In Stoker v. Blue Origin, LLC, __Cal.App.5th__ (2026), the California Court of Appeal determined that the employer’s arbitration agreement was unconscionable and could not be saved through a severance provision. The decision underscores the importance of carefully drafting arbitration agreements for California employees.
1. Background
Craig Stoker, a former senior director at Blue Origin, sued Blue Origin for retaliation, discrimination, harassment, breach of contract, and wrongful termination. Blue Origin moved to compel arbitration. The trial court denied the motion, and the Court of Appeal affirmed, finding that the agreement was unconscionable and unsalvageable, without reaching the question of whether the federal Ending Forced Arbitration Act applied.
2. Key Holdings
a. Adhesive Employment Agreements Carry Inherent Procedural Unconscionability
The evidence presented in this case showed that Blue Origin’s recruiter told Stoker the agreement contained “standard terms” that “everyone has to sign.” There was also no evidence the terms were negotiable. On these facts, the court reaffirmed that take-it-or-leave-it arbitration agreements are contracts of adhesion — even for senior employees. The court also noted that adhesion alone establishes only a low degree of procedural unconscionability, but an adhesive contract is enough to trigger close scrutiny of the contract’s substantive terms, since an agreement must be both substantively and procedurally unconscionable to be unenforceable.
b. Four Substantive Defects Rendered The Agreement Unenforceable
In reviewing the contract’s substantive terms, the court identified four independent grounds of substantive unconscionability:
i. Overbreadth
The agreement required arbitration of “any and all claims, disputes, or controversies” without limitation to employment-related matters. The court held that forcing an employee to arbitrate claims with no nexus to the employment relationship — like a hypothetical car accident with a coworker — is unconscionably broad.
ii. Lack Of Mutuality
The agreement funneled virtually all employee-side claims (discrimination, wage and hour, and whistleblower claims) into arbitration, while carving out claims employers are more likely to bring (trade secrets, intellectual property, and non-solicitation breaches). The court found this one-sided structure unconscionable.
iii. Predispute Jury Trial Waiver
For claims falling outside arbitration, the agreement waived the right to a jury trial. The court reiterated that predispute jury trial waivers are unenforceable under California law.
iv. PAGA Representative Action Waiver
The agreement barred all class, collective, and representative claims, including PAGA actions. The court confirmed that a blanket predispute waiver of representative PAGA claims is unenforceable in California.
c. Severance Was Not Available To Save The Agreement
The employer argued that any unconscionable provisions should be severed but the court refused to sever the offending provisions, finding that:
(a) the overbreadth and mutuality defects could not be fixed by deleting language and the court would have to rewrite the agreement to rectify these issues;
(b) four unconscionable provisions reflected a “systematic effort” to tilt the forum in the employer’s favor; and
(c) routinely severing one-sided terms would incentivize employers to overreach.
Blue Origin’s severability clause did not change the outcome and could not override a court’s discretion to void the entire agreement. This is an important holding for employers to consider.
3. Practical Considerations
In light of this decision, employers should review their arbitration agreements to ensure the following:
a. Narrow The Scope Of The Arbitration Clause
Arbitration provisions should be limited to claims “arising out of or relating to” the employment relationship. Broad, catch-all language covering “any and all disputes” should be avoided.
b. Ensure Mutuality Of Obligation
If the employer carves out trade secret or intellectual property claims from arbitration, the employee should be afforded a reciprocal carve-out. Alternatively, employers may consider subjecting all claims to arbitration without one-sided exceptions.
c. Eliminate Predispute Jury Trial Waivers
Such waivers are unenforceable in California and serve only to compound an unconscionability finding.
d. Do Not Include Waivers Of Representative PAGA Claims
While class action waivers may be enforceable, blanket representative PAGA waivers remain invalid under California law. Representative PAGA actions should be expressly carved out of any representative action waiver.
e. Audit Agreements For Cumulative Defects
A single unconscionable provision may be severable but multiple unconscionable provisions likely are not. The greater the number of unconscionable terms, the more likely a court will void the agreement in its entirety.
f. Do Not Rely On Severability Clauses As A Safeguard
While such clauses may be helpful, they will not rescue an agreement that is fundamentally one-sided.
g. Exercise Care In The Rollout Process
Employees should be afforded adequate time to review the agreement, an opportunity to ask questions, and (where feasible) the ability to negotiate terms. While these measures will not eliminate procedural unconscionability concerns entirely, they may mitigate them.
4. Conclusion
Stoker v. Blue Origin sends a clear signal: California courts will void arbitration agreements that systematically favor the employer, and neither severability clauses nor the federal policy favoring arbitration will alter that result. Employers who have not recently reviewed their arbitration agreements should do so promptly.
To read more articles like this one, subscribe to the ALERT Newsletter today!
About The Author
Carina Novell is an attorney in Sheppard’s Labor and Employment Practice Group in the firm’s San Diego (Downtown) office. Ms. Novell helps companies navigate complex California employment laws and defends both single-plaintiff and complex class action lawsuits. Carina focuses her practice on labor and employment law matters, as well as advising and representing management clients. Carina handles various types of employment litigation, including wage and hour class actions, discrimination, wrongful termination, retaliation, and harassment lawsuits.
Carina is a contributor to the California Labor and Employment ALERT.
Ms. Novell received her law degree from the University of California, Davis and her undergraduate degrees from Saint Mary’s College of California, summa cum laude.