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January 17, 2005

Arbitration agreement unconscionable under Washington law

Courts continue to police individual arbitration agreements to see whether they are unconscionable. Unconscionability is a question of state law, not federal law. Although a huge amount of state law is preempted by the Federal Arbitration Act (FAA), general state rules on unconscionability are not preempted.

Case in point: Al-Safin v. Circuit City Stores (9th Cir 01/14/2005) [Text pdf]. When Al-Safin applied to work at Circuit City, he signed an arbitration agreement. He later sued Circuit City, asserting state and federal discrimination claims, and the employer moved to compel arbitration. The trial court and the 9th Circuit (2-1) concluded that the arbitration agreement was unenforceable because it was unconscionable under Washington state law.

There were seven provisions that the 9th Circuit previously had held unconscionable under California law. The court concluded that they were also unconscionable under Washington law. (1) forcing employees to arbitrate claims against Circuit City, but not requiring Circuit City to arbitrate claims against employees; (2) limiting remedies; (3) splitting costs and fees; (4) imposing a one-year statute of limitations; (5) prohibiting class actions; (6) regarding the filing fee and waiver of the fee; and (7) giving Circuit City the unilateral right to terminate or modify the agreement.

We may see different results in different states, especially if we take each of the seven items one-at-a-time. However, employers take notice. If you really want the advantages of arbitration (the main one being staying out of court), then draft your arbitration agreement with care.

Posted January 17, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.

January 15, 2005

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Posted January 15, 2005 by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.

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