The Washington State Supreme Court recently ruled in Broom v. Morgan Stanley DW Inc. that the statute of limitations, which limits the time within which a party may initiate a dispute, does not apply to agreements governed by the Washington Arbitration Act, in which the parties have agreed to arbitrate disputes unless the parties have expressly agreed that the statute of limitations applies. Since the Washington Arbitration Act does not apply to employment agreements or collective bargaining agreements, this ruling does not directly affect the interpretation of employment related arbitration clauses, but the ruling creates some uncertainty regarding whether the court may apply similar reasoning to individual employment agreements. This ruling will affect most other agreements that contain arbitration clauses.
This ruling by the court was unexpected, and contrary to the manner in which parties in Washington have typically drafted arbitration provisions. The result is that disputes related to agreements with arbitration clauses executed before this recent Supreme Court option may now be brought at any time, and will not be barred by the passage of time.
In most cases it will be mutually advantageous to amend the arbitration clause, since most businesses do not want an open ended exposure to claims. And, while the recent case does not directly cover employment and collective bargaining agreements, the cautious approach is to review all arbitration provisions within all contracts, including employment contracts and consider the addition of statute of limitation language.
For assistance in reviewing your contracts or drafting an amendment to your arbitration clause please contact Doug Albright.