Case Analysis: Armendariz v. Foundation Health Psychcare Services

This case study examines the Supreme Court of California case, Armendariz v. Foundation Health Psychcare Services, Inc., concerning the validity of a mandatory employment arbitration agreement. The employees, Marybeth Armendariz and Dolores Olague-Rodgers, sued their former employer, alleging wrongful termination and violations of the California Fair Employment and Housing Act (FEHA). The central issue revolves around the enforceability of the arbitration agreement, which the employer required as a condition of employment. The court considered whether FEHA claims are arbitrable and if the arbitration agreement contained unconscionable provisions, particularly regarding damages limitations, lack of adequate discovery, and the agreement's lack of mutuality. The Supreme Court ultimately determined the agreement was unenforceable due to unconscionable provisions, particularly the limitation of damages and the one-sided nature of the agreement, which favored the employer. The case underscores the requirements for fair arbitration agreements in employment disputes, emphasizing the need for neutrality, adequate discovery, a written decision, and limitations on costs to allow employees to vindicate their statutory rights.