Will a Washington court apply the other state's law our contract picks?
Generally yes. "We generally enforce contract choice of law provisions with certain exceptions", and "We will enforce a choice of law provision unless all three of these conditions are met" (McKee v. AT&T Corp.): without the provision Washington law would apply; the chosen state's law violates a fundamental public policy of Washington; and Washington's interest in the determination of the issue materially outweighs the chosen state's interest. Whether Washington law would apply without the provision is itself decided by the Restatement's "most significant relationship" test, weighing "the place of contracting, (b) the *385 place of negotiation of the contract, (c) the place of performance of the contract, (d) the location of the subject matter of the contract, and (e) the domicile, residence, or place of incorporation of the parties" (McKee, applying Restatement (Second) of Conflict of Laws § 188). Two statutes take the choice away. One voids the provision outright, the other fixes Washington law as the governing law: a provision in a noncompetition covenant signed by a Washington-based employee or independent contractor is void and unenforceable if it allows or requires the application of choice-of-law principles or the substantive law of any other jurisdiction (RCW 49.62.050(3)), and a nondisclosure or nondisparagement provision in any agreement signed by an employee who is a Washington resident is governed by Washington law (RCW 49.44.211(9)).
The trap
The three-part exception is conjunctive, which is why most commercial clauses survive; but McKee applied it to hold a New York choice-of-law clause in a consumer services agreement unenforceable, because New York law, "which allows waiver of class-based relief, conflicts with our state’s fundamental public policy to protect consumers through the availability of class action". McKee's result: the trial court had found AT&T's whole dispute-resolution provision unconscionable and denied its motion to compel arbitration, and the Supreme Court struck the whole dispute-resolution section as unconscionable but held "the balance of the agreement is enforceable", affirming the trial court "in all respects unless otherwise noted" and remanding. For employment covenants, no balancing is done at all: the two statutes above take the choice away. What RCW 49.44.211 voids is narrow, and the rest of the section says so. Subsection (1) reaches a provision "not to disclose or discuss conduct, or the existence of a settlement involving conduct, that the employee reasonably believed under Washington state, federal, or common law to be illegal discrimination, illegal harassment, illegal retaliation, a wage and hour violation, or sexual assault, or that is recognized as against a clear mandate of public policy". Subsection (6) leaves confidentiality alone: “This section does not prohibit an employer and an employee from protecting trade secrets, proprietary information, or confidential information that does not involve illegal acts.” So a nondisclosure covering trade secrets, proprietary or confidential information is not what this statute voids, provided it does not reach illegal acts.
13 authorities
The words that state the rule
We generally enforce contract choice of law provisions with certain exceptions. Erwin, 161 Wn.2d at 695-96 . We disregard the contract provision and apply Washington law if, without the provision, Washington law would apply; if the chosen state’s law violates a fundamental public policy of Washington; and if Washington’s interest in the determination of the issue materially outweighs the chosen state’s interest. Id. at 694-95 (citing O’Brien v. Shearson Hayden Stone, Inc., 90 Wn.2d 680, 685 , 586 P.2d 830 (1978) and quoting Restatement (Second) of Conflict of Laws § 187 (1971)). We will enforce a choice of law provision unless all three of these conditions are met.
The words that state the rule
Each of these conditions is met in this case. First, if there were no choice of law provision, Washington law would be applied to this consumer contract performed in Washington. Washington applies the “most significant relationship” test from the Restatement, supra, § 188. Mulcahy v. Farmers Ins. Co. of Wash., 152 Wn.2d 92, 100 , 95 P.3d 313 (2004). Courts weigh the relative importance to the particular issue of (a) the place of contracting, (b) the *385 place of negotiation of the contract, (c) the place of performance of the contract, (d) the location of the subject matter of the contract, and (e) the domicile, residence, or place of incorporation of the parties. Id. (citing Restatement, supra, § 188). Here, Washington is the place of contracting, the place of negotiation (what little there was), the place of performance, the location of the subject matter, and the residence of one of the parties. New York’s only tie to this litigation is that it is the state of incorporation of AT&T. We therefore conclude that, absent a choice of law clause, Washington law would apply to this dispute.
The words that state the rule
Second, New York law, which allows waiver of class-based relief, conflicts with our state’s fundamental public policy to protect consumers through the availability of class action. See Scott v. Cingular Wireless, 160 Wn.2d 843, 854 , 161 P.3d 1000 (2007); 7 Dix, 160 Wn.2d at 829 . Protecting parties in a position of weaker bargaining power from exploitation is among the types of fundamental public policy contemplated by Restatement, supra, § 187(2)(b) cmt. g.
- statuteRCW 49.62.050enactment date not established
The words that state the rule
A provision in a noncompetition covenant signed by an employee or independent contractor who is Washington-based is void and unenforceable: (1) If the covenant requires the employee or independent contractor to adjudicate a noncompetition covenant outside of this state; (2) To the extent it deprives the employee or independent contractor of the protections or benefits of this chapter; or (3) If it allows or requires the application of choice of law principles or the substantive law of any jurisdiction other than Washington state.
- statuteRCW 49.44.211enactment date not established
The words that state the rule
(1) A provision in an agreement by an employer and an employee not to disclose or discuss conduct, or the existence of a settlement involving conduct, that the employee reasonably believed under Washington state, federal, or common law to be illegal discrimination, illegal harassment, illegal retaliation, a wage and hour violation, or sexual assault, or that is recognized as against a clear mandate of public policy, is void and unenforceable. Prohibited nondisclosure and nondisparagement provisions in agreements concern conduct that occurs at the workplace, at work-related events coordinated by or through the employer, between employees, or between an employer and an employee, whether on or off the employment premises. Prohibited nondisclosure and nondisparagement provisions include those contained in employment agreements, independent contractor agreements, agreements to pay compensation in exchange for the release of a legal claim, or any other agreement between an employer and an employee. (2) This section does not prohibit the enforcement of a provision in any agreement that prohibits the disclosure of the amount paid in settlement of a claim.
- statuteRCW 49.44.211enactment date not established
The words that state the rule
(9) A nondisclosure or nondisparagement provision in any agreement signed by an employee who is a Washington resident is governed by Washington law. (10) The provisions of this section are to be liberally construed to fulfill its remedial purpose. (11) As an exercise of the state's police powers and for remedial purposes, this section is retroactive from June 9, 2022, only to invalidate nondisclosure or nondisparagement provisions in agreements created before June 9, 2022, and which were agreed to at the outset of employment or during the course of employment. This subsection allows the recovery of damages only to prevent the enforcement of those provisions. This subsection does not apply to a nondisclosure or nondisparagement provision contained in an agreement to settle a legal claim.
- statuteRCW 49.44.211enactment date not established
The words that state the rule
(6) This section does not prohibit an employer and an employee from protecting trade secrets, proprietary information, or confidential information that does not involve illegal acts.
The words that state the rule
Accordingly, we hold that Washington’s strong Consumer Protection Act policy favoring class adjudication of small-dollar claims is a “fundamental policy” contemplated by the Restatement, supra, § 187(2)(b).
The words that state the rule
When the Chelan County Superior Court found the dispute resolution provision of AT&T’s “Consumer Services Agreement” unconscionable and denied its motion to compel arbitration, AT&T appealed. The Court of Appeals, Division Three, certified the case to this court. We affirm the trial court and remand for further proceedings.
The words that state the rule
Finally, Washington’s interest in protecting large classes of its consumers materially outweighs New York’s limited interest in this matter. See Erwin, 161 Wn.2d at 695 . Thus, the New York choice of law provision in AT&T’s Consumer Services Agreement is unenforceable and Washington law will be applied.
- statuteRCW 49.44.211enactment date not established
The words that state the rule
(7) An employer who violates this section after June 9, 2022, is liable in a civil cause of action for actual or statutory damages of $10,000, whichever is more, as well as reasonable attorneys' fees and costs. (8) For the purposes of this section, "employee" means a current, former, or prospective employee or independent contractor.
The words that state the rule
We find that having excised the dispute resolution provision as unconscionable, the balance of the agreement stands on its own. We hold that the balance of the agreement is enforceable subject to this opinion.
The words that state the rule
The dispute resolution section is sever-able from the balance of the contract. We affirm the trial court in all respects unless otherwise noted and remand for further proceedings consistent with this opinion.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.