Mandatory Arbitration of Wage and Hour Disputes Upheld But With Major Changes

Labor & Employment Advisor, Fall 2009

By: Judd H. Lees

The Washington Court of Appeals recently enforced mandatory arbitration of wage andhour disputes under an employment contract and granted the employer’s motion to stay litigationpending arbitration. However, the Court found two provisions “unconscionable” and severedthem from the agreement in Walters v. A.A.A. Waterproofing, Inc. The two provisions at issuerequired that: (1) the loser pay the winner’s attorneys’ fees and (2) the arbitration for theWashington employee take place in Denver, Colorado. With regard to the first requirement, theCourt noted that attorneys’ fees are only available to prevailing employees under state law (notprevailing employers) and that this contracted provision would therefore deter employees frompursuing their statutory wage and hour rights under the agreement. The second provision wasfound similarly unenforceable based on the costs associated with the out-of-state forum. TheCourt therefore severed both provisions but affirmed the judicial stay on the trial court actionpending arbitration.

The decision is good news for employers utilizing mandatory arbitration to resolveemployment disputes and also provides guidance regarding the nature of these mandatoryarbitration provisions. To the extent the arbitration provision presents hurdles to an employeewhich he or she does not face in pursuing statutory claims in court, Washington courts have nothesitated to nullify those provisions.