Introduction
Employment arbitration agreements and other alternative dispute resolution mechanisms have become increasingly popular and useful in the modern workplace, especially in California. By implementing arbitration provisions, employers often seek to limit protracted litigation, resolve disputes more efficiently and cost-effectively, and maintain some level of control and confidentiality in the resolution of their disputes with employees. For decades, arbitration has been the primary means demanded by union organizations to resolve labor disputes with management and will be found in nearly every collective bargaining agreement proposed by labor organizations.
Over the years, more and more legal limitations and requirements have been placed on private arbitration agreements, especially when they are offered as a condition of employment. Moreover, recent class action litigation involving employee compensation and work hours has placed a renewed emphasis on arbitration agreements and the associated waiver of class and other representative action rights. Understanding the nuances of employment arbitration agreements has become an increasingly important aspect of managing a contemporary workforce.
On February 2, 2026, in Fuentes v. Empire Nissan, Inc. (2026) 2026 WL 265574, the California Supreme Court considered how the illegibility of certain provisions or language in an arbitration agreement can affect its enforceability due to unconscionability. Generally, any contract, such as an arbitration agreement, is unenforceable if there is unconscionability. There must be a showing of both procedural and substantive unconscionability. The Fuentes court affirmed that illegibility plays a role in procedural unconscionability rather than substantive unconscionability.
Factual and Procedural Summary
When Evangelina Yanez Fuentes (“Fuentes”) was applying to work at Empire Nissan (“Defendant”), Fuentes signed a document which contained a mandatory arbitration provision. This provision was printed in very small font, was very blurry, and the text was broken up. The arbitration provision was lengthy and dense, consisting of complex sentences with legal jargon and statutory citations. It was nearly illegible. At the time of signing, Fuentes was given five minutes to review it and was told she had to sign it for employment. She did not receive an opportunity to ask questions about the document nor was she given the opportunity to request to receive a copy. The trial court found that the contract was unenforceable because there was a finding of substantive unconscionability. The Court of Appeals reversed but did not analyze whether there might have been procedural unconscionability. The Supreme Court of California reversed and remanded the case, stating that illegibility is a procedural unconscionability consideration, rather than a substantive one.
Unconscionability, Generally
Unconscionability refers to the unfairness of a contract. An unconscionable contract will not be enforced. To establish unconscionability, a party must prove both procedural and substantive unconscionability to at least a certain degree. The procedural element concerns the circumstances of negotiation and the signing of the contract, as well as the presentation and form of the contract itself. This can be shown by oppression or surprise due to unequal bargaining power, provisions of the contract or even the contract itself being hidden among other documents, and through misrepresentations being made during the negotiations process. The substantive element concerns the fairness of the actual terms of the agreement. Both elements must be present, but where one element is of a higher degree, then less evidence of the other element is required to show unconscionability.
Reasoning Behind the Decision
The Fuentes court found that there was significant procedural unconscionability here because Fuentes (1) was only given five minutes to review; (2) the economic pressure on her to sign was particularly high, as she was forced to sign the agreement lest she forfeit her employment with the company; (3) she was not given a meaningful opportunity to ask questions about the agreement; and (4) the Defendant did not notify Fuentes that there was an arbitration agreement or offer to provide her a copy of it.
As to the illegibility issue, the Court stated that surprise supports a finding of procedural unconscionability. The Court provided that surprise is present when an agreement’s meaning is difficult to ascertain.1 The Court found here that the tiny print, the blurry font, the complex sentences, and the legal jargon all created surprise.
Conclusion
Illegibility of a contract can show significant procedural unconscionability and thus render that contract unenforceable. Where there is high substantial procedural unconscionability, only a low showing of substantive unconscionability is necessary to ultimately prove that a contract is unenforceable.
Impact on Employers
Employers should be mindful of not only the language of a contract but its visual form when drafting contracts between themselves and employees, such as arbitration agreements. The experienced attorneys at Palmer Kazanjian Wohl Hodson are available to review and revise existing contract provisions in order to determine their enforceability. We are glad to offer guidance to clients who want to improve their workplace and ensure compliance.
1 Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223