ALASKA SUPREME COURT ADOPTS
"BRIGHT-LINE RULE" THAT SPARES
WORKERS SUBSTANTIAL ARBITRATION COSTS IN EMPLOYMENT ACTIONS
Court also strikes one-sided
provision as unreasonably favorable to employer
April 06, 2009
In a victory for workers
who seek to vindicate their rights under the Alaska Wage and
Hour Act (AWHA), the Alaska Supreme Court held Friday that employers
may not require their employees to arbitrate their wage and hour
claims unless the employer is willing to pay all of the costs
of arbitration. Public Justice was co-counsel for Larry Gibson,
the employee plaintiff in this appeal, along with Alaska civil
rights specialist Ken Legacki.
Public Justice urged the Court to adopt a "bright-line rule"
that would outlaw employers from
imposing mandatory pre-dispute binding arbitration clauses where
the employees would be required to pay significant arbitration
costs to bring claims under the AWHA. The Court agreed with
Public Justice that a "bright-line rule" is indeed
necessary in AWHA cases because "substantial forum costs
would run counter" to the AWHA's policies of deterring employers
from violating the act and encouraging employees to take action
to remedy violations.
"The Alaska Supreme Court's decision is an extremely important
victory for employees who argue that they were denied their rights
under basic wage and hour statutes," said Paul Bland, the
Public Justice staff attorney who argued the appeal in the Alaska
Supreme Court. "By recognizing a bright-line rule that employees
may not be required to pay substantial arbitration costs, the
Court ensures that employers will not be able to make it difficult
or impossible for employees to protect their fundamental legal
The plaintiff in this case, Larry Gibson, had filed suit to recover
over $100,000 dollars in unpaid overtime compensation that he
was owed under the AWHA. Gibson's former employer, Nye Frontier
Ford and Nye Frontier Lincoln Mercury (Nye), had argued that
Gibson was required to bring his case in arbitration, rather
than in court, where he would have to pay half of the arbitration
The Court found that the arbitration costs in this case could
"easily exceed $6,000," which was far above the $150
court filing fee that other workers would have to pay to assert
their rights under the AWHA.
The Court rejected the notion
that Mr. Gibson, and other workers like him who seek to bring
claims under the AWHA, would have to prove on a case-by-case
basis that they are unable to afford the costs of arbitration.
Instead, the Court held that any contract that required
a worker to pay substantial arbitration costs to bring a claim
under the AWHA violated the AWHA's policies, and was unenforceable
for that reason. The Court therefore concluded that "arbitration
may be required under the agreement only if the employer agrees
to pay the arbitration costs."
The Alaska Supreme Court's decision is significant for another
reason. In addition to ruling that employers may not require
their employees to pay substantial arbitration costs to vindicate
their rights, the Court also held that another provision of Nye's
arbitration clause, which permitted appellate review of only
those arbitration awards that exceeded $50,000, was unconscionable.
Public Justice argued - and the Alaska Supreme Court agreed -
that this $50,000 appellate review provision unreasonably favored
employers because workers with claims well over $50,000 might
receive either no award, or an award falling below the $50,000
threshold, and would be deprived of an appeal. By contrast,
in cases where the employer stands to lose $50,000 or more, the
employer would have the right of an appeal. The Court agreed
that the provision unreasonably benefited the employer, struck
this provision as unconscionable, and severed it from Nye's arbitration
"This decision is likely to have national significance,
because of the Court's thoughtful and well-reasoned approach,"
said Gibson's counsel, Kenneth W. Legacki of Anchorage, Alaska.
"For Alaska employees, this decision breaks new ground and
guarantees that if employers decide to require employees to submit
to arbitration, at least the employees will have a fair chance
on a level playing field."
The case will now return to court, unless Nye agrees to
pay all of the costs of arbitrating Gibson's case.
In addition to Bland and Legacki, Public Justice's Power-Cotchett
Fellow Tami Alpert did substantial work on the brief in the case.
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