Hill v. Garda CL Northwest, Inc.
308 P.3d 635
Wash.2013Background
- Garda CL Northwest Inc. required employees at its Washington facilities to sign a company-drafted "labor agreement" negotiated with employee associations that lacked funds and bargaining power.
- The agreements included a grievance/arbitration clause with (a) a 14-day limitations period to pursue claims, (b) caps limiting back-pay recovery to 2 or 4 months, and (c) a fee-splitting requirement for arbitration costs.
- Employees (Hill, Wise, Miller) sued Garda in King County for violations of the Washington Industrial Welfare Act and Minimum Wage Act, alleging meal/rest-break and wage claims, and sought class certification.
- Trial court certified a 306-member class and ordered the class to arbitrate; Garda appealed the class-arbitration ruling and sought individual arbitration.
- The Court of Appeals compelled arbitration but required individual arbitration and did not decide unconscionability; the Washington Supreme Court granted review and addressed whether the arbitration clause is unconscionable.
Issues
| Issue | Plaintiffs' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of arbitration clause (unconscionability) | Clause is substantively unconscionable due to 14-day filing limit, 2/4-month back-pay caps, and fee-splitting that makes arbitration inaccessible | FAA/Concepcion preempts state unconscionability doctrine limiting arbitration terms; clause should be enforced | Clause is substantively unconscionable and therefore unenforceable; reversed Court of Appeals |
| 14-day limitations period | Unreasonably short compared to statutory 3-year limitations; effectively bars claims | Bargain between parties should be enforced | 14-day period is substantively unconscionable and invalid |
| Back-pay caps (2/4 months) | One-sidedly reduces statutory remedies and favors employer | Caps are contract terms; Concepcion limits state interference | Caps are substantively unconscionable because they unfairly curtail statutory remedies |
| Fee-splitting for arbitration costs | Makes forum inaccessible given unions and employees lack funds; deters claims | Fee-sharing is less harsh than all-fees loser-pay rules; Concepcion preempts | Fee-splitting, given presented evidence of prohibitive cost and lack of union funds, is unconscionable |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (U.S. 2011) (preempts state rules that generally prohibit class-action waivers and broadly favors enforcement of arbitration agreements)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (U.S. 2010) (addresses limits on arbitrators imposing class arbitration absent contractual basis)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (courts decide "gateway" questions of arbitrability unless parties clearly commit them to arbitrators)
- Zuver v. Airtouch Commc’ns, Inc., 153 Wn.2d 293 (Wash. 2004) (Washington recognizes unconscionability as judicial gateway to refuse arbitration; examines unfair terms in employment arbitration)
- Gandee v. LDL Freedom Enters., Inc., 176 Wn.2d 598 (Wash. 2013) (invalidated arbitration clause whose unconscionable terms pervaded the agreement; guides severability analysis)
- Adler v. Fred Lind Manor, 153 Wn.2d 331 (Wash. 2004) (struck contract shortening statutes of limitation and addressing fee-splitting concerns)
- Stein v. Geonerco, Inc., 105 Wn. App. 41 (Wash. Ct. App. 2001) (addresses appealability and practical considerations when courts compel arbitration)