A major legal battle is unfolding as a former employee takes on a direct sales company over arbitration agreements and labor law violations. Marites Perez filed a complaint against It Works Marketing, Inc. in the Alameda County Superior Court on September 20, 2021, alleging numerous violations of the California Labor Code.
The case revolves around an arbitration agreement embedded within It Works's Distributor Agreement, which Perez signed when she became an independent distributor for the company on August 3, 2020. Perez contends that this agreement is both procedurally and substantively unconscionable. She claims it was presented in a "take it or leave it" manner without clear delegation of authority to decide arbitrability issues and was hidden within multiple layers of hyperlinks. Furthermore, Perez argues that several provisions within the agreement are unfairly one-sided, favoring It Works significantly.
Perez's complaint accuses It Works of systematically violating wage and hour laws by misclassifying employees as independent contractors, failing to pay minimum and overtime wages, not providing lawful meal periods or rest breaks, unlawfully deducting wages, and not offering workers' compensation insurance among other allegations. These claims are brought under the Labor Code Private Attorneys General Act of 2004 (PAGA), seeking monetary relief, penalties, attorney’s fees, costs, and expenses for herself and other aggrieved employees.
In response to these accusations, It Works filed a motion to compel arbitration based on the Federal Arbitration Act on November 18, 2022. The company argued that Perez had voluntarily agreed to binding individual arbitration as the exclusive means of resolving all claims against It Works. However, the trial court denied this motion on June 14, 2023. The court found that the arbitration agreement did not clearly delegate issues of arbitrability to an arbitrator and was permeated with procedural and substantive unconscionability.
It Works appealed this decision but faced further setbacks as the appellate court affirmed the trial court's ruling. The appellate court highlighted several problematic provisions in the arbitration agreement: a carveout allowing only certain types of claims likely to be brought by It Works to be resolved in court; damage limitation clauses favoring It Works; indemnification requirements imposed solely on Perez; cost-sharing mandates for prearbitration mediation; mandatory arbitration in Florida under Florida law; and confidentiality requirements hindering evidence gathering for PAGA claims.
The appellate court concluded that these provisions collectively rendered the arbitration agreement unenforceable due to their lack of mutuality and fairness. Moreover, attempts by It Works to modify these terms post hoc were deemed insufficient to cure their inherent unconscionability.
The judges presiding over this case include Jackson P.J., Burns J., and Chou J., with Case ID A168331/Perez v. It Works Marketing Inc.