Background
Gabriela Cortez alleged that Burberry Limited and manager Ana Fragoso harassed her and ultimately terminated her employment because of her pregnancy. Her complaint described disputes over remote work, maternity leave, additional medical documentation, and her March 29, 2021 termination for absences. She later learned that Hartford Insurance had sent Burberry the wrong paperwork, but her employment remained terminated. Cortez filed suit in Los Angeles Superior Court on September 6, 2023, asserting disability and sex/gender harassment, discrimination, and retaliation claims under FEHA, along with claims concerning accommodation, the interactive process, family and pregnancy leave, emotional distress, and failure to prevent workplace misconduct.
When hired in April 2018, Cortez electronically signed a five-page agreement requiring employment-related claims to be arbitrated. Burberry answered the complaint, unsuccessfully attempted removal to federal court, and moved to compel arbitration and stay the litigation. Cortez opposed enforcement on procedural and substantive unconscionability grounds, stating that she did not recall signing or initialing the agreement, did not understand its rights waiver, and had not received the cited arbitration rules. On May 24, 2024, the trial court found minimal procedural unconscionability from the agreement’s adhesive nature and substantive defects in its confidentiality provision and class, collective, and representative-action waiver. It refused to sever those terms, describing the agreement as permeated with unconscionability, and denied the motion.
The Court’s Holding
The Court of Appeal accepted the unchallenged finding of minimal procedural unconscionability but rejected the trial court’s treatment of the class-action waiver. Because that waiver expressly excluded PAGA representative actions, it did not waive Cortez’s unwaivable right to pursue such a claim. The court distinguished authorities involving waivers that included PAGA actions and concluded that the FAA otherwise required enforcement of the class, collective, and representative-action waiver. It therefore did not contribute to the agreement’s unconscionability.
The confidentiality clause, however, was substantively unconscionable. Burberry identified no legitimate commercial need for it, and the court found no meaningful mutuality: Burberry already possessed historical information about claims against it, while secrecy would impede Cortez’s investigation into possible patterns of discrimination, harassment, or retaliation. The restriction on disclosing proceedings or documents could also prevent informal interviews of potential witnesses, increase costs, and undermine arbitration’s efficiency. The court rejected Burberry’s preemption argument because applying generally applicable unconscionability principles did not single out arbitration or obstruct the FAA’s objectives.
Relying on the California Supreme Court’s later decision in Ramirez, the court held that multiple unconscionable terms do not automatically prohibit severance. Here, only the confidentiality clause was defective, and excising it required no reformation or added terms. The clause was collateral to arbitration’s central purpose, and the record did not show an illegal scheme or a systematic effort to obtain an unfair forum. The court also agreed that Burberry had not waived arbitration by answering and attempting removal, noting its arbitration defense and prompt motion after remand. It reversed with directions to excise the confidentiality provision, compel arbitration, and stay court proceedings, awarding no costs. Justice Wiley concurred only in the result, reasoning that Burberry’s acceptance of severance made it sufficient to assume rather than decide unconscionability.
Key Takeaways
- A class, collective, and representative-action waiver did not contribute to unconscionability because it expressly preserved PAGA representative actions.
- The confidentiality provision was substantively unconscionable because it lacked a demonstrated commercial need and unfairly restricted the employee’s investigation and preparation.
- Severance was appropriate because removing that single defective clause cured the nonmutual effect without rewriting the agreement or defeating its arbitral purpose.
- The FAA did not preempt application of generally applicable unconscionability principles, and the ruling preserved rather than obstructed arbitration.
- Burberry’s answer and attempted federal removal did not establish waiver, while Justice Wiley joined only the result and not the majority opinion.
Why It Matters
The decision applies Ramirez’s qualitative severance framework to preserve an employment arbitration agreement despite a substantively unconscionable confidentiality clause. It distinguishes between an enforceable class-action waiver that exempts PAGA representative claims and confidentiality restrictions that impair an employee’s ability to investigate workplace misconduct. The practical disposition is not a ruling on Cortez’s underlying FEHA allegations: her claims must proceed in arbitration after the confidentiality term is removed, with the superior-court proceedings stayed.
Read the full opinion (PDF) · Court docket