Failure to Translate Arbitration Agreement Leads to Costly Settlement
We’ve noted the increasing reliance of companies on arbitration agreements to reduce their exposure to liability and the potentially high costs of litigation. Those companies may be surprised to learn that failing to translate such an agreement into the native language of a signatory with limited English proficiency could prevent the agreement from being enforced.
Arbitration agreements are fundamentally contracts, and thus the law of contracts governs their enforcement. Under the doctrine of unconscionability, a court may refuse to enforce a contract if doing so would be fundamentally unfair. Can enforcing an arbitration agreement in English against someone with limited English proficiency qualify as fundamentally unfair? As one California company discovered, the answer is a costly yes.
Two Types of Unconscionability Affect Arbitration Enforcement
Most states recognize two different types of unconscionability, both of which must be present to render an arbitration agreement unenforceable. The first type, procedural unconscionability, deals with the fairness of the circumstances surrounding the negotiation and signing of the arbitration agreement. The second, substantive unconscionability, examines the fairness of the actual terms of the arbitration agreement itself. Because translation issues affect the ability of an individual to understand the terms of the agreement they are signing, translation issues are typically treated as matters of procedural unconscionability.
Baseline Rule: Signatories Have Burden to Understand Agreement Before Signing
As we’ve blogged about before, courts are generally hesitant to invalidate an arbitration agreement merely because the signatories failed to read or understand the agreement before signing. Rather, the burden is on the signatory to understand the agreement fully before signing it. This includes a duty to obtain legal translation services for an agreement in English if the signatory’s limited English proficiency inhibits their understanding.
But this baseline rule does not mean that companies seeking to enforce arbitration agreements should never bother to provide legal translations of their agreements to non-native English speakers. Although failure to translate an arbitration agreement is generally not enough by itself to invalidate the agreement, it does contribute to procedural unconscionability. In other words, courts may treat the failure as a factor that weighs in favor of finding the agreement unconscionable—and therefore unenforceable.
Tree Trimming Company Seeks to Compel Arbitration
In Hermosillo v. Davey Tree Surgery Company, Jose and Oscar Hermosillo filed a class action lawsuit on behalf of themselves and others who worked as tree trimmers for Davey Tree Surgery Company alleging violations of the Fair Labor Standards Act (“FLSA”) and California state law. After removing the case to federal court, the company moved to enforce the arbitration agreements signed by plaintiffs at the beginning of their employment.
In support of this motion, the company asserted that the plaintiffs signed the arbitration agreement during new employee orientation. The Hermosillos disputed whether the company ever provided them with the arbitration agreement. Regardless, the Hermosillos stated that they could not have understood the agreement even if it had been provided, since the agreement was in English and the Hermosillos speak Spanish with very limited English proficiency. They argued that this along with several other factors rendered the agreement unconscionable and therefore unenforceable.
Failure to Provide Agreement Translation in Employees’ Language Contributes to Procedural Unconscionability
The court began its analysis by noting the baseline rule: mere failure to read and understand the terms of a contract does not create procedural unconscionability. Thus, the Spanish-speaking plaintiffs could not automatically invalidate the agreement. But the court then proceeded to list several circumstances that exacerbated the company’s failure to translate the arbitration agreement into Spanish for the Hermosillos.
First, the court noted that no one at the company tried to explain the terms of the agreement or even what it was to the plaintiffs—in either English or Spanish. Indeed, the manager who conducted the new employee orientation session at which the company claimed it provided the Hermosillos with the agreement did not speak Spanish. These circumstances reduced the plaintiffs’ opportunity to secure a Spanish translation of the agreement.
Next, the court pointed out that a substantial portion of the company’s employees spoke Spanish with an English proficiency similar to that of the Hermosillos. Despite this fact, the company persisted in failing to provide a Spanish translation of the agreement or a Spanish interpreter to assist with answering new employees’ questions at orientation.
Finally, the court observed that even accepting the company’s version of events as true, the arbitration agreement was provided under circumstances that gave the plaintiffs very little time to review and consider it. The company presented the agreement for signature during new employee orientation amidst several other documents, strongly implying that signing all of them was a prerequisite to obtaining employment with the company. This high-pressure situation further reduced the Hermosillos’ ability to obtain a Spanish translation and discouraged them from attempting to do so.
Court Declares Arbitration Agreement Unconscionable
Taken together, the court found that these factors rendered the arbitration agreement procedurally unconscionable. The court went on to declare the arbitration agreement substantively unconscionable, since it imposed a six-month time limit on employees’ claims against the company but not on the company’s claims against employees.
The court thus denied the company’s motion to compel arbitration and refused to enforce the arbitration agreement. Free to pursue their claims in federal court, the Hermosillos and other class members went on to secure a $1.2 million settlement against the company earlier this year.
The lesson of Hermosillo is clear: the safest route for companies who use arbitration agreements is to provide legal translations of the agreement in the native languages of signatories with limited English proficiency. Legal translation service All Language Alliance, Inc. can translate your company’s arbitration agreements from English to Spanish, French, Amharic, Romanian, Mongolian, German, Simplified Chinese, Portuguese, Russian, Italian, Traditional Chinese, Somali, and other foreign languages, and provide in-person arbitration interpreters and remote arbitration interpreters for arbitration hearings via Zoom in Mandarin, Cantonese, Korean, Spanish, Italian, Bosnian, and other foreign languages.
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