court would simply modify the agreement to include the
bilateral terms the employer should have included in the first place.’ ” (Id. at p. 517.) As
a general rule, “the greater number of unconscionable provisions a contract contains the
less likely that severance will be the appropriate remedy.” (Ibid.)
12
B. The 2023 Agreements
We begin with the 2023 Dispute Resolution Agreement and the 2023 Services
Agreement. Because the two agreements were executed within days of each other,
concern Barnes’ continued employment, and address dispute resolution, the parties agree
that they should be construed together. This reflects the general principle that “[s]everal
contracts relating to the same matters, between the same parties, and made as part of
substantially one transaction, are to be taken together.” (Civ. Code, § 1642; see also
Alberto v. Cambrian Homecare (2023) 91 Cal.App.5th 482, 490-491 (Alberto)
[considering arbitration and confidentiality agreements together because they create an
“overall dispute resolution process”].) Accordingly, we consider the 2023 agreements
together in determining whether they were procedurally and substantively
unconscionable.
1. Procedural Unconscionability
The trial court concluded that the 2023 Dispute Resolution Agreement had a
“modest amount” of procedural unconscionability because it was a contract of adhesion.
We agree that the 2023 Dispute Resolution Agreement is a contract of adhesion and
conclude that 2023 Services Agreement is one as well. Moreover, we find additional
aspects of procedural unconscionability. As a consequence, we conclude that the 2023
agreements have a moderate level of procedural unconscionability.
The 2023 agreements are clearly contracts of adhesion. As noted above, a contract
of adhesion is “standardized, generally on a preprinted from, and offered by the party
with superior bargaining power ‘on a take-it-or-leave-it basis.’ ” (OTO, supra, 8 Cal.5th
at p. 126.) The 2023 agreements fit the bill. Both the 2023 Dispute Resolution
Agreement and the 2023 Services Agreements are on standardized, pre-printed forms.
The agreements were offered by LRS, Barnes’ employer, who was in a position to place
economic pressure—potential loss of employment—on Barnes. (Ramirez, supra, 16
13
Cal.5th at p. 494; OTO, at p. 127.) And LRS expressly made the 2023 Dispute
Resolution Agreement “a condition of employment” and provided no opt out. In
addition, the 2023 Services Agreement requires Barnes to agree to the other 2023
agreements’ arbitration provision. Consequently, as the trial court concluded, the 2023
agreements are contracts of adhesion and therefore both impose at least a “ ‘modest
degree of procedural unconscionability.’ ” (Nguyen, supra, 4 Cal.App.5th at p. 248.)
Barnes argues that additional factors heighten the procedural unconscionability.
We agree. First, the 2023 Dispute Resolution Agreement is a full six pages, single-spaced
long, and although it used a conventional type size, it was filled with references to state
and federal statutes as well as legal terminology and requirements—which contributes to
procedural unconscionability. (Beco, supra, 86 Cal.App.5th at p. 308.) Second, Barnes
has no legal training and did not have the assistance of a lawyer, another factor that
contributes to procedural unconscionability. (Ibid. [noting that plaintiff was not “legally
sophisticated” and his review of arbitration agreement “was not aided by an attorney”].)
Third, the 2023 agreements were presented to Barnes after years working for LRS as a
condition of continued employment, which imposed substantial pressure upon him to
accept them. (OTO, supra, 8 Cal.5th at p. 127 [“[E]conomic pressure can also be
substantial when employees are required to accept an arbitration agreement in order to
keep their job.”].)
LRS acknowledges that the 2023 Dispute Resolution Agreement is a contract of
adhesion. Nevertheless, it asserts that the agreement had only a “slight” degree of
procedural unconscionability because there was no oppression or surprise. We are not
persuaded. LRS does not dispute that Barnes’ continued employment was conditioned
upon acceptance of the 2023 Dispute Resolution Agreement. Nor does it contend that
Barnes had any legal training or was able to consult with an attorney. And, far from
showing that the agreement was easily understood by lay persons, LRS merely asserts
14
that it was “short, plainly written, and organized” because “it defines ‘Covered Claims,’
lists examples, defines ‘Excluded Claims,’ and contains a severability clause.”
Accordingly, we conclude that the 2023 agreements impose a moderate level of
procedural unconscionability.
2. Substantive Unconscionability
The trial court concluded that that the 2023 agreements imposed a considerable
degree of substantial unconscionability because four provisions—the service agreement’s
injunction provision and the dispute resolution agreement’s PAGA waiver, administrative
monetary relief waiver, and duration—are substantively unconscionable. Barnes agrees
with these conclusions and contends the dispute resolution agreement’s scope is also
substantively unconscionable. Although we disagree with respect to the dispute
resolution agreement’s duration, we otherwise agree with the trial court and therefore
conclude that the 2023 agreement has a high degree of substantive unconscionability.
a. The Injunction Provision
The trial court began its analysis of the 2023 agreements with the 2023 Services
Agreement’s injunction provision, which it found unconscionable because it requires
Barnes to consent to injunctive relief outside of arbitration for breaches of confidentiality,
a claim that only LRS could make, and requires Barnes to waive an essential requirement
for injunctive relief. We agree that the injunction provision is substantively
unconscionable.
“ ‘ “[T]he paramount consideration in assessing . . . conscionability is
mutuality.” ’ ” (Alberto, supra, 91 Cal.App.5th at p. 491.) “An arbitration agreement
need not ‘mandate the arbitration of all claims between’ the parties.” (Ramirez, supra, 16
Cal.5th at p. 495.) “However, if an agreement singles out certain claims for arbitration,
there must be ‘mutuality.’ ” (Ibid.) “[I]t is unfairly one-sided for an employer with
superior bargaining power to impose arbitration on the employee as plaintiff but not to
15
accept such limitations when it seeks to prosecute a claim against the employee, without
at least some reasonable justification for such one-sidedness based on ‘business
realities.’ ” (Armendariz, supra, 24 Cal.4th at p. 117.)
The 2023 Services Agreement is substantively unconscionable because it lacks
mutuality without justification. The agreement prohibits employees from disclosing
“Confidential Information,” which is defined broadly to include all trade secrets,
confidential information, and proprietary information owned by LRS as well as any third-
party information LRS is obligated to maintain in confidence. In addition, the agreement
provides that LRS may seek an injunction or any other remedy, not in or even in
conjunction with arbitration, but instead “through judicial proceedings.” Moreover, the
agreement requires employees to “acknowledge[] that there is no adequate remedy at
law” to redress a breach of the agreement and to “waive[]” any defense against injunctive
relief that LRS “has an adequate remedy at law.”
This provision is one-sided and unfair. It concerns procedural requirements that
no lay person is likely to understand, much less appreciate their significance. It gives
LRS the right to seek injunctive relief and other remedies, including damages, in court
against Barnes on claims arising out of his employment and association with LRS even
though Barnes is required to arbitrate such claims that he has against LRS. In addition,
by requiring Barnes to acknowledge there is no adequate remedy at law and waive any
defense on that ground, the injunction provision allows LRS to obtain injunctive relief
without establishing an essential requirement for such relief. While there may be a
reasonable business justification for imposing a duty of confidentiality on employees and
even for allowing some injunctive relief in court, LRS has not suggested any such
justification for relieving it of the need to establish a basic requirement for injunctive
relief and also allowing it to seek “other remedies including damages” in court.
16
Similar provisions have been held unconscionable. In Alberto v. Cambrian
Homecare, supra, 91 Cal.App.5th 482, an employer required employees to sign both an
arbitration agreement requiring the employees to arbitrate all claims arising out of their
employment and a confidentiality agreement. (Id. at p. 486.) The confidentiality
agreement required employees to acknowledge that unauthorized disclosure of
confidential information “ ‘would cause irreparable injury’ ” to the employer and also
required employees to consent to “ ‘an immediate injunction, without bond, from any
court of competent jurisdiction.’ ” (Id. at p. 487.) Alberto held these provisions
substantively unconscionable. (Id. at pp. 492-493.) The decision reasoned that, while
provisions allowing preliminary injunctive relief may not be automatically
unconscionable, the “additional provisions that waive the employer’s need to obtain a
bond before seeking an injunction, waive the employee’s need to show irreparable harm,
and require an employee to consent to an immediate injunction are unconscionable.” (Id.
at p. 492.) Similarly, Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227 (Carbajal),
held that “[a]n arbitration provision lacks mutuality and is substantively unconscionable
when it authorizes the stronger party to obtain injunctive relief without establishing all of
the essential elements for the issuance of an injunction.” (Id. at p. 250; see also Carmona
v. Lincon Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 86-90 [holding
unconscionable provision allowing employers to seek injunction or damages for breach
of confidentiality agreement in court].)
LRS notes that California law expressly permits parties to seek provisional
remedies in court (Code Civ. Proc., § 1281.8) and that the Supreme Court has held that
provisions permitting preliminary injunctive relief are therefore not automatically
unconscionable (see Baltazar, supra, 62 Cal.4th at pp. 1246-1248). However, the 2023
Services Agreement is not limited to provisional remedies or to remedies in “aid of
arbitration.” To the contrary, it authorizes LRS to seek permanent injunctive relief as
17
well as “any other remedies, including damages,” and to do so in court without any
arbitration. Moreover, while Alberto expressly recognized that preliminary injunctive
relief provisions are “not, by themselves, unconscionable,” it also held that provisions
relieving employers of the need to prove essential requirements for injunctive relief—as
the 2023 Services Agreement does—are unfair and unconscionable. (Alberto, supra, 91
Cal.App.5th at p. 492.) Finally, far from implicitly overruling Carbajal as LRS asserts,
the Supreme Court noted that the decision is “instructive” in holding an injunction
provision unconscionable. (Ramirez, supra, 16 Cal.5th at pp. 499-500.
Accordingly, we conclude that the 2023 Services Agreement’s injunctive relief
provision is “blatantly one-sided” and creates a “moderate level of substantive
unconscionability.” (Carbajal, supra, 245 Cal.App.4th at pp. 249, 253.)
b. The PAGA Waiver
In addition to holding the 2023 Service Agreement’s injunction provision
substantively unconscionable, the trial court held the waiver of PAGA claims in the 2023
Dispute Resolution Agreement substantively unconscionable. Here again, we agree.
The 2023 Dispute Resolution Agreement contains a “Class Waiver” that precludes
PAGA claims for violations involving others and waives any monetary recovery or other
relief from such claims. (Boldface omitted.) The waiver states that Covered Claims
“must be pursued on an individual basis only” and cannot be “brought, heard, or
adjudicated as a multi-plaintiff, multi-claimant, class, collective, or representative action,
or . . . proceeding.” The waiver also states that, to the maximum extent permitted by law,
“you and LRS waive the right . . . to participate in” or “receive money, or any other
relief” from any representative, collective or class proceeding involving a claim covered
by the 2023 Dispute Resolution Agreement. Finally, the waiver prevents an arbitrator or
court from combining individual claims, facilitating the production of class-wide contact
information, or arbitrating any class, collective, or representative proceeding.
18
Although the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA) permits
arbitration agreements to include class action waivers (see AT&T Mobility LLC v.
Concepcion (2011) 563 U.S. 333, 340, 352) and to require arbitration of PAGA claims
(see Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 663 (Viking River)), the
FAA does not preempt California law prohibiting waiver of the right to bring PAGA
claims at all (id. at p. 661; see also id. at p. 653 [“ ‘ “[B]y agreeing to arbitrate a statutory
claim, a party does not forgo the substantive rights afforded by the statute . . . .” ’ ”]).
Moreover, our Supreme Court has held that an employee’s right to bring PAGA claims is
unwaivable because PAGA was “established for a public reason”—to augment the limited
enforcement capability of the Labor and Workforce Development Agency—and
“requiring the waiver of PAGA rights would harm the state’s interests in enforcing the
Labor Code.” (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348,
383 (Iskanian), overruled on other grounds Viking River, supra, 596 U.S. at pp. 661-
663).) Accordingly, if “an employment agreement compels the waiver of representative
claims under the PAGA, it is contrary to public policy and unenforceable as a matter of
state law.” (Id. at p. 384; see also Civ. Code, § 3513 [“Any one may waive the advantage
of a law intended solely for his benefit. But a law established for a public reason cannot
be contravened by private agreement.”].)
LRS points out that, contrary to the trial court’s assumption, the 2023 Dispute
Resolution Agreement does not contain a “blanket waiver” of the right to bring PAGA
actions because it permits arbitration of PAGA claims brought by employees concerning
Labor Code violations they personally suffered. LRS is correct that the agreement
provides for arbitration of individual PAGA claims concerning Labor Code violations
personally suffered. However, this fact does not save the PAGA waiver. Even if the
agreement permits Barnes to bring individual PAGA claims, it still prohibits him from
bringing claims concerning Labor Code violations suffered by others and therefore
19
interferes with the purpose for which PAGA was established: “to augment the limited
enforcement capacity of the [Labor and Workforce Development] Agency.” (Iskanian,
supra, 59 Cal.4th at p. 383.) Accordingly, even where employees are permitted to assert
individual PAGA claims, a prohibition against “asserting any nonindividual PAGA
claims” is contrary to public policy, invalid, and unconscionable. (Gregg v. Uber
Technologies, Inc. (2023) 89 Cal.App.5th 786, 797; see also Adolph v. Uber
Technologies, Inc. (2023) 14 Cal.5th 1104, 1126 [“Viking River left intact Iskanian’s rule
against agreements that compel waiver of non-individual claims,” italics added].)
LRS asserts that the 2023 Dispute Resolution Agreement has a savings clause in
the excluded claims section of the agreement. LRS appears to be referring to a provision
excluding from arbitration “claims which, after application of the FAA and FAA
preemption principles, are not subject to arbitration or pre-dispute arbitration
agreements.” However, LRS only vaguely asserts that the savings clause “creates an
ambiguity that must be resolved [by] adopting the reading that leaves it lawful” and does
not explain how the PAGA waiver implicates the FAA and FAA preemption principles.
Vague and conclusory argument is inadequate. (See, e.g., People v. Williams (1997) 16
Cal.4th 153. 206 (Williams) [“Points ‘perfunctorily asserted without argument in support’
are not properly raised.”]; see also In re S.C. (2006) 138 Cal.App.4th 396, 408 (S.C.) [“To
demonstrate error, appellant must present meaningful legal analysis . . . .”].) In any
event, a savings clause does not render an unfair, one-sided provision in an employment
agreement conscionable for the simple reason that “the employee would have no way of
knowing what would be covered or not covered by this provision.” (Hasty v. American
Automobile Assn. of Northern California (2023) 98 Cal.App.5th 1041, 1062 (Hasty).)
We therefore conclude that the 2023 Dispute Resolution’s PAGA waiver provision
is both invalid and substantively unconscionable.
20
c. The Administrative Monetary Relief Waiver
The 2023 Dispute Resolution Agreement also contains a provision requiring
employees to waive any monetary relief from federal, state, or local administrative
proceedings. The trial court held that this provision is substantively unconscionable and,
indeed, “shocks the conscience.” Here, too, we agree.
Towards the end of the section defining the scope of arbitration, the 2023 Dispute
Resolution Agreement contains a provision unrelated to arbitration. This provision states
that “you shall not be entitled to seek or receive any monetary compensation” as a result
of filing charges with a federal, state, or local administrative agency or participating in
any investigation by the Equal Employment Opportunity Commission or a state or local
human rights agency. Because this waiver restricts employees, it is one-sided and only
benefits LRS. In addition, because it has nothing to do with arbitration, this waiver is
also unexpected and harsh. Hasty, supra, 98 Cal.App.4th 1041 considered a similar
provision waiving the right to any remedy or relief from charges or complaints brought
by administrative agencies. (Id. at p. 1060.) Hasty held that such “[a] waiver of
administrative remedies and relief, hidden in an arbitration agreement, is overly harsh and
shocks the conscience.” (Ibid.) The waiver here, which is also hidden, is similarly overly
harsh and shocking.
LRS contends that Hasty is distinguishable because the waiver in that case covered
all remedies and relief. While that is true, the waiver in that case also applied to both
parties (Hasty, supra, 98 Cal.App.5th at p. 1060), whereas the waiver in the 2023 Dispute
Resolution Agreement applies only to employees and, thus, is expressly one-sided. Even
more important, LRS does not identify what relief besides monetary compensation was
waived in Hasty, much less show that other relief was more important. Nor does LRS
offer any reasonable justification for the one-sided waiver of administrative monetary
21
relief. As a consequence, LRS fails to show why this waiver is any less shocking and
unfair than the waiver in Hasty.
LRS also asserts that “[w]aiving a legal right one does not actually have does not
give an employer any ‘greater benefit.’ ” However, it fails to identify the legal right it is
referencing, much less explain why Barnes does not have it. As a consequence, this
argument is inadequate. (Williams¸ supra, 16 Cal.4th at p. 206; S.C., supra, 138
Cal.App.4th at p. 480.) Finally, LRS notes that the administrative monetary relief waiver
applies only “unless otherwise provided by applicable law.” However, it again fails to
explain what law might invalidate the waiver, and, in any event, as previously noted, such
a savings clause does not make an unconscionable provision fair because an employee
“would have no way of knowing what would be covered or not covered by this
provision.” (Hasty, supra, 98 Cal.App.5th at p. 1062.) Moreover, if, as LRS seemed to
suggest at oral argument, the administrative monetary relief waiver does not apply to any
administrative monetary relief to which an employee is entitled, the waiver has no
legitimate purpose and serves only to deter unsophisticated employees from seeking
monetary relief to which they are entitled.
We therefore conclude that the administrative waiver provision shocks the
conscience and is substantively unconscionable.
d. The Scope, Duration, and Third-Party Provisions
In addition to arguing that the injunction provisions of the 2023 Services
Agreement and that the PAGA and administrative monetary relief waivers in the 2023
Dispute Resolution Agreement are unconscionable, Barnes argues that the scope and the
duration of the latter agreement are unconscionable as well. The trial court held that the
duration, but not the scope, of the agreement is unconscionable. We do not agree that the
agreement’s duration is unconscionable. However, another portion of the 2023 Dispute
Resolution Agreement—the third-party provision—is unconscionable.
22
Barnes argues that the 2023 Dispute Resolution Agreement is unconscionably
overbroad because it covers claims “relating to your employment or association with
LRS.” (Italics added.) Reasoning that the subject matter of the agreement was “not
problematic,” the trial court disagreed with Barnes. We do as well. While the 2023
Dispute Resolution Agreement requires arbitration of claims relating to Barnes’
association with LRS in addition to his employment, there is no reason to believe that his
association with LRS, an employment staffing agency, extends significantly beyond
employment. Moreover, the resulting scope of the 2023 Dispute Resolution Agreement is
a far cry from the agreement covering “ ‘all claims, whether or not arising out of . . .
employment’ ” considered in Cook v. University of Southern California (2024) 102
Cal.App.5th 312, 321 (Cook), or the agreement covering “any claim that the Company
has against me or that I have against the Company . . . including but not limited to claims
arising and/or relating in any way to my hiring, my employment, or association with the
Company” considered in Cocom v. AMB Aviation, Inc. (C.D. Cal. Dec. 27, 2024) 2024
WL 5701894, *2. As a consequence, we agree with the trial court that the scope of the
2023 arbitration agreement is not problematic.
However, we disagree with the trial court concerning the agreement’s duration.
Relying on Cook, the trial court ruled that the duration provision, which states that the
agreement “shall survive any termination of Employee’s employment with the
Company,” is unconscionable. The arbitration agreement considered in Cook similarly
stated that the agreement would “ ‘survive the termination of Employee’s employment,
and may only be revoked or modified in a written document that expressly refers to the
“Agreement to Arbitrate Claims” and is signed by the President of the University.’ ”
(Cook, supra, 102 Cal.App.5th at p. 325 (italics added).) However, the employer in Cook
was the University of Southern California, an entity that frequently has contact with non-
employees. The arbitration agreement in that case also covered “ ‘all claims, whether or
23
not arising out of Employee’s University employment, remuneration, or termination, that
Employee may have against the University.’ ” (Id. at p. 321.) Consequently, if that
arbitration agreement were of infinite duration, it could apply unexpectedly, for example,
should the ex-employee become “ ‘the victim of a botched surgery in a USC hospital in
15 years.’ ” (Id. at p. 318.) There is no similar danger with LRS and therefore no reason
to conclude that the duration provision in the 2023 Dispute Resolution Agreement is
overly harsh or unreasonably favorable to LRS.
However, the agreement contains another substantively unconscionable provision:
the third-party provision, which the trial court considered in connection with the 2021
agreement but not the 2023 agreement.
The 2023 Dispute Resolution Agreement covers claims that “(i) LRS has against
you [Barnes], (ii) you have against LRS, or (iii) you have against LRS’ current or former
affiliates, subsidiaries, divisions, predecessors, successors, assigns, parents, partners,
members, vendors, clients, customers, or any entity alleged to be a joint employer with
LRS, and LRS and/or their current and former employees, officers, directors, and agents.”
Thus, the 2023 agreement requires Barnes to arbitrate not only covered claims against
LRS, but also covered claims against, among others, LRS’s affiliates and other third
parties designated by LRS. However, the agreement does not require those third parties
to arbitrate any claims against Barnes. Cook considered a provision similarly requiring
an employee to arbitrate claims against entities related to her employer but not requiring
those related entities to arbitrate claims against the employee. (Cook, supra, 102
Cal.App.5th at p. 317.) Cook held that this provision unfairly “confers a benefit on [the
employer] and its broadly defined ‘related entities’ that is not mutually afforded” the
employee. (Id. at p. 327.) Moreover, because the employer “offered no justification for
this one-sided treatment,” Cook held the provision “substantively unconscionable for lack
of mutuality.” (Id. at p. 328.)
24
Although LRS argues Cook is distinguishable, it does not offer any business
justification for the one-sided treatment of the third parties designated by LRS. Instead,
LRS argues that Cook is distinguishable because the arbitration agreement in this case is
limited to disputes arising out of its employment relationship with Barnes. In fact, as
noted above, the agreement is broader and covers claims arising out of Barnes’
association with LRS as well as his employment. Even more important, while Cook
mentioned the broad scope of the arbitration agreement at issue in discussing the third-
party provision in that case, it did not stress the scope or otherwise suggest that its
unconscionability holding depended on that scope. (Cook, supra, 102 Cal.App.5th at
pp. 326-328.)
LRS also asserts the third-party provision is not unconscionable because, even if
not named in an arbitration provision, third parties connected to an employer can compel
arbitration of covered claims against them based on equitable estoppel principles. While
that is true, the 2023 Dispute Resolution Agreement’s third-party provision relieves the
designated parties of the need to satisfy those principles and thus increases the likelihood
that claims against those parties will be arbitrated. Finally, at oral argument LRS asserted
that the third parties designated in the agreement are unlikely to have many claims
against Barnes and other employees based on their employment and association with
LRS. While that may be true, it merely reduces the degree of substantive
unconscionability.
We therefore conclude that the third-party provision in 2023 Dispute Resolution
Agreement lacks mutuality and is substantively unconscionable.
3. Enforceability
Because the 2023 agreements are moderately procedurally unconscionable, under
the sliding scale for unconscionability only a moderate degree of substantive
unconscionability is needed to render the agreement’s provisions unconscionable. (See,
25
e.g., Carbajal, supra, 245 Cal.App.4th at p. 253.) This requirement is satisfied. The one-
sided injunction provision in the 2023 Services Agreement permitting LRS to seek
injunctive relief in court and requiring Barnes to waive an essential requirement for such
relief has at least a moderate level of substantive unconscionability. (See Carbajal,
supra, 245 Cal.App.4th at pp. 249, 253; but see Alberto, supra, 91 Cal.App.5th at p. 495
[holding “nonmutual confidentiality injunction provisions” had a “high degree of
substantive unconscionability”].) The unlawful and invalid PAGA waiver in the 2023
Dispute Resolution Agreement has a “high degree of substantive unconscionability”
(Alberto, at p. 496), and the agreement’s restriction on monetary administrative relief for
which LRS failed to offer any justification “shocks the conscience” (Hasty, supra, 98
Cal.App.5th at p. 1060). The agreement’s third-party provision, though one-sided and
unjustified, does not rise to the same level. However, combined with the other provisions
of the 2023 agreements, it shows a high degree of substantive unconscionability, and,
thus, the third-party provision is unenforceable as well.
We therefore conclude that the 2023 Services Agreement injunction and the 2023
Dispute Resolution Agreement’s PAGA waiver, its administrative monetary relief waiver,
and the third-party provision are unenforceable due to unconscionability.
4. Severance
While the class action waiver implicates Barnes’ attempt to bring a class action
and request for relief under PAGA for his rest breaks claim, most of Barnes’ claims are
not impacted by the 2023 agreements’ unconscionable provisions. As a consequence,
LRS asked the trial court to sever those provisions and enforce the remainder of the
agreements. However, finding that unconscionable provisions “permeate” the 2023
agreements, the trial court declined to sever. Reviewing this ruling for abuse of
discretion (Ramirez, supra, 16 Cal.5th at p. 513), we find none.
26
As Barnes does not dispute that the unconscionability in the 2023 agreements can
be cured by severance, we must assess whether the trial court abused its discretion in
concluding that severance would not further the interests of justice. (Ramirez, supra, 16
Cal.5th at p. 514.) In making this assessment, we recognize “[t]he ‘strong legislative and
judicial preference is to sever the offending term and enforce the balance of the
agreement.’ ” (Id. at p. 513.) We also recognize that the 2023 Dispute Resolution
Agreement contains a severance clause, which implicitly expresses an intent that, if
possible, unconscionable provisions be severed. (Id. at p. 517.)
Nonetheless, the trial court reasonably concluded that severance was not in the
interests of justice. In this case, severance would not preserve a contractual relationship
because Barnes resigned from LRS in September 2023. In addition, barring LRS from
arbitrating claims against Barnes would not cause LRS an undeserved detriment because
it was LRS who drafted the 2023 agreements and included in them four substantively
unconscionable provisions. While there is no bright line rule concerning the number of
provisions that may be severed from a contract, “the greater the number of
unconscionable provisions a contract contains the less likely that severance will be the
appropriate remedy.” (Ramirez, supra, 16 Cal.5th at p. 517; see also id. at p. 516.) In
addition, three of the unconscionable provisions—the injunction provision, the PAGA
waiver, and the administrative monetary relief waiver—forced Barnes to relinquish
significant rights, and LRS has failed to offer any reasonable business justification for
these provisions. Especially in light of this failure, it is reasonable to conclude that these
provisions were included solely to advantage LRS and that LRS engaged in a systematic
effort to disadvantage Barnes and other employees. It would be contrary to the interests
of justice to condone that effort by severing the unconscionable provisions and allowing
LRS to enjoy the benefits of arbitration in spite of them. (Id. at pp. 516-517.) We
27
therefore conclude that the trial court did not abuse its discretion by refusing to sever the
unconscionable provisions in the 2023 agreements.
While LRS contends that the unconscionability in the 2023 agreement can be
cured through severance, it fails to explain why severance would be in the interests of
justice in spite of the large number of unconscionable provisions. Indeed, LRS
considered only whether it was in the interests of justice to sever one provision (the
injunction provision) and thus fails to show that it is in the interests of justice to sever all
four of the provisions that we have found unconscionable.
Accordingly, we conclude that the 2023 agreements are unconscionable and
unenforceable.
C. The 2021 Agreements
As noted above, before Barnes signed the 2023 Dispute Resolution Agreement and
the 2023 Services Agreement, he signed two analogous agreements: the 2021 Agreement
to Arbitrate and the 2022 Services Agreement. Although the 2022 Services Agreement
was signed in March 2022, a little more than three months after the 2021 Agreement to
Arbitrate, both agreements address dispute resolution between Barnes and LRS, and
therefore we consider them together. (Civ. Code, § 1642; see also Alberto, supra, 91
Cal.App.5th at pp. 490-491.)
After concluding that the 2023 agreements were unconscionable and
unenforceable, the trial court ruled that the 2021-2022 agreements were operative
because the 2023 agreements substituted for the 2021-2022 agreements under the
doctrine of novation and those agreements sprung back to life when the 2023 agreements
were invalidated. (See Rest.2d Contracts, § 279, cmt. b [“to the extent that the
substituted contract is vulnerable on such grounds as . . . unconscionability, recourse may
be had on the original duty”].) This conclusion is in tension with the determination that
severance is not in the interests of justice because it would reward LRS’s efforts to take
28
advantage of Barnes and other employees. However, we need not resolve that tension
because the 2021-2022 agreements are also unconscionable and unenforceable.
1. Procedural Unconscionability
The trial court concluded that the 2021-2022 agreements had a “slight degree” of
procedural unconscionability because the 2021 Agreement to Arbitrate contains an opt-
out provision. We agree that the 2021-2022 agreements are procedurally unconscionable
but conclude that the degree of such unconscionability is higher: modest rather than
slight.
Much like the 2023 Dispute Resolution Agreement and the 2023 Services
Agreement, the 2021 Agreement to Arbitrate and the 2022 Services Agreements are on
pre-printed, standardized forms. LRS, Barnes’ employer, offered these agreements to
Barnes as part of his employment, and the 2022 Services Agreement required Barnes to
agree to the 2021 Agreement to Arbitrate and “waive[] any right to object” to that
agreement. In addition, while the 2021 Agreement to Arbitrate was only four, single-
spaced pages long, it nonetheless was filled with references to state and federal statutes as
well as legal terminology and requirements. Moreover, Barnes had no more legal
training or the assistance of a lawyer in 2021 and 2022 than he did in 2023.
Unlike the 2023 Dispute Resolution Agreement, the 2021 Agreement to Arbitrate
did not say it was “a condition of employment.” However, on page four, under the
heading “Consideration,” (boldface omitted) the 2021 agreement said something similar:
“Unless otherwise provided by applicable law . . . employment or continued employment
with LRS shall constitute consideration and acceptance by you” of the agreement.
However, in the next section under the heading “Opt Out,” the 2021 agreement stated that
“[a]rbitration is not a mandatory condition of employment. You may opt out by
mailing . . . written notice of the intent to opt out within 30 calendar day of signing this
Agreement.” (Italics added, boldface omitted.) Thus, the 2021 Agreement to Arbitrate
29
made agreement to arbitration the default, and those employees who read the agreement
all the way to the end and understood it were able to opt out of it within 30 days of
signing the agreement.
However, this ability to opt out of the 2021 Agreement to Arbitrate was effectively
rescinded by the 2022 Services Agreement signed in March 2022. That agreement
required Barnes and other employees to agree that “any potential disputes arising under
this Agreement” as well as “any other aspect of Professional’s employment with the
Company” would be governed by the 2021 Agreement to Arbitrate executed by the
Professional and to “waive[] any right to object to [the] same.” Moreover, nothing in the
2022 Services Agreement acknowledges the possibility of opting out of this arbitration
agreement or indicates that previous opt outs would be honored.
Focusing on the opt-out provision, LRS argues that the 2021 Agreement to
Arbitrate is not a contract of adhesion because it was not offered to Barnes “ ‘on a take-it-
or-leave-it basis.’ ” (OTO, supra, 8 Cal.5th at p. 126.) That was true when the
Agreement to Arbitrate was signed. However, by March 2022 when the 2022 Services
Agreement required Barnes to agree to arbitrate all employment-related claims under the
2021 arbitration agreement and to waive any objection to enforcement of that agreement,
it was not. Thus, when the 2023 agreements were signed, and the novation of the 2021-
2022 contracts occurred, the 2021-2022 agreements were contracts of adhesion.
As a consequence, while the 2021 Agreement to Arbitrate is less procedurally
unconscionable than the 2023 Dispute Resolution Agreement, we nonetheless conclude
that it imposed a modest degree of procedural unconscionability.
2. Substantive Unconscionability
Unlike the 2023 Dispute Resolution Agreement, the 2021 Agreement to Arbitrate
does not contain an administrative monetary relief waiver. Nonetheless, the 2021-2022
agreements are substantively unconscionable. The 2022 Services Agreement contains the
30
same injunction provision as the 2023 Services Agreement, and the 2021 Agreement to
Arbitrate contains an even broader PAGA waiver than its 2023 counterpart and a similar
third-party provision.
a. The Injunction Provision
The 2022 Services Agreement and the 2023 Services Agreement are largely
identical. Like the 2023 agreement, the 2022 agreement prohibits employees from
disclosing “Confidential Information,” which is defined broadly to include all trade
secrets, confidential information, and proprietary information owned by LRS as well as
any third-party information LRS is obligated to maintain in confidence. In addition, like
the 2023 agreement, the 2022 agreement provides that LRS may seek an injunction or
any other remedy “through judicial proceedings.” And the agreement requires employees
to “acknowledge[] that there is no adequate remedy at law” to redress a breach of the
agreement and to “waive[]” any defense that LRS “has an adequate remedy at law.”
Accordingly, like 2023 Services Agreement, the 2022 Services Agreement is “blatantly
one-sided” and creates a “moderate level of substantive unconscionability.” (Carbajal,
supra, 245 Cal.App.4th at pp. 249, 253.)
b. The PAGA Waiver
Like the 2023 Dispute Resolution Agreement, the 2021 Agreement to Arbitrate
contains a PAGA waiver. However, the PAGA waiver in the 2021 agreement imposes a
blanket waiver. It “waive[s] the right to commence, be a party to, participate in, receive
money or any other relief from, or amend any existing lawsuit to include any
representative, collective or class proceeding or claims or to bring jointly any claim
covered by this agreement.” It also prohibits the parties from bringing claims covered by
the agreement “on behalf of other individuals or entities.” Moreover, unlike the 2023
Dispute Resolution Agreement, the 2021 agreement does not provide for individual
PAGA claims. As a consequence, the PAGA waiver in the 2021 Agreement to Arbitrate is
31
even more clearly legally invalid and substantively unconscionable than the waiver in the
2023 agreement.
c. The Third-Party Provision
The 2021 Agreement to Arbitrate contains essentially the same third-party
provision as the 2023 Dispute Resolution Agreement. The 2021 agreement covers “all
disputes . . . which LRS may have against you [Barnes] or you may have against LRS, its
affiliates, subsidiaries, divisions, predecessors, successors, assigns and their current and
former employees, officers, directors, and agents . . . .” However, just like the 2023
agreement, the 2021 agreement does not provide for arbitration of claims that LRS’s
affiliates and other third parties listed in the agreement may have against Barnes. As a
consequence, like the 2023 Dispute Resolution Agreement, the 2021 agreement’s third-
party provision lacks mutuality and is substantively unconscionable. (Cook, supra, 102
Cal.App.5th at pp. 327-328.)
3. Enforceability
Because the 2021-2022 agreements have a modest level of procedural
unconscionable, more than a moderate level of substantive unconscionability is needed to
render the agreement’s provisions unconscionable and unenforceable. (See, e.g.,
Carbajal, supra, 245 Cal.App.4th at p. 253.) As with the 2023 agreements, the one-sided
injunctive relief provision in the services agreement has at least a moderate level of
substantive unconscionability. (See id. at p. 253; see also Alberto, supra, 91 Cal.App.5th
at p. 495.) In addition, the blanket PAGA waiver in the 2021 Agreement to Arbitrate has
a “high degree of substantive unconscionability.” (Alberto, at p. 495.) And, combined
with the injunction provisions and the PAGA waiver, the 2021 agreement’s third-party
provision shows a high degree of substantive unconscionability. (Cook, supra, 102
Cal.App.5th at p. 321.) As a consequence, the injunction provision, PAGA waiver, and
third-party provision in the 2021-2022 agreements are unconscionable and unenforceable.
32
4. Severance
Finally, the trial court did not abuse its discretion in concluding that it is not in the
interest of justice to sever the unconscionable provisions in the 2021-2022 agreements.
As with the 2023 agreements, severance would neither conserve a contractual
relationship nor cause LRS an undeserved detriment. In addition, while there are only
three unconscionable provisions in the 2021-2022 agreements, the waiver of an essential
requirement for injunctive relief and the PAGA waiver both forced Barnes to relinquish
significant rights without reasonable justification. Even more important, inclusion of
similar provisions in the 2023 agreement as well as the administrative monetary relief
waiver shows a systematic effort to take advantage of Barnes and other employees, which
should not be condoned by severing the unconscionable provisions and allowing LRS to
compel arbitration. (Ramirez, supra, 16 Cal.5th at p. 517.) As a consequence, the trial
court did not abuse its discretion in concluding that it is not in the interests of justice to
sever the unconscionable provisions in the 2021-2022 agreements.
Accordingly, we conclude that the 2021-2022 agreements, like the 2023
agreements, are unconscionable and unenforceable and that the trial court properly denied
LRS’ motion to compel arbitration and to dismiss the class action claims.
III. DISPOSITION
The order dated March 24, 2025 denying the motion to compel arbitration is
affirmed. Respondent is awarded costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1),
(2).)
33
____________________________
BROMBERG, J.
WE CONCUR:
____________________________________
DANNER, ACTING P. J.
____________________________________
CHUNG, J.
Barnes v. LRS Healthcare, LLC
H053238
Judge of the Santa Clara County Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.