For some employers, arbitration agreements are a required document provided to employees during onboarding, which, if disputes arise later in the relationship, employers may use to resolve those disputes in an arbitration setting, rather than in court. However, employees often challenge the enforceability of those agreements, and in Fuentes v. Empire Nissan (decided on February 2, 2026), the California Supreme Court provided a helpful warning to employers that rushing employees to sign agreements with unnecessary fine print and illegible text can add significant strength to employees’ ability to challenge the enforceability of an arbitration agreement.
The Employer Gave The Employee 5 Minutes To Review An Arbitration Agreement Buried In The Fine Print Of Onboarding Documents.
When Evangelina Yanez Fuentes applied to work for Nissan, she signed a document called “Applicant Statement and Agreement.” The agreement required that “any claim” between the employer and the employee “shall be submitted to and determined exclusively by binding arbitration.” The form arbitration agreement stated that the terms could only be modified if “signed by the President of the Company.”
According to the Court, the entire document was one page in length and in a font so small that a photocopy of the agreement was blurry. In fact, the relevant paragraph compelling arbitration contained around 900 words “squeezed into about three vertical inches.” Aside from being difficult to physically read, the agreement contained legal jargon and complex sentences, which made it difficult to understand.
On top of the near-illegible font and complex language, the record showed that Fuentes only had five minutes to review the agreement, which was included with her employment application materials, and was told to hurry because the drug testing facility was about to close. Later during her employment, Fuentes signed two confidentiality agreements regarding Nissan’s trade secrets. These confidentiality agreements would allow Nissan to seek “any proper injunction” along with “any other remedies.” Only Fuentes signed these agreements.
Nissan terminated Fuentes’s employment, following an extended medical leave, and Fuentes sued for discrimination and wrongful termination.
The Trial Court Ruled That The Barely Legible Arbitration Agreement Was Procedurally And Substantively Unconscionable, But The Court Of Appeal Disagreed.
At the start of the case, Nissan filed a motion to compel Fuentes to litigate her claims in arbitration, and Fuentes opposed that motion by arguing that the arbitration agreement was unenforceable due to “unconscionability.” To establish that a contract is unenforceable because it is unconscionable, the party opposing enforcement must show unfairness both in the procedure by which the contract was formed and the substance of its terms. This is called procedural and substantive unconscionability, and at the trial court level, they both must exist.
Procedural unconscionability concerns the fairness of the procedure to form the contract, such as small font, multiple contracts, legal jargon, or extreme time limits that place pressure on an employee to sign the agreement. Substantive unconscionability is about the actual substance of the contract and whether it is fair to the employee. This includes whether the terms and obligations are mutual between the employee and employer.
While both are required to establish the unconscionability defense, the elements are on a sliding scale. The more procedurally unconscionable the contract is in its formation, the less substantively unconscionable it needs to be to establish an unconscionability defense.
The trial court determined that the agreement had a high degree of procedural unconscionability because it was barely legible, difficult to understand, and Fuentes was not provided with sufficient time to review it. Additionally, the court found that the agreement had a low to moderate degree of substantive unconscionability. First, the trial court determined that fine-print terms are substantively unconscionable. Additionally, the court found that the two confidentiality agreements appeared to create a carveout, which would allow Nissan to bring some claims in regular court, like breach of confidentiality claims, in court rather than arbitration. This carveout, therefore, meant that the arbitration agreement did not apply equally, or mutually, to Nissan and Fuentes.
Nissan then appealed to the Second District Court of Appeal, which, importantly, disagreed with the idea that illegibility alone, regardless of the substance of the terms buried in the fine print, qualified as substantively unconscionable.
The Court of Appeal also held that the confidentiality agreements, read in conjunction with the arbitration agreement, required Nissan to arbitrate claims under the confidentiality agreement. Moreover, the Court of Appeal determined that Nissan’s President never signed the confidentiality agreements, thereby not altering the binding arbitration terms of the first agreement. The Court of Appeal found that these findings, along with the presumption that the law favors arbitration, rendered the agreement substantively fair to Fuentes.
The California Supreme Court Reversed: An illegible Font Made The Agreement Procedurally Unconscionable, But Was Not Enough On Its Own To Make Agreement Substantively Unconscionable, But Court Of Appeals Made An Incorrect Assumption.
At the California Supreme Court, the Court found the arbitration agreement had a high degree of procedural unconscionability. In particular, the Court noted Fuentes faced economic pressure, insufficient time to review, complex sentences filled with legalese, and a tiny, blurry font.
The Supreme Court began its next analysis by determining whether “fine-print terms” are substantively unconscionable due to its near illegible form. These “fine-print terms” are normally one-sided terms buried within large paragraphs, making it difficult to discern unfavorable language. However, the Supreme Court found that “font size” alone “does not affect the substance of an agreement’s terms.”
Next, the Supreme Court looked towards mutuality of the arbitration agreement—whether the terms were fair and even between the parties. There, the Supreme Court noted that Fuentes interpreted the confidentiality agreements to provide an exception for Nissan to bring claims outside arbitration, while Fuentes must continue to bring all her claims through arbitration. The Court, disagreeing with the Court of Appeal, found that the plain language of the confidentiality agreements did not limit Nissan to arbitration. The Court found that the Court of Appeal’s reliance on the proposition that “the law strongly favors arbitration” to be misplaced, and that the presumption is merely that the law does not disfavor arbitration agreements and, accordingly, they should be enforced like any other contract. Further, the Court of Appeal erroneously resolved a factual question that Nissan’s President never signed the confidentiality agreements, which would impact the analysis as to whether the substantive terms of the agreement were fair and mutual. Therefore, the Supreme Court remanded the question as to whether the confidentiality agreements carved out an exception for Nissan, asking the lower court to closely scrutinize the terms of the agreements.
Based on the California Supreme Court’s decision, employers should consider two things. First, employers should make sure that their arbitration agreements and other contracts are legible, in a large enough font, understandable, and that the employee has sufficient time to review them. Second, employers should be careful when having an employee sign multiple agreements throughout their employment. Any ancillary agreements and their terms should be carefully reviewed for potential conflicts with an arbitration agreement.