Arbitration has been affirmed in many recent decisions, including several in the past years by the U.S. Supreme Court. But will all arbitration agreements be enforced, even if they impose limitations on the claimants? Not according to a decision yesterday by the Washington Supreme Court. Instead, overbroad agreements may be held invalid as “unconscionable.”
In Hill et al. v. Guarda (Washington, 9/12/13), several employees filed a lawsuit alleging class action wage and hour violations. The employer moved to compel arbitration based on a series of “labor agreements” that included an arbitration clause. However, the agreements also contained contractual limitations on employee rights, including a 14-day limitations period (Washington law allows three years), a 2- or 4-month limit on back pay awards (same), and an onerous fee-sharing arrangement (Washington law requires minimal filing fees). The Court found each of these provisions to be overly broad, sufficient to defeat an attempt to compel arbitration.
Does this mean the end of arbitration agreements? No, but it emphasizes the importance of reviewing existing clauses to ensure that only reasonable provisions and restrictions are contained in arbitration agreements. The more restrictive and limiting on employee rights, the less likely the arbitration clause will be enforced. Please contact your Dorsey attorney to review your arbitration agreements.