Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. GIC879042, Judith F. Hayes, Judge.
NARES, J.
Jani-King of California, Inc. (Jani-King) employed Frank John Stiglich III as a salesperson to procure janitorial cleaning contracts. Under the parties' written employment agreement, Stiglich's compensation included, in addition to a base salary, commissions on sales of Jani-King's cleaning services originated solely by him, subject to various conditions precedent such as the performance of monthly "follow-ups" with the designated account contact persons to monitor the satisfaction of the customers, the completion of all documentation related to the sales and acceptance of the accounts, and the accomplishment of account "walk-throughs" with the designated franchisees. Jani-King terminated Stiglich's employment in mid-June 2006.
Claiming Jani-King had not paid him the commissions he had earned on four sales he procured before he was fired, Stiglich brought the matter before the labor commissioner, who found in his favor and awarded him compensation. Jani-King appealed and obtained a trial de novo in the superior court, and the court entered judgment in favor of Stiglich, awarding him earned commissions in excess of $15,000, plus interest and penalties. The court found that Jani-King's termination of Stiglich's employment rendered meaningless the contractual requirement that Stiglich follow up on his accounts and that it would be unconscionable to permit Jani-King to avoid liability for the commissions when Jani-King continued to service the accounts for which Stiglich was the procuring cause.
Jani-King appeals, contending the court erred (1) in awarding the claimed commissions because substantial evidence demonstrates Stiglich was unable to service the accounts as required by the conditions precedent set forth in section 4.7 of the agreement, and thus Stiglich did not earn the commissions even though he might have been the procuring cause for the sales; and (2) in finding the express terms of the agreement were unconscionable.
We conclude that Jani-King's termination of Stiglich's at-will employment operated to excuse Stiglich's performance of the duties set forth in the provisions of section 4.7 of the agreement because substantial evidence shows that Jani-King's termination of Stiglich's employment effectively prevented him from performing those duties with respect to cleaning services contracts the court properly found he had procured. We also conclude that the forfeiture provisions of the agreement are adhesive and unconscionably one-sided, and thus unenforceable as a matter of law. Accordingly, we affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
California Rules of Court, rule 8.204(a)(2)(C) requires that an appellant's opening brief "[p]rovide a summary of the significant facts limited to matters in the record." In its opening brief, Jani-King has provided an abbreviated two-page statement of facts that is silent with respect to most of the evidence presented at trial. Jani-King's statement of facts does not comply with rule 8.204(a)(2)(C). The Division of Labor Standards Enforcement of the State of California Department of Industrial Relations (DLSE) has not provided a statement of the facts on behalf of respondent Stiglich.
Jani-King, a company that operates and franchises businesses that provide commercial, industrial, institutional and residential janitorial services, employed Stiglich in March 2005 as an "account executive" salesperson to procure cleaning contracts. Under section 2.1 of the parties' agreement, Stiglich was an at-will employee whose compensation (under section 4) included a base monthly salary of $2,500, plus commissions on sales of Jani-King's cleaning services originated solely by him, subject to various conditions set forth in section 4.7, which provided: "In addition to other requirements contained herein, before any commission shall be considered earned and payable to [Stiglich], the following requirements and conditions must be fulfilled: [¶] 1. Service must have begun on the account. [¶] . . . [¶] 4. During the period in which commissions are paid for any account, [Stiglich] must 'follow-up' with the designated account contact person on a monthly basis to monitor the customer satisfaction level. This follow-up must be documented on the appropriate Jani-King forms and filed in the Jani-King Regional Office. Follow-up includes notifying the Operations Department of any concerns about service expressed by the client, and providing such assistance to the Operations Representative and the designated franchisee necessary to avoid a cancellation of the account. . . . [¶] 5. All documentation related to the sales and account acceptance has been completed, an account walk-through with the designated franchisee who accepts the account has been accomplished, and service of the account has started." The agreement also provided for a bonus of $1,000 when total "Initial Monthly Billing" for accounts sold by Stiglich reached $10,000 per month.
On June 16, 2006, Jani-King's vice-president, John Allen, terminated Stiglich's employment. Claiming Jani-King had not paid him commissions he had earned on sales he procured in the Ironstone Bank account, the Bucca di Beppo account, and the Downtown San Diego Partnership East Village (East Village) and Downtown San Diego Partnership Gaslamp (Gaslamp) portions of the Clean and Safe account before he was fired, Stiglich successfully brought his claims before the DLSE. After an evidentiary hearing, the labor commissioner awarded Stiglich more than $28,000 in wages, reimbursable business expenses, interest, and penalties.
Jani-King appealed and obtained a trial de novo in the superior court under Labor Code section 98.2. In his trial brief, Stiglich argued he was entitled to the commissions because he was the procuring cause of the sales, the provisions of the agreement allowing Jani-King to keep his commissions following its termination of his employment constituted a forfeiture of earned wages that was against public policy, and to allow Jani-King to retain commissions Stiglich earned before his termination would produce an unconscionable result. Jani-King argued that Stiglich had not earned the commissions because he did not satisfy the contractual conditions precedent before it terminated his employment. At the trial, Stiglich testified on his own behalf; and Randall Franzine, the regional director of Jani-King's San Diego region who supervised all of Jani-King's account executives, testified on behalf of Jani-King. Numerous exhibits were admitted in evidence.
With respect to the Ironstone Bank contract, Stiglich testified that Jani-King had already been cleaning an Ironstone Bank building in Stiglich's territory in La Jolla, and a new Ironstone Bank was being built in Solana Beach. Stiglich stated he filled out an account bid sheet for the Solana Beach Ironstone Bank account, and Franzine approved it by initialing it. Stiglich testified he negotiated the contract between Ironstone Bank and Jani-King for the cleaning of the Solana Beach building, Franzine approved that contract before Stiglich was terminated, and it was signed on June 26, 2006, after he was terminated. The written contract, which was admitted into evidence, showed that another salesperson, Aaron Nester, signed the contract next to Stiglich's name, which was crossed out. On June 14, 2006, before he was terminated, Stiglich sent a letter to Cory Moore at Ironstone Bank in Solana Beach thanking her for considering Jani-King's enclosed completed proposal. Stiglich also gave testimony with respect to his involvement in procuring the other accounts at issue in this case, as well as to his bonus claim, and he acknowledged Jani-King paid him for the St. Vincent Church account.
Franzine testified that the salespersons' territories are divided by zip code, and Stiglich did not earn the commission on the Ironstone Bank account in Solana Beach because it was outside his territory and Stiglich "wasn't assigned nor did he get permission to address this account outside of his territory." Franzine also indicated that Stiglich would have been able to see the activity for Ironstone Bank within Jani-King's computer only by "putting a false zip code in the lead when he entered it into the system," and this was demonstrated by trial exhibit No. 13. That exhibit, which was admitted in evidence, shows it was titled "Customer Lead Maintenance"; it was created on March 21, 2006, by Stiglich; the customer is listed as Ironstone Bank in Solana Beach; the zip code is incorrectly listed as "92104"; Cory Moore is listed as the contact person; and Stiglich entered a note stating "this is a new building being built by BYCORE, it will be ready in [J]une 06. [S]ubmitting bid to [C]ory." Franzine stated the Ironstone Bank commission was paid to Nester.
Franzine also indicated that under section 4.7 of the agreement Stiglich did not earn a commission on the Bucca di Beppo account or the East Village portion of the Clean and Safe account; he was not entitled to a commission on the renewal of the Gaslamp portion of the Clean and Safe account; and Jani-King paid a commission to Stiglich on the St. Vincent Church account under protest pursuant to section 4.7 of the agreement.
When asked on cross-examination whether Jani-King effectively terminated Stiglich's ability to satisfy the conditions precedent set forth in section 4.7 of the agreement, Franzine replied that "base[d] on the facts surrounding the termination[, Stiglich] excluded himself from it due to his activity." Franzine elaborated by stating, "Had he not been involved [in] what he was involved in, he wouldn't have been terminated. He could have fulfilled the duties per his employment agreement, and . . . received the balance of the commission."
The court entered judgment in favor of Stiglich, awarding him earned commissions in the amount of $15,961.50, plus interest and penalties, for a total judgment of $21,993.17. In its written ruling, the court accepted as credible Stiglich's testimony regarding the Ironstone Bank account. It specifically found that Stiglich sold the Ironstone Bank contract after he received authorization to go outside his area to make the sale, he had an Ironstone Bank in his territory, he was given express authorization to continue his efforts with the new Ironstone Bank building under construction in Solana Beach; he located this bank building while it was in the construction stage, he sent correspondence and estimates, he negotiated and signed the contract, and he did not attempt to deceive Jani-King by entering a zip code on the commission form as that form clearly stated that Solana Beach was the location of the new account, and his supervisor signed off on the bid sheet for this contract with the bank.
In addition, the court found it would be unconscionable to permit Jani-King to avoid liability for commissions when Jani-King continued to service the accounts for which Stiglich was the procuring cause. The court found that Stiglich negotiated and obtained the Bucca di Beppo account, he was the procuring cause of the contract, and, regarding Stiglich's claim that Jani-King prevented him from complying with the contract terms requiring follow-up services on his accounts, "[t]he requirement that [Stiglich] follow up with this account was rendered meaningless since [his] termination rendered him incapable of fulfilling this requirement."
With respect to the Clean and Safe account, the court found that Stiglich was entitled to the full commission on the Gaslamp sale, and 50 percent of the commission on the East Village sale because he worked with someone else on that sale. The court awarded Stiglich a $1,000 bonus, finding that his commissions in June 2006 exceeded $10,000.
With respect to Jani-King's reliance on the provisions of section 4.7 of the agreement, the court reiterated its finding that Jani-King's termination of Stiglich's employment prevented him from following up on his accounts. This appeal followed.
DISCUSSION
I. JANI-KING'S TERMINATION OF STIGLICH'S EMPLOYMENT PREVENTED HIM FROM SATISFYING THE CONDITIONS PRECEDENT
Jani-King contends the court erred in awarding the claimed commissions to Stiglich because substantial evidence demonstrates Stiglich was unable to service the accounts as required by the conditions precedent set forth in section 4.7 of the agreement, and thus he did not earn the commissions even though he might have been the procuring cause for the sales. Specifically, Jani-King asserts that "[t]he [agreement] at issue in this case contained clear, unambiguous conditions precedent to a commission being earned and payable to [Stiglich]. These conditions included: (1) service having begun on the account, (2) sales must have been originated solely by the employee, (3) [the] employee must follow up with designated account contact persons during the period in which commissions are paid to ensure customer satisfaction, and (4) all documentation related to the sale and account acceptance must be completed." Jani-King maintains the court erred in awarding Stiglich the "additional" commissions because the court itself found that Stiglich did not satisfy the foregoing conditions. These contentions are unavailing.
A. Applicable Legal Principles
Agreements between employers and employees concerning commissions "have long been an established─and accepted─business practice." (Koehl v. Verio, Inc. (2006) 142 Cal.App.4th 1313, 1330 (Koehl).) Witkin explains that "[w]here the compensation of a sales agent is a commission on the sale, the agent is entitled to recover if his or her efforts are the effective or procuring cause of the sale, even though others may have intervened in the completion of the transaction." (3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and Employment, § 121, p. 164, italics added, citing Chamberlain v. Abeles (1948) 88 Cal.App.2d 291, 296 (Chamberlain) & Willson v. Turner Resilient Floors (1949) 89 Cal.App.2d 589, 595 (Willson).)
The courts in California have long held that to be entitled to a commission as the procuring cause of a sale, a sales agent "does not necessarily have to consummate the transaction." (Willson, supra, 89 Cal.App.2d at p. 595, citing Chamberlain, supra, 88 Cal.App.2d 291 & Brea v. McGlashan (1934) 3 Cal.App.2d 454 (Brea).) In Brea, an action by a radio station employee to recover commissions pursuant to an employment agreement under which the defendant station owner promised to pay her 25 percent of the sums advertisers paid under contracts she procured, the Court of Appeal stated that the word "procure," in its broadest sense, "means to prevail upon, induce or persuade a person to do something." (Brea, supra, 3 Cal.App.2d at p. 465.) Affirming the judgment for the plaintiff, the Brea court explained that "[i]n this sense did the trial court interpret it, when it found in its findings, that the two contracts upon which it allowed a commission were secured 'as a result of plaintiff's efforts'. This was a correct interpretation of the contract. For otherwise, one might employ an agent to interview persons, and secure from them promises of contracts and then, by having another one 'close' the contracts, deny the agent the fruit of his labor. The law does not sanction such action. On the contrary, the rule is that if an agent (or broker) is the inducing or procuring cause of the contract, he is entitled to the commission, even though the principal takes it out of his own hand and completes it. The originating cause, which ultimately led to the conclusion of the transaction, is held to be the procuring cause." (Ibid., italics added; see also Willson, supra, 89 Cal.App.2d at p. 595, Chamberlain, supra, 88 Cal.App.2d at p. 296 & Wise v. Reeve Electronics, Inc. (1960) 183 Cal.App.2d 4, 10.)
In general, "the right of a salesperson . . . to a commission depends on the terms of the contract for compensation." (Koehl, supra, 142 Cal.App.4th at p. 1330; Steinhebel v. Los Angeles Times Communications, LLC (2005) 126 Cal.App.4th 696, 705; Commeford v. Baker (1954) 127 Cal.App.2d 111, 117.) "[C]ases have long recognized, and enforced, commission plans agreed to between employer and employee, applying fundamental contract principles to determine whether a salesperson has, or has not, earned a commission." (Koehl, supra, 142 Cal.App.4th at p. 1331, italics added.)
Among the "fundamental contract principles" mentioned in Koehl is the following rule: "Prevention of performance by the promisee is equivalent to performance by the promisor." (Unruh v. Smith (1954) 123 Cal.App.2d 431, 437 (Unruh); see also 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 851, pp. 937-938 ["[p]revention or hindrance of the other party's performance operates . . . as an excuse for the performance"].) In Unruh, the Court of Appeal explained that "[a] party to a contract cannot take advantage of his own act or omission to escape liability thereon. Where a party to a contract prevents the fulfillment of a condition or its performance by the adverse party, he cannot rely on such condition to defeat his liability." (Unruh, supra, 123 Cal.App.2d at p. 437.)
B. Analysis
Here, the record shows that by terminating Stiglich's employment, Jani-King prevented him from following up on his accounts in fulfillment of the duties set forth in section 4.7 of the agreement. At trial, Jani-King's San Diego regional director, Franzine, acknowledged on cross-examination that had Stiglich not been terminated, he could have fulfilled those duties and received the balance of the commissions on his accounts. Having prevented Stiglich from performing his contractual follow-up duties, Jani-King may not rely on those conditions precedent to defeat its contractual liability for commissions on contracts the court properly found Stiglich had procured. (Unruh, supra, 123 Cal.App.2d at p. 437; 1 Witkin, Summary of Cal. Law, supra, § 851, pp. 937-938.)
Jani-King asserts that Unruh, supra, 123 Cal.App.2d 431, is not applicable, citing American Software, Inc. v. Ali (1996) 46 Cal.App.4th 1386 (American Software). Jani-King's reliance on American Software is unavailing. That case is distinguishable in that it involved an account executive whose employment relationship with the defendant corporation ended when she voluntarily resigned. (American Software, supra, 46 Cal.App.4th at p. 1388.) American Software thus did not involve a claim that the employer, by terminating the employment of an account executive, prevented that employee from fulfilling specified conditions precedent set forth in the employment agreement.
Jani-King also relies on Koehl, supra, 142 Cal.App.4th 1313, but acknowledges that "the conditions at issue in Koehl differ from the conditions in the [agreement] in this case." Koehl is inapposite. Like American Software, supra, 46 Cal.App.4th 1386, Koehl did not involve a claim that the employer prevented an employee from fulfilling conditions precedent specified in a commissions agreement by terminating his or her employment. In Koehl, the principal questions presented were (1) whether an employer's commission plans, which allowed the employer to charge back advance payments made to sales associates for anticipated sales commissions when the sales failed to generate revenue, violated the Labor Code prohibition against recoupment of paid wages; and (2) whether any contract in that matter was unconscionable. (Koehl, supra, 142 Cal.App.4th at pp. 1317, 1330, 1338.)
Jani-King's reliance on Division of Labor Standards Enforcement v. Dick Bullis, Inc. (1977) 72 Cal.App.3d Supp. 52 is also misplaced. As Jani-King acknowledges, the plaintiff in that case, a former automobile salesperson seeking to recover commissions for seven vehicles she claimed she had sold, voluntarily terminated her employment before the delivery of the vehicles. (Id. at pp. 54-55.) The pertinent employment contract term in Bullis provided: "'No commissions . . . will be payable to a salesman under any conditions for any unit not actually physically delivered and licensed prior to termination of employment.'" (Id. at p. 55.) Upholding the trial court's grant of nonsuit, the Appellate Department of the Superior Court of San Mateo County rejected the plaintiff's contention that the contract term denying a salesperson commissions for vehicles not physically delivered prior to termination of employment was void and unenforceable both as a contract of adhesion and as a disfavored forfeiture. (Id. at pp. 54, 58.) Bullis is distinguishable in that the plaintiff salesperson in that case voluntarily terminated her employment, with the result that, as a consequence of her own action, she did not earn the claimed commissions because the subject vehicles were not delivered and licensed prior to the termination of her employment. The Bullis court thus had no occasion to reach the issue of the applicability of the prevention of performance doctrine at issue here.
Although Jani-King contends Stiglich did not earn the commissions the court awarded to him because he failed to satisfy the conditions set forth in section 4.7 of the agreement, Jani-King also asserts inconsistently that "[p]art of the commissions was to compensate [him] for the post-sale work being performed." (Italics added.) In support of this latter assertion, Jani-King cites the testimony of Stiglich's supervisor, Franzine, who testified on behalf of Jani-King and stated on cross-examination, in reference to Stiglich's accounts, that "[h]ad [Stiglich] not been involved [in] what he was involved in, he wouldn't have been terminated," and "[h]e could have fulfilled the duties per his employment agreement, and thus . . . received the balance of the commission." (Italics added.) Any trier of fact could reasonably infer from Franzine's testimony that Stiglich in fact did earn commission income by procuring cleaning services contracts and that he could earn additional commission income by fulfilling the post-procurement duties set forth in section 4.7 of the agreement.
Such an inference is also supported by documentary evidence admitted into evidence at trial. Specifically, the court received in evidence as exhibit No. 4 a set of monthly Jani-King commission statements, including one for the month of May 2006 that Stiglich testified was filled out by Franzine, showing, by account, commissions due to Stiglich. Under a section of that commission statement titled "CURRENT MONTH SALES," Franzine listed the Bucca di Beppo account, and indicated that Stiglich "Sold" the Bucca di Beppo account on May 25, 2006, less than a month before Jani-King terminated his employment on June 16. Significantly, Franzine also indicated on the May 2006 commission statement that the "Total Commission Due" on the Bucca di Beppo account was $930, and the "Account Start Date" was June 12, 2006, four days before Jani-King fired Stiglich. Although Franzine indicated at trial that Stiglich did not earn his commission on the Bucca di Beppo account because he did not satisfy the requirements set forth in section 4.7 of the agreement, the court, as the trier of fact, resolved any conflicts in the evidence and awarded to Stiglich a commission for this account, finding that Stiglich was the procuring cause of the account and that "[t]he requirement that [he] follow up with this account was rendered meaningless since [his] termination rendered him incapable of fulfilling this requirement."
The trial record also contains evidence that Jani-King enforced the provisions of section 4.7 of the agreement in a selective manner. The court expressly found that "[t]he terms of the employment contracts were not enforced equally among all sales representatives. While [Jani-King argues] that because the employment contract refers to an obligation to make follow up calls to maintain various accounts before commissions were paid as a reason for withholding commissions from [Stiglich], [Jani-King] ignored that portion of the [agreement] which states commissions are "[p]ayable only on sales originated solely by the employee" in awarding commissions on the Ironstone Bank account to a sales representative in whose area the bank was located but who had little if anything to do with procuring the account." (Italics added.) At trial, Stiglich testified he negotiated the contract between Ironstone Bank and Jani-King for the cleaning of the Solana Beach building, and Franzine approved that contract before Stiglich was terminated. He also indicated that Aaron Nester, another Jani-King account executive, was not the salesman who sold that contract. Jani-King presented no evidence showing that Nester had procured that contract. However, Franzine testified that Jani-King paid Nester the commission on the Solana Beach Ironstone Bank account. The undisputed evidence thus shows that Jani-King paid that commission to Nester even though the underlying sale was not "originated solely by" Nester within the meaning of section 4.7 of Jani-King's standardized employment agreement.
Jani-King suggests it did not prevent Stiglich from fulfilling his follow-up duties under section 4.7 of the agreement, and thus the prevention of performance doctrine (discussed, ante) is not applicable, because, although Stiglich was an at-will employee, his termination was his own fault. Specifically, in its opening brief, Jani-King asserts that Stiglich "effectively stole the Ironstone Bank account" from another account executive, and that the court "punished" Jani-King for attempting to mitigate the damage caused by Stiglich when he "violated" the territorial rights of that account executive. In supplemental letter briefing, Jani-King asserts that although the reasons for Stiglich's termination "should not be relevant to whether the [court] erred in refusing to enforce the clear and unambiguous terms of the [agreement]," Stiglich was "not without fault with respect to the 'prevention of performance' factors." In support of these assertions, Jani-King cites Franzine's testimony that Stiglich entered false zip code information into Jani-King's computer system to make it appear that the Solana Beach Ironstone Bank account was in his territory.
By letter request dated September 4, 2008, this court asked the parties to submit simultaneous supplemental letter briefs (1) identifying the evidence, if any, in the record showing the reasons why Jani-King terminated Stiglich's employment, and (2) discussing whether those reasons for termination of Stiglich's employment, if any, were relevant to his contention on appeal that "under the doctrine of prevention of performance, Jani-King's prevention of [his] completing performance under the commission agreement must be interpreted as equivalent to actual performance of his post-sale duties."
The court, however, resolved the conflicts in the evidence regarding this matter, and expressly found that Stiglich's testimony was credible, he sold the Ironstone Bank contract after he had been given authorization to "go outside of his area to sell this account," and he "did not attempt to deceive [Jani-King] by entering a San Diego zip code on the commission form" because that form clearly stated that the location of the new account was Solana Beach. Jani-King does not challenge the sufficiency of the evidence on which the court's findings rest. Even if he had made such a challenge, it is not our task to weigh conflicts and disputes in the evidence; that is the province of the trier of fact. "Our authority begins and ends with a determination as to whether, on the entire record, there is any substantial evidence, contradicted or uncontradicted, in support of the judgment." (Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 630-631.)
Citing Labor Code section 2922, Jani-King contends in its reply brief that "[a]ccepting [Stiglich's] argument that he is entitled to commissions even though he did not service the accounts in question because he was prevented from performing when he was terminated, would in essence nullify the long-established presumption of at-will employment in California." We reject this contention. Labor Code section 2922 creates a presumption of at-will employment. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 335.) "An at-will employment may be ended by either party 'at any time without cause,' for any or no reason, and subject to no procedure except the statutory requirement of notice." (Ibid.) Our conclusions that Jani-King's termination of Stiglich's at-will employment prevented him from performing his post-procurement contractual duties, and thus that the court did not err in awarding him commissions on the accounts he had procured, does not nullify or in any manner affect the statutory at-will employment presumption. The presumption still exists, and an at-will employment may still be ended by either party at any time without cause, for any or no reason, subject to the statutory notice requirement. However, when an at-will sales employee has earned a commission or a portion of a commission by procuring a contract prior to the termination of his or her employment, but is prevented from performing post-procurement duties specified in the employment agreement as a result of that termination, the employee's performance of the post-procurement duties is deemed excused, and the prevention of performance is the legal equivalent of such performance. (See Unruh, supra, 123 Cal.App.2d at p. 437; 1 Witkin, Summary of Cal. Law, supra, § 851, pp. 937-938.)
Labor Code section 2922 provides: "An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month."
Although the trial record shows that Jani-King presented some evidence at trial that it claims demonstrates Stiglich engaged in misconduct that led to the termination of his employment, a review of the trial transcript, the parties' trial briefs, and the court's written ruling in this matter all show that the question of whether the termination was justified by good cause was not one of the issues litigated at trial. Stiglich did not sue Jani-King for wrongful termination. He sued to recover earned and unpaid commissions, a bonus, interest, and statutory penalties. Jani-King's principal defense at trial was its claim that it did not owe Stiglich the claimed commissions because he did not fulfill the duties specified in section 4.7 of the agreement, and thus he did not earn the commissions.
Finally, we are guided in our analysis by the principle that forfeitures are disfavored under California law as a matter of public policy. Civil Code section 1442 provides: "A condition involving a forfeiture must be strictly interpreted against the party for whose benefit it is created." The California Supreme Court has explained that "'[f]orfeitures are not favored by the courts, and, if an agreement can be reasonably interpreted so as to avoid forfeiture, it is the duty of the court to avoid it. [Citations.]'" (Universal Sales Corp. v. California Press Mfg. Co. (1942) 20 Cal.2d 751, 771.) Here, the provisions of sections 4.7 and 4.4 of the agreement, if enforced in disregard of the doctrine of prevention of performance (discussed, ante), would result in a forfeiture of commissions on cleaning services contracts that Stiglich had procured on Jani-King's behalf prior to his termination, a result that is disfavored as a matter of public policy.
Section 4.4, which Jani-King referenced for the first time in its supplemental letter brief and is not the subject of any of Jani-King's contentions in its opening and reply briefs, provides: "Notwithstanding anything to the contrary, upon termination of employment, whether by Jani-King or Employee, Employee shall relinquish all rights to commissions which have not been paid to date to Employee pursuant to the terms of this Agreement. Employee shall be entitled to all other compensation due Employee, prior to the date of termination, under the terms of this Agreement computed pro-rata up to and including that date. Employee shall earn no compensation after the date of termination."
In sum, we conclude that Jani-King's termination of Stiglich's at-will employment operated to excuse Stiglich's performance of the duties set forth in section 4.7 because substantial evidence shows that Jani-King's termination of Stiglich's employment effectively prevented him from performing those duties with respect to cleaning services contracts the court properly found he had procured.
II. UNCONSCIONABILITY
Jani-King also contends the court erred in finding the express terms of the agreement were unconscionable. We reject this contention and conclude that the forfeiture provisions of sections 4.7 and 4.4 of the agreement are adhesive and unconscionably one-sided, and thus unenforceable as a matter of law.
A. Applicable Legal Principles
In 1979 the Legislature enacted Civil Code section 1670.5, which codified the principle that a court may refuse to enforce a contract or contractual provision based on unconscionability. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz). Unconscionability generally includes "'an absence of meaningful choice on the part of one of the parties together with contract terms that are unreasonably favorable to the other party.'" (A&M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 486.) "Phrased another way, unconscionability has both a 'procedural' and a 'substantive' element." (Ibid.; see also Armendariz, supra, 24 Cal.4th at p. 114.)
"'Procedural unconscionability'[, which] concerns the manner in which the contract was negotiated and the circumstances of the parties at that time" (Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1329), focuses on "oppression" or "surprise" due to unequal bargaining power. (Armendariz, supra, 24 Cal.4th at p. 114). "The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party." (Kinney, supra, 70 Cal.App.4th at p. 1329.) The component of surprise arises when the challenged terms are "hidden in a prolix printed form drafted by the party seeking to enforce them." (Ibid.) "The procedural element of an unconscionable contract generally takes the form of a contract of adhesion," which is a standardized contract that is "'"imposed and drafted by the party of superior bargaining strength, [and] relegates to the [other] party only the opportunity to adhere to the contract or reject it."'" (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071; Armendariz, supra, 24 Cal.4th at p. 113.)
Substantive unconscionability focuses on "overly harsh" or "one-sided" results. (Armendariz, supra, 24 Cal.4th at p. 114.) "Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided." (Little v. Auto Stiegler, Inc., supra, 29 Cal.4th at p. 1071.)
Although procedural and substantive unconscionability must both be present before a court in the exercise of its discretion may refuse to enforce a contract or a contract provision on the ground of unconscionability, "they need not be present in the same degree." (Armendariz, supra, 24 Cal.4th at p. 114.) These elements are reviewed in tandem through the use of a "sliding scale" approach under which "the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa." (Armendariz, supra, 24 Cal.4th at p. 114; Carboni v. Arrospide (1991) 2 Cal.App.4th 76, 83.)
A finding of procedural unconscionability does not mean the contract or contract provision is unenforceable; it means "courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided." (Gentry v. Superior Court (2007) 42 Cal.4th 443, 469.) At one end of the "sliding scale" spectrum are contracts that have been freely negotiated by parties of roughly equal bargaining power, in which there is no procedural unconscionability. "Although certain terms in these contracts may be construed strictly, courts will not find these contracts substantively unconscionable, no matter how one-sided the terms appear to be." (Ibid.) At the other end of the spectrum are "[c]ontracts of adhesion that involve surprise or other sharp practices." (Ibid.) "Ordinary contracts of adhesion, although they are indispensable facts of modern life that are generally enforced [citation] contain a degree of procedural unconscionability even without any notable surprises, and 'bear within them the clear danger of oppression and overreaching.' [Citation.] [¶] Thus, a conclusion that a contract contains no element of procedural unconscionability is tantamount to saying that, no matter how one-sided the contract terms, a court will not disturb the contract because of its confidence that the contract was negotiated or chosen freely, that the party subject to a seemingly one-sided term is presumed to have obtained some advantage from conceding the term or that, if one party negotiated poorly, it is not the court's place to rectify these kinds of errors or asymmetries." (Id. at pp. 469-470.)
B. Analysis
As a preliminary matter, we reject Jani-King's contention that Stiglich "did not raise unconscionability as a basis for his claims below except in a last-minute comment in the rebuttal of his closing argument," and thus Jani-King "was not given a reasonable opportunity to present evidence as to the [agreement's] commercial setting, purpose, and effect so as to aid the court in making the determination." The record shows that Jani-King and Stiglich exchanged their trial briefs on June 21, 2007, and the bench trial was held on July 19 of that year. Citing Civil Code section 1670.5 and A&M Produce Co. v. FMC Corp., supra, 135 Cal.App.3d 473 (discussed, ante) and other case authorities, Stiglich argued at pages 33-34 of his trial brief that "[t]he 'allocation of risks or costs' as between [Jani-King] and [Stiglich] which calls for the employer to enjoy the windfall of retaining the unpaid commission is 'overly harsh' as to the employee and such a result is not 'justified by the circumstances under which the contract was made.' [¶] Pursuant to section 1670.5 of the Civil Code, the court may construe [Jani-King's] attempt to retain the commission as a forfeiture which would bring about an unconscionable result." (Italics added.) We now turn our attention to the merits of Jani-King's contention that the court erred in finding the express terms of the agreement were unconscionable.
"Unconscionability analysis begins with an inquiry into whether the contract is one of adhesion." (Armendariz, supra, 24 Cal.4th at p. 113.) We conclude the agreement is an adhesion contract. The agreement, which is titled "Account Executive Employment and Non-Disclosure Agreement," is a standardized contract. Stiglich testified that Jani-King presented it to him before he started working, and he signed it. Nothing in the trial record indicates that the forfeiture provisions in sections 4.4 and 4.7, or any other provisions of the agreement, were the subject of negotiation before the parties signed it. A reasonable trier of fact could reasonably infer that Jani-King imposed this standardized contract on employees, including Stiglich, as a condition of employment and without an opportunity to negotiate. To quote Armendariz, supra, 24 Cal.4th at page 115, "in the case of [sales commissions contracts containing forfeiture provisions], the economic pressure exerted by employers on all but the most sought-after employees may be particularly acute, for the [forfeiture provisions stand] between the employee and necessary employment, and few employees are in a position to refuse a job because of [those provisions]." Jani-King, the party of superior bargaining strength that drafted the agreement and presented it to Stiglich on a "take it or leave it" basis, relegated to him only the opportunity to adhere to the contract or reject it. We thus conclude the forfeiture provisions in sections 4.7 and 4.4 of the agreement were adhesive and procedurally unconscionable. (See Little v. Auto Stiegler, Inc., supra, 29 Cal.4th at p. 1071; Armendariz, supra, 24 Cal.4th at p. 113.)
Having concluded the forfeiture provisions were procedurally unconscionable, we must next determine whether they were manifestly unfair or one-sided, and thus substantively unconscionable. (Gentry v. Superior Court, supra, 42 Cal.4th at p. 469.) As already discussed, sections 4.7 and 4.4 of the agreement, if enforced in disregard of the doctrine of prevention of performance, would result in a forfeiture of commissions on cleaning services contracts that Stiglich had procured on Jani-King's behalf prior to his termination, a result that is disfavored as a matter of public policy. (Civ. Code, § 1442; Universal Sales Corp. v. California Press Mfg. Co., supra, 20 Cal.2d at p. 771.) Jani-King does not claim those forfeiture provisions allocated any risk to itself or its franchisees, and it is clear from the record that the revenue stream from the contracts Stiglich procured inured to Jani-King's benefit. We thus conclude the forfeiture provisions of Jani-King's adhesive agreement are substantively unconscionable in that they imposed an unjustified, one-sided, and manifestly unfair allocation of risk on Stiglich and Jani-King's other account executive employees. For all of the foregoing reasons, we affirm the judgment.
DISPOSITION
The judgment is affirmed. Stiglich is awarded his costs on appeal.
WE CONCUR: BENKE, Acting P. J., HUFFMAN, J.