[Copyrighted Material Omitted]
Kenneth W. Legacki, Kenneth W. Legacki, P.C., Anchorage, F. Paul Bland, Jr., Public Justice, P.C., Washington, D.C., for Petitioner.
Jeffrey A. Friedman, Friedman, Rubin & White, Anchorage, for Respondents.
Before : FABE, Chief Justice, MATTHEWS, EASTAUGH, CARPENETI, and WINFREE, Justices.
An employee was ordered by the superior court to arbitrate his Alaska Wage and Hour Act claim under an arbitration agreement that is governed by the Federal Arbitration Act. He contends that the arbitration agreement is unconscionable for three reasons: (1) it is subject to unilateral change by the employer; (2) it has a $50,000 appellate threshold that favors the employer; and (3) it requires the employee to pay arbitration costs that he would not have to pay if his claim were prosecuted in superior court. We conclude that (1) the agreement is not subject to unilateral change; (2) the $50,000 appellate threshold clause is unconscionable but severable from the agreement; and (3) arbitration costs may not be imposed on the employee. As a consequence of these conclusions, we hold that arbitration may be required under the agreement only if the employer agrees to pay the arbitration costs.
I. FACTS AND PROCEEDINGS
Larry Gibson filed suit against his former employers, Nye Frontier Ford, Inc., and Nye Frontier Lincoln Mercury, Inc. (collectively Nye), in the superior court seeking to recover unpaid overtime compensation and liquidated damages under the Alaska Wage and Hour Act (AWHA). Gibson alleged he was owed in excess of $100,000 in unpaid overtime compensation for work performed between 2005 and 2007. He sought compensatory damages plus an equal amount of liquidated damages, as well as costs and attorney's fees allowed under the AWHA.
Nye answered and interposed three affirmative defenses. Nye claimed that Gibson was exempt from the overtime provisions of the AWHA because he held an " executive, managerial, or administrative" position; that part of his claim was barred by the statute of limitations; and that his claim was subject to an arbitration agreement.
Nye moved to stay the superior court proceedings pending arbitration. Gibson opposed this motion, arguing in part that the arbitration agreement between the parties was not enforceable because it was unconscionable and would potentially require him to pay part of the arbitration costs, contrary to the policy of the AWHA. Nye responded that the arbitration agreement was not unconscionable and acknowledged that Gibson would likely be asked to pay one half of the arbitration costs, but argued that these would be relatively modest and that Gibson had not met his burden of showing that this requirement would preclude him from vindicating his rights under the AWHA. The superior court entered an order staying proceedings pending arbitration. From this order Gibson filed a petition for review. We granted review.
A. Contract Documents
The arbitration clause at issue is found on the final two pages of the forty-five page Nye employee handbook. We set forth the text of the last two pages, including the caption and attestation clause, numbering each paragraph for ease of reference:
Employee Acknowledgement and Agreement
This will acknowledge that I have received my copy of the NYE FRONTIER LINCOLN MERCURY [] Employee Handbook and that I will familiarize myself with its contents.
I understand that this Handbook represents the current policies, regulations, and benefits, and that except for employment
at-will status, any and all policies and practices can be changed at any time by the Dealership. The Dealership retains the right to add, change or delete wages, benefits, policies and all other working conditions at any time (except the policy of " at-will employment" which may not be changed, altered, revised or modified without a writing signed by the Owner of the Dealership).
I understand that nothing in the Employee Handbook creates or is intended to create a promise or representation of continued employment and that employment at Nye Frontier Lincoln Mercury is employment " At-Will" , that may be terminated at the will of the Dealership or myself. I understand that I have the right to terminate my employment at any time, with or without cause or notice and that the Dealership has a similar right. I further understand that my status as an " At-Will" employee may not be changed except in writing signed by the Owner of the Dealership. My signature below certifies that I understand the foregoing agreement and that " At-Will" status is the sole and entire agreement between the Dealership and myself concerning the duration of my employment and the circumstances under which my employment may be terminated. It supersedes all prior agreements, understandings and representations (whether written or oral) concerning my employment with the Dealership.
I agree that any claim, dispute, or controversy which would otherwise require or allow resort to any court or other governmental dispute resolution forum (including, but not limited to any and all claims of discrimination, harassment or any other complaint based on the employment relationship or the termination of same), between myself and the Dealership (or its owners, directors, and officers, employees, agents, and parties affiliated with its employee benefit and health plans) arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with, the Dealership, whether based on tort, contract, statutory, or equitable law, or otherwise, shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act, in conformity with applicable state laws, provided, however, that: In addition to requirements imposed by law, any arbitrator herein shall be a retired Alaska Superior Court Judge and shall be subject to disqualification on the same grounds as would apply to a judge of such court. It is the intent of this arbitration clause to provide for the inexpensive, speedy and just resolution of all such disputes. To this end, discovery shall be limited to the extent permissible.
Resolution of the dispute shall be based solely upon the law governing the claims and defenses pled, and the arbitrator may not invoke any basis other than such controlling law to decide the dispute. As reasonably required to allow full use and benefit of this agreement's modifications to the Act's procedures, the arbitrator may extend the times set by the Act for the giving of notices and setting of hearings. Awards exceeding $50,000.00 shall include the arbitrator's written reasoned opinion and, at either party's written request within 10 days after issuance of the award, shall be subject to reversal and remand, modification, or reduction following review of the record and arguments of the parties by a second arbitrator who shall, as far as practicable, proceed according to the law and procedures applicable to ...