Is this arbitration clause enforceable in Washington, and what happens to a one-sided term inside it?
Under Washington's Uniform Arbitration Act an agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable and irrevocable except upon a ground that exists at law or in equity for the revocation of contract. The court decides whether an agreement to arbitrate exists or covers the controversy; the arbitrator decides whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable. The Act does not apply to any arbitration agreement between employers and employees or between employers and associations of employees. Unconscionable terms inside an arbitration agreement are generally severed so that the agreement to arbitrate survives, but where an employer engages in an “insidious pattern” of inserting numerous unconscionable provisions, courts may decline to sever (Adler). Three more things the chapter says. A challenge to the existence or scope of the agreement does not stop the arbitration: "the arbitration proceeding may continue pending final resolution of the issue by the court, unless the court otherwise orders" (RCW 7.04A.060(4)). On a motion to compel, "The court may not refuse to order arbitration because the claim subject to arbitration lacks merit or grounds for the claim have not been established" (RCW 7.04A.070(3)). And the chapter does not apply to arbitration under chapter 7.06 RCW, the mandatory arbitration of smaller civil cases (RCW 7.04A.030(3)).
The trap
Two traps. First, an employment arbitration clause is outside chapter 7.04A RCW entirely, so a drafter who relies on the Act's machinery for an employee agreement is relying on a statute that says it does not apply. Second, severance is not guaranteed, and Adler did not end in a clean order to arbitrate: the court severed the two substantively unconscionable terms (the agreement's "parties shall bear their own respective costs and attorneys fees" clause and its 180-day notice-or-waiver period) so the agreement to arbitrate survived, but it remanded Adler's procedural-unconscionability claim, whether he implicitly waived his jury-trial right, and the substantive conscionability of the fee-splitting provision. It said an "insidious pattern" of numerous unconscionable terms may sink the whole agreement, and that two provisions were not such a pattern. Before a dispute arises the parties cannot waive or vary the provisions RCW 7.04A.040(2) lists, including 7.04A.060(1), nor unreasonably restrict notice, arbitrator disclosure or the right to a lawyer; and under 7.04A.040(3) the requirements of RCW 7.04A.070 can never be waived or varied, before or after a dispute.
9 authorities
- statuteRCW 7.04A.060enactment date not established
The words that state the rule
(1) An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of contract. (2) The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate. (3) An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.
- statuteRCW 7.04A.040enactment date not established
The words that state the rule
(2) Before a controversy arises that is subject to an agreement to arbitrate, the parties to the agreement may not: (a) Waive or vary the requirements of RCW 7.04A.050(1), 7.04A.060(1), 7.04A.080, 7.04A.170 (1) or (2), 7.04A.260, or 7.04A.280; (b) Unreasonably restrict the right under RCW 7.04A.090 to notice of the initiation of an arbitration proceeding; (c) Unreasonably restrict the right under RCW 7.04A.120 to disclosure of any facts by a neutral arbitrator; or (d) Waive the right under RCW 7.04A.160 of a party to an agreement to arbitrate to be represented by a lawyer at any proceeding or hearing under this chapter.
The words that state the rule
The Restatement position concerning severance of unconscionable provisions should also apply in cases where courts are confronted with substantively unconscionable *359 provisions in employment arbitration agreements. 14 Accord Helstrom v. N. Slope Borough, 797 P.2d 1192, 1200 (Alaska 1990); Faber v. Menard, Inc., 367 F.3d 1048, 1054 (8th Cir. 2004); Gannon v. Circuit City Stores, Inc., 262 F.3d 677, 682-83 (8th Cir. 2001); Spinetti v. Serv. Corp. Int’l, 324 F.3d 212, 221-22 (3d Cir. 2003); Parilla v. IAP Worldwide Servs. VI, Inc., 368 F.3d 269 , 288 (3d Cir. 2004). Application of this rule facilitates the accomplishment of important federal and state public policies favoring arbitration of disputes. See Gannon, 262 F.3d at 682 (noting that if courts declared an entire arbitration agreement invalid even if the agreement contained only one invalid provision, such a result would discourage parties from arbitrating their disputes). ¶44 Nonetheless, we acknowledge that in instances where an employer engages in an “insidious pattern” of seeking to tip the scales in its favor in employment disputes by inserting numerous unconscionable provisions in an arbitration agreement, courts may decline to sever the unconscionable provisions. Ingle, 328 F.3d at 1180 . In this case, however, Adler and Fred Lind Manor’s arbitration agreement contains just two substantively unconscionable provisions. The primary thrust of their agreement is the agreement to arbitrate. Consequently, we can sever the unconscionable attorney fees and limitations provisions *360 without disturbing the primary intent of the parties to arbitrate their disputes.
The words that state the rule
We reject Adler’s claims that the WLAD entitles him to a judicial forum, that Fred Lind Manor has waived its right to arbitrate this dispute, and/or that Fred Lind Manor should be equitably estopped from asserting arbitration. However, we conclude that the attorney fees and limitations provisions of the arbitration agreement are substantively unconscionable but sever these provisions from the agreement thus preserving the parties’ intent to arbitrate their disputes. We remand to the trial court for determination, consistent with this opinion, of Adler’s claims of procedural unconscionability, including whether Adler implicitly waived his right to a jury trial and the substantive conscionability of the fee-splitting provision.
- statuteRCW 7.04A.060enactment date not established
The words that state the rule
(4) If a party to a judicial proceeding challenges the existence of, or claims that a controversy is not subject to, an agreement to arbitrate, the arbitration proceeding may continue pending final resolution of the issue by the court, unless the court otherwise orders.
- statuteRCW 7.04A.070enactment date not established
The words that state the rule
(3) The court may not refuse to order arbitration because the claim subject to arbitration lacks merit or grounds for the claim have not been established.
- statuteRCW 7.04A.030enactment date not established
The words that state the rule
(3) This chapter does not apply to any arbitration governed by chapter 7.06 RCW. (4) This chapter does not apply to any arbitration agreement between employers and employees or between employers and associations of employees.
The words that state the rule
The aggrieved party must deliver to the other party a written notice of his/her/its intention to seek arbitration no later than 180 days after the event that first gives rise to the dispute. Otherwise his/her/its rights shall be irrevocably waived. The dispute shall be decided by one arbitrator selected by mutual agreement of the parties, or absent agreement, in accordance with the Rules. The arbitrator’s fee and other expenses of the arbitration process shall be shared equally. The parties shall bear their own respective costs and attorneys fees.
- statuteRCW 7.04A.040enactment date not established
The words that state the rule
(3) The parties to an agreement to arbitrate may not waive or vary the requirements of this section or RCW 7.04A.030 (1)(a) or (2), 7.04A.070, 7.04A.140, 7.04A.180, 7.04A.200 (3) or (4), 7.04A.220, 7.04A.230, 7.04A.240, 7.04A.250 (1) or (2), 7.04A.901, 7.04A.903, section 50, chapter 433, Laws of 2005, or section 51, chapter 433, Laws of 2005. [ 2005 c 433 s 4.]
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.