Topics: Arbitration Agreements, Court Decisions, Employee Hiring, Discipline & Termination

On June 13, 2025, a California Court of Appeal struck down an arbitration agreement because of unconscionable terms entered by the parties in a separate employment agreement, governing different dispute resolution fora and procedures that were more favorable to the employer. In Silva v. Cross Country Healthcare, Inc., the Court held that the employment agreement and arbitration agreement (which did not have an integration clause) signed simultaneously as part of the hiring process must be read together, and that unconscionable—or, in other words, unfair—terms can render the arbitration agreement unenforceable.

In Silva, several employees brought class and representative claims against Cross Country Healthcare based on alleged California Labor Code violations. The employer moved to compel arbitration, asserting that the Arbitration Agreement, signed by the employees prior to employment, included a class action waiver clause and required arbitration of all claims between the employees and the employer on an individual basis.

The trial court denied the employer’s motion to compel arbitration, reasoning that because the Arbitration Agreement and Employment Agreement were executed on the same day as part of the employee’s hiring and both dealt with how disputes between the employer and employee would be resolved, they must be read together. Moreover, the trial court determined that because the Employment Agreement contained unconscionable terms that favored the employer (allowing the employer to seek injunctions in court for the type of claims the employer would most likely pursue), the arbitration agreement requiring the employee to pursue claims only in arbitration rendered the arbitration agreement unconscionable.

On appeal, the California Court of Appeal affirmed the trial court’s findings.

The Court of Appeal found that the two agreements created a one-sided framework favoring the employer for two reasons: (1) the agreements required arbitration of claims more likely to be brought by employees (the weaker party), but exempted from arbitration claims more likely to be brought by the employer (the stronger party); (2) the Employment Agreement included terms that have repeatedly been found to be unconscionable, requiring the employees to agree (without similar concessions in the employees’ favor) that:

  • The confidentiality, non-compete, and non-solicitation terms are lawful
  • Any breach of those terms will cause irreparable harm to the employer
  • The employer is entitled to injunctive relief
  • The employer could obtain injunctive relief without posting bond, which is usually required.

Finally, since the agreements created an entire arbitration scheme that is unfairly one-sided as to highly favor the employer, the court found that the trial court properly used its discretion in rendering the entire Arbitration Agreement unenforceable, rather than rewrite the agreements to negate the unconscionable terms.

Takeaways for Employers

The Silva decision rejected the employer’s attempt to sidestep longstanding California precedent by having employees sign two agreements to get the benefit of arbitration that would be otherwise unconscionable under a single agreement.

Employers should be advised to review all documents executed in the onboarding process and revise any terms that may be viewed as unconscionable when read in conjunction with any mandatory arbitration agreements.

If you have any questions about this decision or how it may affect your new-hire onboarding agreements, arbitration agreements, or litigation strategies, please contact your favorite CDF attorney. To stay up to date, be sure to subscribe to CDF’s California Labor & Employment Blog.

*Special thanks to CDF law clerk Sara Anderson for her research and contributions to this article.