Arbitration not Suitable for Suit Against Ralphs

(CN) - Former Ralphs Grocery employees need not arbitrate their claims against the company, at a cost of up to $7,000 per day and per person, even though they agreed to do so in applying for work, the 9th Circuit ruled Monday.

Zenia Chavarria, a former deli clerk at a Ralphs in California, filed a proposed class action against the company in 2011, alleging that it had failed to pay for meal breaks and overtime, and had forced her and others to work off the clock, among other things, in violation of the California Labor Code.

U.S. District Judge Dean Pregerson in Los Angeles refused to compel arbitration because he found the company's arbitration policy "unconscionable."

A three-judge panel of the federal appeals court in Pasadena affirmed on Monday.

The unanimous panel noted that the agreement was unconscionable in a number of ways, including that Chavarria was forced to sign it as part of her application process.

"Ralphs did not provide Chavarria the terms of the arbitration policy until her employment orientation, three weeks after the policy came into effect regarding any dispute related to her employment," Judge Richard Clifton wrote for the panel. "The employment application merely contains a one-paragraph 'notice' of the policy. The policy itself is a four-page, single-spaced document with several complex terms."

Moreover, the arbitration policy as it stands requires that the arbiter's costs be "apportioned at the outset of the arbitration and must be split evenly between Ralph's and the employee."

"The significance of this obstacle becomes more apparent through Ralphs' representation to the district court that the fees for a qualified arbitrator under its policy would range from $7,000 to $14,000 per day," Clifton wrote. "Ralphs' policy requires that an employee pay half of that amount - $3,500 to $7,000 - for each day of the arbitration just to pay for her share of the arbitrator's fee. This cost likely dwarfs the amount of Chavarria's claims."

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