Once again an intermediate appellate court has been called upon to enforce an arbitration agreement set aside by a trial court. In HEB, LP d/b/a Joe V’s Smart Shop v. Saenz (No. 01-20-00850-CV), an employee of HEB was injured when a forklift struck her. She sued HEB, a non-subscriber, for negligence. HEB moved to compel arbitration based on a provision in the benefits agreement the employee signed when she was hired. The employee alleged that the arbitration provision was procedurally unconscionable because she spoke no English and HEB would not explain it to her in Spanish. The trial court agreed and denied HEB’s motion to compel.
The First Court of Appeals [Houston] reversed. First the court found that an arbitration agreement existed and that the employee’s claim fell within the provision. The court of appeals’ analysis focused on whether the employee established that the arbitration agreement was not enforceable because of procedural unconscionability. The analysis requires the court to review the circumstances around the adoption of the agreement. To vindicate a procedural unconscionability claim, those circumstances must be “shocking,” and “[A]bsent fraud, misrepresentation, or deceit, a party is bound by the terms of the contract he signed, regardless of whether he read it or thought it had different terms” (citing In re McKinney, 167 S.W.3d 833, 835 (Tex. 2005)). Moreover “[G]ross disparity in bargaining position is not evidence of procedural unconscionability, nor is an employer’s ‘take-it-or-leave-it’ offer to at-will employees procedurally unconscionable” (citing In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002). McKinney and other SCOTX precedent likewise stand for the proposition that “a party’s testimony that he did not understand the significance of his signature on the contract is not evidence of procedural unconscionability,” even though the party may be unsophisticated or testifies that he would not have signed the contract had the concept of arbitration been explained to him. Finally, illiteracy in English does not rise to the level of unconscionability if the agreement is either explained to the party or translated into a language in which the party is literate.
Here the court of appeals found that the employee’s electronic signature on the new hire forms that included the benefits agreement with the arbitration clause met the requirements of the Uniform Electronic Transactions Act (requiring security procedures, including a unique identification and password for each new employee). This was true even though a Spanish-speaking HEB employee helped her complete the forms by inputting information that she verbally provided. HEB also provided a Spanish-language hard copy of the agreement when the employee started work, which according to the agreement constituted acceptance of plan benefits (and thus the arbitration provision). As SCOTX held in Halliburton, when “the employer has provided notice of the benefit plan and informs the employee that the continuing employment constitutes an acceptance of the agreement,” the employee will be bound to the arbitration agreement.
Second, the court of appeals found that the employee did not prove procedural unconscionability. The court premised its discussion on the presumption that a person who signs a contract has read and understood its contents and that illiteracy in English is insufficient to show unconscionability when a translation has been provided. Here the court ruled that although there was some evidence that the employee’s questions about the provision were “rebuffed” by other HEB employees when she filled out the forms, she did not ask any questions at a new employee orientation session conducted in Spanish and was given a Spanish-language copy of the benefits agreement. The court admonished HEB for some “lack of transparency and disclosure,” which “can lead a new employee to unwittingly waive the right to a jury trial.” But in the absence of “shocking evidence of fraud, misrepresentation, or deceit,” the court followed precedent, reversed the trial court, and rendered judgment that the parties arbitrate the employee’s claims.
This case obviously represents a win for non-subscribers who require employees to sign arbitration agreements in return for receiving health care benefits. Its lengthy analysis of the law of procedural unconscionability will give non-subscribing employers a roadmap for arguing motions to compel arbitration before trial courts who are reluctant to send injured plaintiffs to the nearest hired judge. It could also encourage employers to review their procedures for getting employee signatures on arbitration agreements to make sure that they comply with the Uniform Electronic Transactions Act (for online agreements executed by electronic signature) and that employees receive a copy of the agreement in their spoken language.