Court Acknowledges Right To Compel Arbitration Of Employment Disputes

Co-Written By Markham Ball

Facts

The US Supreme Court has held that arbitration agreements in employment

contracts are valid, even if state laws prohibit arbitration of the kinds of

employment disputes that are covered by the arbitration agreements (Circuit

City Stores, Inc v Adams, decided March 21 2001).

In the Circuit City Case, the employee, Saint Clair Adams, signed a

job application that included the following arbitration clause:

"I agree that I will settle any and all previously unasserted

claims, disputes or controversies arising out of or relating to my application

or candidacy for employment, employment and/or cessation of employment with

Circuit City, exclusively by final and binding arbitration

before a neutral arbitrator. By way of example only, such claims include

claims under federal, state and local statutory or common law, such as the Age

Discrimination in Employment Act, Title VII of the Civil Rights Act of

1964, the Americans with Disabilities Act, the law of contract and the law

of tort."

Adams filed an employment discrimination action against Circuit City in a

California state court under California state fair employment laws, asserting

violations of those laws and various tort claims. Circuit City then went to the

federal court seeking to enjoin the state court action. The Federal Court of

Appeals for the Ninth Circuit held that the Federal Arbitration Act did not

apply to most employment contracts, including Adams's. However, the US Supreme

Court reversed the decision. It stated that, under a 1984 decision of the court,

it was settled that Congress intended the Federal Arbitration Act "to apply

in state courts, and to pre-empt state anti-arbitration laws to the

contrary."

Although the attorneys general of 22 states had urged the court in amicus

briefs that state laws limiting the ability of employers and employees to enter

into arbitration agreements should not be held invalid, the court disagreed by a

five to four majority. Congress, it held, intended the Federal Arbitration Act

to apply to the employment agreements of all employees engaged in interstate

commerce except railroad workers and seamen, who are the subject of special

legislation.

"Arbitration agreements," said the court, "allow parties to

avoid the costs of litigation, a benefit that may be of particular importance in

employment litigation, which often involves smaller sums of money than disputes

concerning commercial contracts." Even more important...

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