## Facts

- Airtouch Communications, Inc. hired Therese R. Zuver as a sales support representative in 1997.
- As a condition of employment, Zuver signed a predispute agreement requiring arbitration of broadly defined employment-related claims.
- The agreement included a confidentiality requirement for arbitration proceedings and awards.
- The agreement required the employee to waive punitive or exemplary damages for common-law claims, without imposing the same restriction on the employer.
- The agreement included fee-splitting and a prevailing-party attorneys’ fees provision, and contained a severability clause.
- After serious medical problems and an extended medical leave, Airtouch terminated Zuver’s employment.
- Zuver sued in Washington superior court alleging disability discrimination under Washington law.
- Airtouch moved to compel arbitration and stay the lawsuit; the trial court granted the motion.

## Issues

1. Whether the arbitration agreement was procedurally unconscionable based on the circumstances of its presentation and formation.
2. Whether the confidentiality provision was substantively unconscionable.
3. Whether the limitation-of-remedies provision, including the employee-only punitive-damages waiver, was substantively unconscionable.
4. If certain provisions were unconscionable, whether they should be severed and the remainder of the arbitration agreement enforced.

## Decision

- The Washington Supreme Court held the agreement was not procedurally unconscionable.
- The court held the confidentiality provision was substantively unconscionable.
- The court held the limitation-of-remedies provision, including the unilateral punitive-damages waiver, was substantively unconscionable.
- Applying the severability clause, the court severed the unconscionable provisions and enforced the remainder of the agreement.
- Arbitration was compelled, but without the severed confidentiality and remedies-limitation terms.

## Legal Principles

- Under the FAA, arbitration agreements are generally enforceable, but may be invalidated by generally applicable contract defenses, including unconscionability.
- Washington recognizes procedural unconscionability (unfairness in contract formation) and substantive unconscionability (overly one-sided terms); either may render a clause unenforceable.
- A confidentiality requirement in an employment arbitration agreement may be substantively unconscionable when it disproportionately benefits the employer by hindering employees’ ability to establish patterns of discrimination or wrongdoing.
- A unilateral limitation on employee remedies, such as an employee-only punitive-damages waiver, may be substantively unconscionable for lack of mutuality and for skewing the dispute-resolution process.
- When unconscionable provisions are discrete and the parties included a severability clause, a court may sever the offending terms and enforce the remainder of the arbitration agreement.

## Conclusion

The court enforced the parties’ agreement to arbitrate employment disputes but struck as substantively unconscionable the confidentiality requirement and the employee-only punitive-damages waiver, severing those provisions and compelling arbitration under the remaining terms.


Zuver v. Airtouch Commc’ns, Inc., 153 Wn. 2d 293, 103 P.3d 753 (Wash. 2004) (en banc)