The Texas Appeals Court in El Paso had denied an employer’s motion to compel arbitration in an employment dispute that arose with an employee who was unable to read English. In Delfingen US-Texas, LP v Valenzuela, No. 08-12-00022-CV (Tex. App. 8th February 6, 2013), Guadalupe Valenzuela was hired to work as a temporary employee at Delfingen in El Paso, Texas. In 2008, the woman was offered a permanent position with the company. Following a company orientation that was conducted entirely in Spanish, Valenzuela signed a number of documents that were written in English including a “Dispute Resolution and Arbitration Policy and Agreement.” The agreement included a clause that required all disputes related to Valenzuela’s employment be submitted to binding arbitration.
After Valenzuela was terminated, she filed a lawsuit against Delfingen alleging she was fired because she claimed workers’ compensation benefits following an injury that took place at work. Delfingen then filed a motion to compel arbitration based on the agreement Valenzuela signed during orientation. Valenzuela argued against arbitration by stating the agreement was “procedurally unconscionable” and said she was rushed to sign the agreement despite that it was written in English. She also alleged the agreement was not fully explained to her. Delfingen challenged Valenzuela’s assertions and argued that her inability to read English did not invalidate the agreement. Following an evidentiary hearing, a district court denied Delfingen’s motion to compel arbitration and the company then filed an interlocutory appeal with Texas’ Eighth District.
On appeal, Delfingen’s sole contention was that Valenzuela failed to meet her burden of proving the arbitration agreement was procedurally unconscionable. After stating that the Federal Arbitration Act applied to the case, the appellate court said agreements to arbitrate employment disputes “are generally enforceable under Texas law.” The court also stated Texas recognizes procedural unconscionability which “refers to the circumstances surrounding adoption of the arbitration provision.”
Next, the court said,
Delfingen met its initial burden of showing that an agreement to arbitrate exists and Valenzuela has never disputed that her claim falls within its scope. Consequently, the presumption favoring arbitration attached and the burden shifted to Valenzuela to establish her defense of procedural unconscionability.
The court continued by addressing the proper standard of review as Delfingen filed the company’s interlocutory appeal pursuant to Section 51.016 of the Civil Practice and Remedies Code which became effective in 2009. According to the court,
The Texas Supreme Court has not specifically addressed the appropriate standard of review for interlocutory appeals under Section 51.016 of an order denying a motion to compel arbitration.
After examining recent case law, the El Paso court decided,
Given that unconscionability, like waiver, is a legal question which is reviewed de novo by the appellate court, we conclude that the appropriate standard of review in this case is the abuse of discretion standard.
Next, the appellate court examined Valenzuela’s unconscionability claims,
Under the FAA, unequal bargaining power does not establish grounds for defeating an agreement to arbitrate absent a well-supported claim that the agreement resulted from the sort of fraud or overwhelming economic power that would provide grounds for revocation of any contract. In re AdvancePCS Health L.P., 172 S.W.3d at 608. Likewise, claims of unsophistication and inability to understand do not establish procedural unconscionability. In re Palm Harbor Homes, 195 S.W.3d at 679.
The appeals court continued,
Standing alone, Valenzuela’s illiteracy in English is insufficient to establish that the Agreement is unconscionable. A person who signs a contract must be held to have known what words were used in the contract and to have known their meaning, and he must be held to have known and fully comprehended the legal effect of the contract.
Finally, the Eighth District affirmed the lower court’s decision to deny arbitration by stating,
Delfingen knew that Valenzuela did not understand English and it required her to attend an orientation session during which a company representative told her that she was going to translate the important parts of the documents. Accepting as we must the trial court’s finding that Guzman did not explain, discuss, or translate the Arbitration Agreement, we recognize that the trial court could have also found that Delfingen affirmatively misled Valenzuela about the importance of the Agreement. Based on the totality of the circumstances, we conclude that Valenzuela carried her burden of proving that the Arbitration Agreement is procedurally unconscionable.