Jackson v. Tesla, Inc.

Background

Tesla, Inc. moved to compel arbitration of Roy Jackson’s claims involving disability discrimination and wage-and-hour violations and to stay the federal case. Jackson did not dispute that, when he accepted Tesla’s employment offer, he signed an Offer Letter and a separate Arbitration Agreement. The Arbitration Agreement covered claims related to his employment with Tesla.

Jackson’s objections

Jackson argued that the Arbitration Agreement was unconscionable, meaning unfairly imposed or unfairly one-sided. He argued that it was procedurally unconscionable because it was presented as a take-it-or-leave-it employment agreement and he had less than one day to review and sign it. He also noted that he had to review an Employee Non-Disclosure and Inventions Assignment Agreement as part of the offer package.

Jackson argued that the agreement was substantively unconscionable because the JAMS Employment Arbitration Rules and Procedures did not provide enough discovery, meaning the exchange of information needed to resolve the dispute.

Court’s analysis

The court explained that California law requires both procedural and substantive unconscionability before a contract term is unenforceable, although the two elements need not exist to the same degree. The court found only a low level of procedural unconscionability. Jackson had not provided evidence that he wanted to consult an attorney but could not, or that he was rushed into accepting the offer without being able to understand and consider its terms. The court treated the pressure associated with the employment offer as insufficient to make the agreement unenforceable.

The court rejected the substantive-unconscionability argument because the Arbitration Agreement authorized the arbitrator to compel adequate discovery. The court concluded that this authority addressed the concern that the JAMS rules might otherwise limit discovery needed to resolve Jackson’s claims.

Ruling and effect

The court found that Jackson had shown only low-level procedural unconscionability and no substantive unconscionability. It held that the Arbitration Agreement was enforceable, granted Tesla’s motion to compel arbitration, and granted the request to stay the case. Jackson’s claims in the federal action were stayed. The opinion did not decide the merits of Jackson’s disability-discrimination or wage-and-hour claims.