Chapter 5 - § 5.5 • REMEDIES FOR ILLEGAL OR VOID PROVISIONS

• Jurisdiction: Colorado

§ 5.5 • REMEDIES FOR ILLEGAL OR VOID PROVISIONS

See also § 7.11.1.

If a provision in the arbitration agreement is found to be unconscionable or otherwise invalid, what is the remedy? Does it make the agreement to arbitrate unenforceable or only that particular clause? The answer may depend upon whether there is a severability clause and how many void provisions there are.

In Booker v. Robert Half International, Inc.,⁷³ Judge Roberts (now Chief Justice Roberts) examined the following question:

[W]hat should a court do when confronted with a statutory claim and an arbitration agreement that is unenforceable as written, because it contains a provision purporting to limit such rights: decline to enforce the agreement and allow the statutory claims to proceed in court, or sever the offensive provision and require arbitration under the remainder of the agreement?⁷⁴

The claim alleged racial discrimination and wrongful constructive discharge. The arbitration clause was unenforceable as written because it precluded an award of punitive damages, which were available under the District of Columbia statute. The agreement also contained a severability clause.

Booker's first argument was that the waiver provision prohibited any change in the agreement except by a written agreement of the parties. The court, however, found the waiver and severability clauses compatible. Severability was a contingency contemplated by the parties, not a modification of the contract subject to the waiver clause.

Booker's second argument focused on the employment context in which this issue arises:

[Appellant urges that] responding to illegal provisions in arbitration agreements by judicially pruning them out leaves employers with every incentive to "overreach" when drafting such agreements. Ifjudges merely sever illegal provisions and compel arbitration, employers would be no worse off for trying to include illegal provisions than if they had followed the law in drafting their agreements in the first place. On the other hand, because not every claimant will challenge the illegal provisions, some employees will go to the arbitral table without all their statutory rights.⁷⁵

The court answered this "why not overreach" argument, by saying, "[T]he more the employer overreaches, the less likely a court will be able to sever the provisions and enforce the [arbitration] clause."⁷⁶ In this case, there was but one discrete illegal provision, which could easily be severed without undermining the...