## Facts

- Gerald Adler, an immigrant from Poland, was hired by Fred Lind Manor in 1992 as a maintenance employee and later held supervisory roles.
- In 1995, after a management change, Fred Lind required employees, as a condition of continued employment, to sign an agreement requiring arbitration of employment-related disputes.
- In 2001 Adler sustained work injuries and was placed on light duty by his physician; he later suffered additional injuries.
- In 2002 Fred Lind terminated Adler, asserting he could no longer perform his job.
- Adler pursued administrative discrimination charges and then filed suit under the Washington Law Against Discrimination (WLAD), alleging disability discrimination and wrongful discharge.
- Fred Lind moved to compel arbitration and stay the court action based on the arbitration agreement.
- The agreement included (among other terms) a 180-day limitations period, an attorney-fee provision limiting fee recovery otherwise available under WLAD, and a fee-splitting provision requiring the employee to pay part of arbitration costs.

## Issues

1. Whether enforcing a predispute employment arbitration agreement for WLAD discrimination claims impermissibly deprives an employee of a jury trial or a judicial forum.
2. Whether the agreement was procedurally unconscionable based on how it was imposed and agreed to.
3. Whether specific provisions were substantively unconscionable, including the 180-day limitations period, the attorney-fee provision, and the fee-splitting term.
4. Whether any unconscionable provisions could be severed while enforcing the remaining agreement.
5. Whether the employer waived arbitration or was equitably estopped from invoking it.

## Decision

- The Washington Supreme Court held that WLAD claims may be subject to predispute arbitration agreements if arbitration does not eliminate substantive statutory rights.
- The court held the agreement’s 180-day limitations clause and attorney-fee provision were substantively unconscionable because they unreasonably favored the employer and impaired WLAD remedial rights.
- The court ordered those unconscionable provisions severed rather than invalidating the entire arbitration agreement.
- The court remanded for factual development and findings on procedural unconscionability, the fee-splitting provision (including whether costs would impede access to the forum), and whether any jury-trial waiver was knowing and voluntary.
- The court rejected, on the existing record, Adler’s claims that the employer clearly waived arbitration or should be estopped from seeking to compel it.

## Legal Principles

- Statutory employment-discrimination claims are arbitrable when arbitration preserves the claimant’s substantive statutory rights and remedies.
- A contractual waiver of the right to a jury trial must be knowing, voluntary, and intelligent; an undeveloped record may require remand.
- Substantive unconscionability focuses on overly harsh, one-sided terms; procedural unconscionability focuses on the circumstances of assent, including oppression and surprise.
- Contract terms that shorten statutory limitations periods or restrict statutory attorney-fee remedies in a one-sided manner may be substantively unconscionable.
- Cost-allocation provisions in arbitration agreements require a fact-based inquiry into likely fees and the claimant’s ability to pay when they may impede effective pursuit of statutory rights.
- When unlawful provisions are severable and the parties’ overall intent to arbitrate can still be effectuated, courts may sever offending terms and enforce the remainder.

## Conclusion

The court enforced arbitration for WLAD claims in principle but struck employer-favoring provisions that curtailed statutory time limits and attorney-fee remedies, severed those terms, and remanded for factual findings on procedural fairness, fee-splitting, and whether any jury-trial waiver was valid.


Adler v. Fred Lind Manor, 103 P.3d 773 (Wash. 2004)