Granting a motion to compel arbitration of an employment dispute but severing an unconscionable provision allowing the employer to select the arbitrator, a Pennsylvania federal court ordered the parties to arbitrate, as the arbitration agreement's primary purpose was to resolve disputes, not to determine procedures for selecting an arbitrator.

In Roberts v. Time Plus Payroll Services, Inc., No. CIV.A. 07-4101, 2008 WL 376288 (E.D. Pa. Feb. 7, 2008), Roberts worked for Payroll Data Systems for over twenty years. On August 31, 2005, Time Plus acquired Payroll Data Systems. Roberts remained employed as a sales manager and vice-president. On September 1, 2005, Time Plus demoted Roberts to an hourly position until it terminated his employment on September 30, 2005.

Time Plus permitted younger employees to remain at Time Plus with the same salary and benefits as they had with Payroll Data Systems. Consequently, Roberts sued Time Plus for age discrimination under state and federal age discrimination statutes. Time Plus moved to compel arbitration pursuant to an arbitration agreement Roberts had signed on September 5, 2005. Roberts opposed the motion, arguing the arbitration agreement was unconscionable because it gave Time Plus sole discretion to select an arbitrator.

The Court ordered the parties to arbitrate their dispute but severed the portion of the agreement that only provided Time Plus with a right to select an arbitrator. Under Pennsylvania law, a party asserting unconscionability must show that a contract is both procedurally and substantively unconscionable. The Court found the agreement was procedurally unconscionable because Roberts had no choice but to sign the agreement on a take it or leave it basis shortly after Time Plus had demoted him.

The Court also found the provision allowing Time Plus, at its sole discretion, to choose the arbitrator substantively unconscionable. However, the Court chose to sever the unconscionable provision from the arbitration agreement, as the arbitration agreement expressly stated, "If any portion of this agreement is found unenforceable, that portion shall fail while the remainder of this agreement continues in full force and effect."

Pennsylvania law allows a party to enforce a legal contract containing an illegal provision provided the illegal provision is not the contract's primary purpose or essential component thereof. Here, the primary purpose of the arbitration agreement was to resolve employment related disputes, not to manage the selection of arbitrators. Based on the strong federal policy favoring arbitration, the Court granted Time Plus' motion to compel arbitration but modified the arbitration agreement to allow the parties a mutual right to participate in arbitrator selection.