Court rules workers can be forced into arbitration

The Associated Press
Thursday March 22, 2001


WASHINGTON — Employers can force workers to take job-related disputes to arbitration rather than to court, the Supreme Court said Wednesday in a ruling with special significance for employees who are not union members. 

The court divided 5-4 to rule that employers can use a federal law to enforce the arbitration agreements many workers sign when they take jobs. 

The court’s conservative-led majority took a narrow view of a federal law from the early days of the labor era that makes commercial arbitration agreements enforceable in federal court. The majority said an exception to the law did not apply to the case of a gay former electronics salesman who claimed he was harassed at work. 

While employees can still try to challenge the arbitration agreements, the ruling strengthens employers’ hands while giving employees fewer options to claim they were treated unfairly. 

The decision will probably increase the popularity of binding arbitration among employers, said employment lawyer Laura Allen of the New York firm Brown & Wood. “It means employers can continue doing what they’ve been doing already, only more so,” she said. 

Business groups already champion the practice as a cheaper, simpler and fairer alternative to resolving cases in court. 

Arbitration typically involves an outsider playing a role akin to a judge, but without a lot of the expensive procedures and requirements of a court proceeding, and without the unpredictability of a jury. 

Circuit City Stores had asked a federal judge to rule that the 1925 Federal Arbitration Act required Saint Clair Adams to settle his discrimination claim by arbitration. 

Adams’ lawyer, Michael Rubin, predicted the court’s ruling in Circuit City’s favor will embolden other employers to do the same thing. 

The heart of Wednesday’s case is a portion of the 1925 law that makes an exception for “seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce.” 

Adams’ lawyers said the “commerce” part of the phrase applied to him, and a federal appeals court agreed. The 9th U.S. Circuit Court of Appeals said the arbitration enforcement law did not apply to employment or labor contracts at all. 

Circuit City contended that the exception from the arbitration enforcement law was limited to workers actually involved in moving goods from one state to another, and the Supreme Court agreed. 

Justice Anthony Kennedy, writing for the court majority, said the 9th Circuit interpretation is unworkable and would spawn more lawsuits.  

He was joined by Chief Justice William H. Rehnquist and Justices Antonin Scalia, Clarence Thomas and Sandra Day O’Connor. 

A broad exception would “call into doubt the efficacy of alternative dispute resolution procedures adopted by many of the nation’s employers, and in the process undermine” the Federal Arbitration Act, he wrote. 

Arbitration clauses in employment contracts typically apply to nonunion workers who sign them as a condition of employment. Critics of the practice say workers often don’t read the legal fine print and don’t realize what rights they are signing away. 

Use of arbitration in employment cases has risen in recent decades, and about 10 percent of American workers are now covered by binding arbitration. 

High technology, one of the fastest-growing areas of the work force in recent years, is overwhelmingly nonunion. Although it is not clear how many high tech workers have signed arbitration clauses, lawyers said the practice is common. 

Justice John Paul Stevens wrote a dissenting opinion that accused the majority of “playing ostrich” to the legislative and historical context of the arbitration law and its consequences. 

That history includes opposition to the arbitration law from organized labor, which feared it would force courts to enforce unfair labor contracts, Stevens wrote for himself and Justices Ruth Bader Ginsburg and Stephen J. Breyer. Justice David H. Souter filed a separate dissent. 

The majority decision Wednesday resurrects the reasons labor feared arbitration enforcement in 1925, Stevens wrote. 

On the Net: Supreme Court web site: http://www.supremeurtus.gov