The Washington Supreme Court has recently provided guidance to employers contemplating arbitration agreements with their employees. In Zuver v. Air Touch Communications and Adler v. Fred Lind Manor, the Court concluded that agreements requiring arbitration of all claims arising out of employment, including statutory discrimination claims, can be enforceable. The Court noted the following guidelines:
- Contract defenses such as fraud, duress, or "unconscionability" can invalidate arbitration agreements.
- An employer can require an applicant for employment to sign a pre-dispute arbitration agreement as a condition of hire. An employer can also require an existing employee to sign a pre-dispute arbitration agreement after the employee has been hired, if the agreement is supported by consideration. The mutual promises of employer and employee to arbitrate their disputes will be considered sufficient consideration.
- A pre-dispute arbitration agreement will be considered procedurally acceptable if an applicant or employee is provided with a "meaningful choice" to accept or reject the agreement considering all the circumstances. These circumstances include the manner in which the arbitration agreement is presented, whether the employee had a reasonable opportunity to consider the terms of the agreement, and whether the important terms of the agreement are "hidden in a maze of fine print."
- Provisions in an arbitration agreement will be considered substantively unconscionable if they are so one sided and overly harsh with respect to one party. The Washington Supreme Court considers the following provisions unconscionable:
- A provision that arbitration proceedings and awards must be kept confidential.
- A provision that bars the employee, but not the employer, from recovering punitive or exemplary damages.
- A provision that significantly shortens the statute of limitations for discrimination claims.
- A provision that each party shall bear their own costs and attorneys fees.
- A provision which provides that the parties split arbitration costs and fees may be unconscionable if it precludes the employee from requesting arbitration. The employer can easily remedy a challenge to such a provision by offering to pay arbitration fees and costs.
- If an arbitration agreement contains a severability clause, Washington courts will strike only invalid provisions. However, if the unconscionable provisions are so numerous as to pervade the entire agreement, the entire agreement will be deemed unenforceable despite the existence of a severability clause.
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