June 1999
By Raymond L. Hogge, Jr., Esq.
Payne, Gates, Farthing & Radd, P.C.
Attorneys and Counsellors at Law
Dominion Tower, Fifteenth Floor
999 Waterside Drive
Norfolk, Virginia 23510-3309
(757) 640-1500
CONTENTS
1. AUTHOR'S BIOGRAPHY
2. INTRODUCTION
3. ALEXANDER V. GARDNER-DENVER CO.
4. GILMER V INTERSTATE / JOHNSON LANE CORP.
5. DEVELOPMENTS AFTER GILMER
a. The Civil Rights Act of 1991
b. Austin v. Owens- Brockway Glass Container, Inc.
6. WRIGHT V. UNIVERSAL MARITIME SERVICE CORP.
a. Facts
b. Deciding Not to Decide the Big Question
c. Arbitrability of Statutory Claims Will Not Be
Presumed
d. Express, Clear and Unmistakable
e. Application of Wright to Claims Under Other
Statutes
f. Arbitration of Statutory Claims of Non-Union
Employees
7. DUFFIELD V. ROBERTSON STEPHENS & CO.
8. ARBITRATION OF INDIVIDUAL STATUTORY EMPLOYMENT DISCRIMINATION
CLAIMS IN THE FOURTH CIRCUIT
a. O'Neil v. Hilton Head Hospital
b. Johnson v. Circuit City Stores, Inc.
9. ELSEWHERE, AFTER WRIGHT
10. TIPS FOR MAKING ARBITRATION ENFORCEABLE
*****
Raymond L. Hogge, Jr. practices labor and employment law with the law firm of Payne, Gates, Farthing & Radd, P.C., in Norfolk, Virginia. He advises corporate and municipal employers, and represents them in administrative proceedings and litigation in federal, state and local agencies and courts. He publishes a complementary monthly newsletter, Virginia Labor and Employment Law News, which is available by fax or by mail by calling (757) 640-1500, and is the author of Virginia Labor and Employment Law News Online, which can be accessed at http://hometown.aol.com/rayhogge/vleln.htm.
Mr. Hogge is the Chairman of the Employment Law Section of the Virginia Association of Defense Attorneys, is the Chairman of the Norfolk and Portsmouth Bar Association's Continuing Legal Education Committee, serves on the Legislative Committee of the Hampton Roads Society for Human Resource Management, serves on the Political Action Committee of the Hampton Roads Utility and Heavy Contractors' Association, serves on the Board of Directors of the Hampton Roads Chapter of the National Multiple Sclerosis Society, and is a member of the Peninsula Personnel Association, the Labor Relations and Employment Law Section of the Virginia Bar Association, the Labor and Employment Law Section of the American Bar Association, the Section of Labor Law and Labor Relations of the Federal Bar Association, and the Employment Law Committee of the Defense Research Institute. He graduated from the College of William and Mary with a B.A. degree in government and economics, received his law degree from the University of Richmond where he served as the Lead Articles Editor of The University of Richmond Law Review, and served as a judicial clerk at the federal court in Norfolk, Virginia.
Mr. Hogge writes and speaks frequently on labor and employment law issues, and has authored or co-authored works including "Wrongful Discharge in Virginia - Is there Life After Doss?" (V.A.D.A. Journal of Civil Litigation, 1998), "Employment and Labor Law in Virginia" (Lorman Education Services, 1996, 1997), "Virginia Labor and Employment Law" (National Business Institute, 1993, 1994, 1995), "Wrongful Discharge in Virginia" (Virginia State Bar Litigation News, Spring 1996), "A Guide for Virginia Employers to the Family and Medical Leave Act of 1993" (1994), and "Employment and Architectural Provisions of the Americans with Disabilities Act of 1990" (Norfolk-Portsmouth Bar Association, 1992).
Arbitration has long been recognized under federal law. It is recognized, for example, in the National Labor Relations Act, which applies to disputes between employers and their union employees. It is recognized more generally in the Federal Arbitration Act, 9 U.S.C. Section 1 et seq., provides (in part):
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. (9 U.S.S. Section 901.)
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. (9 U.S.S. Section 902.)
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration. (9 U.S.S. Section 903.)
Thus, the FAA can be made applicable to most disputes through a written agreement. There are, however, certain exceptions to this general rule. Some of these are set forth in the express language of the FAA. Others are created by the courts. For example, the Fourth Circuit holds that the Federal Arbitration Act is not applicable to labor disputes arising from collective bargaining agreements. Domino Sugar Corp. v. Sugar Workers Local Union 392, 10 F.3d 1064 (4th Cir. 1993); Austin v. Owens-Brockway Glass Container, Inc., 70 F.E.P. Cases 272 (4th Cir. 1996).
Virginia law also recognizes arbitration. The Virginia Uniform Arbitration Act, Va. Code Section 8.01-577 et seq., provides (in part):
Persons desiring to end any controversy, whether there is a suit pending therefor or not, may submit the same to arbitration, and agree that such submission may be entered of record in any court. Upon proof of such agreement out of court, or by consent of the parties given in court in person or by counsel, it shall be entered in the proceedings of such court. Thereupon a rule shall be made, that the parties shall submit to the award which shall be made in accordance with such agreement and the provisions of this chapter. Neither party shall have the right to revoke an agreement to arbitrate except on a ground which would be good for revoking or annulling other agreements. Submission of any claim or controversy to arbitration pursuant to such agreement shall be a condition precedent to institution of suit or action thereon, and the agreement to arbitrate shall be enforceable, unless the agreement also provides that submission to arbitration shall not be a condition precedent to suit or action.
A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, except upon such grounds as exist at law or in equity for the revocation of any contract. This article also applies to arbitration agreements between employers and employees or between their respective representatives unless otherwise provided in the agreement; provided, however, that nothing in this chapter shall be construed to create any right to arbitration with respect to any controversy regarding the employment or terms and conditions of employment of any officer or employee of the Commonwealth.
There has been little controversy with respect to the ability of parties to voluntarily agree to resolve a dispute through arbitration, after the dispute has arisen. But under what circumstances can parties agree in advance to resolve their disputes through arbitration rather than in court? Can an employer require an employee, as a condition of employment, to enter into such an agreement? Even with respect to claims under federal statutes which arguably confer upon employees the right to a jury trial? These are the questions which the courts have found difficult to resolve, and which have become increasingly important with the explosion of civil litigation involving employment claims and the steady increase in the size of verdicts awarded by juries to disgruntled employees and applicants.
3. ALEXANDER V. GARDNER-DENVER CO.
The United States Supreme Court first addressed the arbitration of statutory employment claims in Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974). In Alexander, Mr. Harrell Alexander was a union (United Steelworkers of America) member who worked for Gardner-Denver as a maintenance worker, and who was fired for poor job performance. Alexander, who was black, instituted a grievance under the collective bargaining agreement, which contained a clause prohibiting discrimination on the basis of race stating "there shall be no discrimination against any employee on account of race, color, religion, sex, national origin, or ancestry," and which contained an arbitration clause which covered "differences aris[ing] between the Company and the Union as to the meaning and application of the provisions of this Agreement" and "any trouble arising in the plant." The arbitrator found Alexander was discharged for cause, and made no finding with respect to race discrimination.
While his claims under the collective bargaining agreement were pending, Alexander filed a charge of discrimination with the state civil rights agency, which referred it to the EEOC. The EEOC rejected his race discrimination claim, and issued a right to sue letter. Alexander then filed a lawsuit under Title VII. The trial court and the Court of Appeals ruled against Alexander, accepting the employer's argument that Alexander was bound by the arbitration clause because he had elected to pursue his discrimination claims under the collective bargaining agreement. On appeal, however, the United States Supreme Court rejected a number of arguments asserted by the company, and held that Alexander was entitled to litigate his Title VII claims in court.
The Court first held that the "election of remedies" doctrine did not apply. The Court reasoned that, while the race discrimination claims covered by the collective bargaining agreement involved contractual rights to be free from race discrimination, Title VII created statutory rights which were independent of the collective bargaining agreement.
Second, the Court found that Alexander did not waive his right to assert his claims under Title VII in court by entering into the collective bargaining agreement, because "it is clear that there can be no prospective waiver of an employee's rights under Title VII."
Third, the Court ruled that Alexander did not waive his rights under Title VII by submitting his grievance to arbitration. The Court stated that, "although presumably an employee may waive his cause of action under Title VII as part of a voluntary settlement, mere resort to the arbitral forum to enforce contractual rights constitutes no such waiver."
Fourth, the Court rejected the company's argument that a court should defer to the decision of the arbitrator because the race discrimination claim was before the arbitrator, the collective bargaining agreement prohibited the form of discrimination charged in the suit under Title VII, and the arbitrator had authority to rule on the claim and to fashion a remedy. According to the Court, "arbitral procedures, while well suited to the resolution of contractual disputes, make arbitration a comparatively inappropriate forum for the final resolution of rights created by Title VII."
The Alexander case caused considerable doubt as to whether employees asserting statutory claims under Title VII and similar laws could be required to arbitrate those claims. See, e.g., Rosenfeld v. Department of Army, 769 F.2d 237 (4th Cir. 1987). In the later case of Gilmer v Interstate / Johnson Lane Corp. (discussed below), however, the Supreme Court seemed to be much more ready to enforce arbitration of such claims.
4. GILMER V INTERSTATE / JOHNSON LANE CORP.
In Gilmer v Interstate / Johnson Lane Corp., 500 U.S. 20 (1991), the employer, Interstate / Johnson Lane Corporation, hired Robert Gilmer as Manager of Financial Services. To perform his job, he was required to register with several stock exchanges, including the New York Stock Exchange. His registration application, entitled "Uniform Application for Securities Industry Registration or Transfer," provided, among other things, that he "agreed to arbitrate any dispute, claim or controversy" arising between him and Interstate "that is required to be arbitrated under the rules, constitutions or by-laws of the organizations with which I register." NYSE Rule 347 provides for arbitration of "any controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative." Interstate terminated Gilmer at age 62, Gilmer brought suit under the Age Discrimination in Employment Act, and Interstate sought to compel arbitration. Gilmer argued that compelling him to arbitrate his ADEA claims pursuant to an arbitration agreement was inconsistent with the statutory framework and purposes of the ADEA, for a number of reasons.
First, Gilmer argued that compulsory arbitration was improper because it deprived him of the judicial forum provided for by the ADEA. The Court rejected that argument, reasoning that "if Congress intended the substantive protection afforded by the ADEA to include protection against waiver of the right to a judicial forum, that intention will be deducible from text or legislative history." Moreover, the Court noted, "Gilmer's argument ignores the ADEA's flexible approach to resolution of claims. The EEOC, for example, is directed to pursue 'informal methods of conciliation, conference, and persuasion,' which suggests that out-of-court dispute resolution, such as arbitration, is consistent with the statutory scheme established by Congress. In addition, arbitration is consistent with Congress' grant of concurrent jurisdiction over ADEA claims to state and federal courts, because arbitration agreements, 'like the provision for concurrent jurisdiction, serve to advance the objective of allowing [claimants] a broader right to select the forum for resolving disputes, whether it be judicial or otherwise.'"
Gilmer next argued that a further alleged deficiency of arbitration is that arbitrators often will not issue written opinions, resulting, he contended, in a lack of public knowledge of employers' discriminatory policies, an inability to obtain effective appellate review, and a stifling of the development of the law. The Court rejected this argument as well. It noted that the NYSE rules required that all arbitration awards be in writing, that the awards contain the names of the parties, a summary of the issues in controversy, and a description of the award issued, and that the award decisions are made available to the public.
Gilmer argued that arbitration procedures cannot adequately further the purposes of the ADEA, because they do not provide for broad equitable relief and class actions. The Court rejected that argument as well, noting that arbitrators have the power to fashion equitable relief and that the NYSE rules do not restrict the types of relief an arbitrator may award.
Gilmer contended that the Court should refuse to enforce arbitration agreements relating to ADEA claims because there often will be unequal bargaining power between employers and employees. The Court dismissed that argument as well, stating that "mere inequality in bargaining power is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context," and stating that "arbitration agreements are enforceable save upon such grounds as exist at law or in equity for the revocation of any contract." The Court indicated, however, that extreme inequality in bargaining power may render an arbitration agreement unenforceable, cautioning that "courts should remain attuned to well-supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds "for the revocation of any contract." Nevertheless, the Court ruled, "there is no indication in this case, however, that Gilmer, an experienced businessman, was coerced or defrauded into agreeing to the arbitration clause in his registration application."
Gilmer thus breathed life into compulsory arbitration agreements as a means of resolving employment discrimination claims outside of court. It also, however, created confusion, because it appeared to conflict with but did not overrule Alexander. Courts attempted to reconcile the two cases, but reached differing conclusions.
1. The Civil Rights Act of 1991
At about the same time the Supreme Court issued its decision in Gilmer, Congress passed the Civil Rights Act of 1991. Because the Act authorized jury trials under Title VII, some courts interpreted the Act as rendering compulsory arbitration agreements unenforceable with respect to Title VII claims. See, e.g., Duffield v. Robertson Stephens & Co., No. 97-15698 (9th Cir. 5/8/98). The view adopted by the Fourth Circuit, however, was to the contrary. See Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875, 70 F.E.P. Cases 272 (4th Cir. 1996), cert denied, 117 S. Ct. 432 (1996).
2. Austin v. Owens- Brockway Glass Container, Inc.
In Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875, 70 F.E.P. Cases 272 (4th Cir. 1996), cert. denied, 117 S. Ct. 432 (1996), the Fourth Circuit announced that it would enforce collectively bargained compulsory arbitration agreements with respect to Title VII claims. Austin was reflective of the general willingness the Fourth Circuit has demonstrated to enforce arbitration agreements in the employment discrimination context.
In Austin, Linda Austin worked for Owens-Brockway under a collective bargaining agreement which contained an arbitration clause. After she was fired, she sued the company under Title VII, claiming sex discrimination, and under the Americans with Disabilities Act. The United States District Court for the Western District of Virginia, relying upon Gilmer v Interstate / Johnson Lane Corp., granted summary judgment to the company on the grounds that she had failed to submit her claim to arbitration. The Fourth Circuit upheld the trial court's decision.
The Fourth Circuit rejected the employee's argument that she should not be limited to arbitration under the collective bargaining agreement because, having been fired, she was no longer an employee and therefore was not covered by the agreement. The Court noted that an employee is entitled to arbitrate any claim relating to a termination that occurs while his or her collective bargaining agreement is in force, even if the collective bargaining agreement has expired at the time he or she asserts the claim.
The Fourth Circuit also rejected the employee's argument that, because the arbitration clause used the word "may," arbitration of her statutory claims was permissive rather than mandatory. The language in question stated " All disputes not settled pursuant to the procedures set forth in Article 31, Grievance Procedures, may be referred to arbitration." The Court explained that "we are of the opinion ... that the purpose of the word 'may' in this section of the collection bargaining agreement is to give an aggrieved party the choice between arbitration and abandonment of his claim."
Finally, the Court found that Austin's complaints under Title VII and ADA were within the matters covered by the language of the collective bargaining agreement. They were covered by the agreement's grievance procedure because the agreement stated:
ARTICLE 38
Fair Employment Practice and Equal Opportunities
1. The Company and the Union will comply with all laws preventing discrimination against any employee because of race, color, religion, sex, national origin, age, handicap, or veteran status.
2. This Contract shall be administered in accordance with the applicable provisions of the Americans with Disabilities Act. Before taking action relative to this Section, the Company will meet with the Local Union, and both parties will have sufficient opportunity to express their opinions regarding an anticipated action.
3. Any disputes under this Article as with all other Articles of this Contract shall be subject to the grievance procedure.
They were subject to arbitration because the agreement stated:
ARTICLE 32
Arbitration
1. All disputes not settled pursuant to the procedure set forth in Article 31, Grievance Procedure, may be referred to arbitration by a notice given to the company or the union by the other within 10 days after the conclusion of Step 4 of the grievance procedure....
5. *** The arbitrator's decision shall be final and binding upon both parties.
Because these statutory claims were specifically covered by the agreement, the Court determined that arbitration of them could be compelled.
Perhaps the most notable aspect of the Austin decision is the Fourth Circuit's attempt to reconcile the decisions in Alexander v. Gardner-Denver Co. and Gilmer v Interstate / Johnson Lane Corp.. The Court of Appeals, in effect, expressed the view that Gilmer overruled Alexander with respect to statutory employment claims:
In Gilmer, the Supreme Court made clear that agreements to arbitrate statutory claims are enforceable. The Gilmer Court recognized that arbitration of a statutory claim is not equal to giving up any right under a statute, it is simply another forum in which to resolve the dispute.
Gilmer thus rejects the principal concern in Alexander v. Gardner-Denver Co., that arbitration is an "inappropriate forum" for the resolution of Title VII statutory rights. The Court rejected arguments that arbitration panels may be biased; that limited discovery would hinder a plaintiff attempting to prove discrimination; that lack of a written opinion would result in decreased public awareness of discriminatory employment policies and ineffective appellate review; and that employers and employees have unequal bargaining power. The Court refused to presume that arbitrators would be biased, explained that choosing arbitration means trading the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration; noted that judicial review of arbitration awards, although limited, is adequate to ensure compliance with statutory requirements; refused to decide that lack of class actions should bar arbitration, because individual conciliation should not be barred; and decided that the claim of unequal bargaining power is one that should be decided in individual cases.
Gilmer further provides that once parties have contracted to arbitrate a statutory matter, the parties should be held to that agreement unless Congress intended to prohibit arbitration of that matter:
We need not decide what the legislative history means in absolute terms because in our case it means that voluntary agreements to arbitrate statutory claims are allowed. To decide otherwise, we would have to hold that Gilmer has no effect at all and that Alexander is still the law that statutory claims cannot be the subject of required arbitration. We do not think Congress intended to return to the old law.
Applying this reasoning to the Title VII and ADA claims of Austin, the Court explained that "Miss Austin's burden under Gilmer is to show that Congress intended to preclude arbitration of statutory claims, and she has failed to meet that burden."
Austin established that, at least in the Fourth Circuit, arbitration of claims under Title VII and the ADA could be compelled in the context of a unionized workforce. The Court also opined in dicta that, "whether the dispute arises under a contract of employment growing out of securities registration application, a simple employment contract, or a collective bargaining agreement, an agreement has yet been made to arbitrate the dispute. So long as the agreement is voluntary, it is valid, and we are of opinion it should be enforced." Nevertheless, because in the Fourth Circuit the Federal Arbitration Act is not applicable to labor disputes arising from collective bargaining agreements, Domino Sugar Corp. v. Sugar Workers Local Union 392, 10 F.3d 1064 (4th Cir. 1993); Austin v. Owens-Brockway Glass Container, Inc., 70 F.E.P. Cases 272 (4th Cir. 1996), the status of arbitration based upon arbitration agreements outside of collective bargaining agreements was uncertain until the Court's 1997 decision in O'Neil v. Hilton Head Hospital.
Interestingly, Austin sought an appeal of the Fourth Circuit's decision to the United States Supreme Court, but the Supreme Court declines to hear the case.
6. WRIGHT V. UNIVERSAL MARITIME SERVICE CORP.
Wright v. Universal Maritime Service Corp., No. 97-889 (U.S. S. Ct.11/16/1998), was the case which many observers look to for the answer to the split which had developed among the federal circuits with respect to arbitration of employment discrimination claims. Unfortunately, it created as many questions as it answered.
1. Facts
In Wright, Caesar Wright was a longshoreman and a member of Local 1422 of the International Longshoremen's Association, AFL-CIO, which used a hiring hall to supply workers to stevedoring companies represented by the South Carolina Stevedore's Association. In 1992 while working for Stevens Shipping and Terminal Company, which was a member of the association, Wright was injured. He asserted a claim under the Longshore and Harbor Workers' Compensation Act for permanent disability, which he settles for $250,000 and $10,000 in attorney's fees. Wright also sought, and was awarded, Social Security disability benefits.
By January of 1995, however, Wright apparently had recovered from his permanent disability. He returned to the Union hiring hall, and between January 2 and January 11 obtained work with four stevedoring companies. Shortly thereafter, however, the companies learned that Wright had been certified as permanently disabled. They notified the Union that they would not accept Wright for employment since, in their view, a person who was certified as permanently disabled was not qualified to perform Longshore work under the collective bargaining agreement. The Union, however, responded that the Americans with Disabilities Act entitled Wright to employment if he could perform his job duties, and that refusing to hire Wright would constitute a lock-out prohibited by the collective bargaining agreement.
When Wright learned that the companies would no longer hire him, he contacted the Union to ask how he could return to work. According to Wright, the Union told him to obtain counsel and file a claim under the ADA instead of filing a grievance under the collective bargaining agreement. Wright hired an attorney, and filed and ADA charge with the EEOC and the South Carolina State Human Affairs Commission, claiming the stevedoring companies and the Association violated the ADA by refusing him work. The EEOC rejected his claim, and issued a right to sue letter. Wright then filed suit under the ADA.
The Fourth Circuit held that the provisions of the collective bargaining agreement were sufficiently broad to encompass a statutory claim under the ADA, and that such provisions were enforceable. It therefore held that Wright was required to submit his claim to arbitration, and was barred from asserting it in court. Wright appealed.
2. Deciding Not to Decide the Big Question
The Supreme Court first addressed the question of whether a provision in a collective bargaining agreement could effectively waive an employee's right to assert an ADA claim in court. It recognized that two lines of cases had developed on this issue, the first one following Alexander v Gardner-Denver Co. and the second following Gilmer v Interstate/Johnson Lane Corp.:
The first is represented by Alexander v. Gardner-Denver Co., 415 U. S. 36 (1974), which held that an employee does not forfeit his right to a judicial forum for claimed discriminatory discharge in violation of Title VII of the Civil Rights Act of 1964, 78 Stat. 253, as amended, 42 U. S. C. §2000e et seq., if "he first pursues his grievance to final arbitration under the nondiscrimination clause of a collective-bargaining agreement." In rejecting the argument that the doctrine of election of remedies barred the Title VII lawsuit, we reasoned that a grievance is designed to vindicate a "contractual right" under a CBA, while a lawsuit under Title VII asserts "independent statutory rights accorded by Congress." The statutory cause of action was not waived by the union's agreement to the arbitration provision of the CBA, since "there can be no prospective waiver of an employee's rights under Title VII." We have followed the holding of Gardner-Denver in deciding the effect of CBA arbitration upon employee claims under other statutes. See McDonald v. West Branch, 466 U. S. 284 (1984) (claim under 42 U. S. C. §1983); Barrentine v. Arkansas-Best Freight System, Inc., 450 U. S. 728 (1981) (claim under Fair Labor Standards Act, 29 U. S. C. §201 et seq.).
The second line of cases implicated here is represented by Gilmer v. Interstate/Johnson Lane Corp., supra, which held that a claim brought under the Age Discrimination in Employment Act of 1967 could be subject to compulsory arbitration pursuant to an arbitration provision in a securities registration form. Relying upon the federal policy favoring arbitration embodied in the Federal Arbitration Act, we said that "statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the FAA."
The Court also recognized that there was an apparent conflict between those cases, and acknowledged that differing theories had been offered to reconcile them:
There is obviously some tension between these two lines of cases. Whereas Gardner-Denver stated that "an employee's rights under Title VII are not susceptible of prospective waiver," Gilmer held that the right to a federal judicial forum for an ADEA claim could be waived.
Petitioner and the United States as amicus would have us reconcile the lines of authority by maintaining that federal forum rights cannot be waived in union-negotiated CBAs even if they can be waived in individually executed contracts--a distinction that assuredly finds support in the text of Gilmer.
Respondents and their amici, on the other hand, contend that the real difference between Gardner-Denver and Gilmer is the radical change, over two decades, in the Court's receptivity to arbitration, leading Gilmer to affirm that "questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration." Gilmer, they argue, has sufficiently undermined Gardner-Denver that a union can waive employees' rights to a judicial forum.
Unfortunately, the Supreme Court declined to resolve the conflict between Gardner-Denver and Gilmer, and specifically declined "to resolve the question of the validity of a union-negotiated waiver."
The Court did so because, they explained, "it is apparent to us, on the facts and arguments presented here, that no such waiver has occurred." In other words, the Court declined to decide whether a collectively bargained agreement to arbitrate ADA claims could be enforceable, because the actual language used in the collective bargaining agreement in this case did not reveal an agreement to submit such claims to arbitration. That language mandated the following procedure:
1. "Matters under dispute which cannot be promptly settled between the Local and an individual Employer shall, no later than 48 hours after such discussion, be referred in writing covering the entire grievance to a Port Grievance Committee," which was evenly divided between representatives of labor and management.
2. If the Port Grievance Committee could not reach an agreement within five days of receiving the complaint, then the dispute would be referred to a District Grievance Committee, which also was evenly divided between labor and management, the decision of which by majority vote would be "final and binding."
3. If the District Grievance Committee was unable to reach a majority decision within 72 hours after meeting, then the committee was required to refer the matter to a professional arbitrator.
The collective bargaining agreement also stated:
The Union agrees that this Agreement is intended to cover all matters affecting wages, hours, and other terms and conditions of employment and that during the term of this Agreement the Employers will not be required to negotiate on any further matters affecting these or other subjects not specifically set forth in this Agreement. Anything not contained in this Agreement shall not be construed as being part of this Agreement. All past port practices being observed may be reduced to writing in each port.
Finally, the CBA stated that "it is the intention and purpose of all parties hereto that no provision or part of this Agreement shall be violative of any Federal or State Law."
3. Arbitrability of Statutory Claims Will Not Be Presumed
The company argued that, under Section 301 of the National Labor Relations Act, there should be a "presumption of arbitrability" in accordance with the "Steelworker Trilogy" of Steelworkers v. Enterprise Wheel & Car Corp., 363 U. S. 593 (1960); Steelworkers v. American Mfg. Co., 363 U. S. 564 (1960); Steelworkers v. Warrior & Gulf Nav. Co., 363 U. S. 574 (1960). The Court acknowledged that "in collective bargaining agreements, we have said, there is a presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." The Court stated, however, that the presumption of arbitrability applies only to disputes over the meaning of the collective bargaining agreement, and does not apply to disputes regarding the meaning of the ADA or other federal statutes:
That presumption does not extend beyond the reach of the principal rationale that justifies it, which is that arbitrators are in a better position than courts to interpret the terms of a CBA. This rationale finds support in the very text of the LMRA, which announces that "[f]inal adjustment by a method agreed upon by the parties is declared to be the desirable method for settlement of grievance disputes arising over the application or interpretation of an existing collective bargaining agreement." The dispute in the present case, however, ultimately concerns not the application or interpretation of any CBA, but the meaning of a federal statute. The cause of action Wright asserts arises not out of contract, but out of the ADA, and is distinct from any right conferred by the collective-bargaining agreement. To be sure, respondents argue that Wright is not qualified for his position as the CBA requires, but even if that were true he would still prevail if the refusal to hire violated the ADA.
The company countered that the dispute did involve the interpretation of the collective bargaining agreement, and therefore should be presumed to be arbitrable, because the CBA stated that it is "the intention and purpose of all parties hereto that no provision or part of this Agreement shall be violative of any Federal or State Law," including the ADA. The Court rejected this argument, and expressly stated that such language is insufficient to incorporate the ADA be reference into the collective bargaining agreement.
The Court, moreover, went on to say that the result would be the same even if such language did serve to incorporate the ADA by reference. While such language would create "a contractual right that is coextensive with the federal statutory right, the ultimate question for the arbitrator would be not what the parties have agreed to, but what federal law requires." What federal law requires, the Court explained, "is not a question which should be presumed to be included within the arbitration requirement."
The Court further stated that, with respect to the presumption of arbitrability, it makes no difference whether the collective bargaining agreement limits the arbitrator to interpreting and applying the contract. Whether the CBA, as in Gardner-Denver, limits the arbitrator to interpreting and applying the terms of the CBA or, as here, imposes no such express limitation, the matters subject to arbitration will not be presumed to include the interpretation of federal statutes.
While these rulings against presumed arbitrability are important, equally important is the Court's statement in its discussion of that issue that "it may well be that ordinary textual analysis of a CBA will show that matters which go beyond the interpretation and application of contract terms are subject to arbitration; but they will not be presumed to be so." This is a clear indication that a collective bargaining agreement may effectively place the interpretation of federal laws within the scope of the arbitrator's jurisdiction if the collective bargaining agreement does so expressly. The Court, in rejecting the presumption of arbitrability of statutory claims, is not saying that statutory claims cannot be made subject to arbitration. Rather, the Court is stating that statutory claims will not be presumed to be subject to arbitration.
4. Express, Clear and Unmistakable
So, then, what type of language in a collective bargaining agreement is sufficient to place statutory employment discrimination claims within the scope of an arbitration agreement? The Court answered that question as follows:
Not only is petitioner's statutory claim not subject to a presumption of arbitrability; we think any CBA requirement to arbitrate it must be particularly clear. In Metropolitan Edison Co. v. NLRB, 460 U. S. 693 (1983), we stated that a union could waive its officers' statutory right under Section 8(a)(3) of the National Labor Relations Act to be free of anti-union discrimination, but we held that such a waiver must be clear and unmistakable. "[W]e will not infer from a general contractual provision that the parties intended to waive a statutorily protected right unless the undertaking is 'explicitly stated.' More succinctly, the waiver must be clear and unmistakable."
We think the same standard [is] applicable to a union-negotiated waiver of employees' statutory right to a judicial forum for claims of employment discrimination. Although that is not a substantive right, and whether or not Gardner-Denver's seemingly absolute prohibition of union waiver of employees' federal forum rights survives Gilmer, Gardner-Denver at least stands for the proposition that the right to a federal judicial forum is of sufficient importance to be protected against less-than-explicit union waiver in a CBA. The CBA in this case does not meet that standard. Its arbitration clause is very general, providing for arbitration of "[m]atters under dispute," -- which could be understood to mean matters in dispute under the contract. And the remainder of the contract contains no explicit incorporation of statutory antidiscrimination requirements. (Indeed, it does not even contain, as did the CBAs in Austin and Gardner-Denver, its own specific antidiscrimination provision.)
Thus, in Wright the Supreme Court announced that an arbitration clause in a collective bargaining agreement that waives an employee's statutory right to a judicial forum for employment discrimination claims will be enforceable only if it is "expressly stated" and "clear and unmistakable."
Obviously, it will be necessary to remember this requirement when drafting arbitration clauses for collective bargaining agreements in the future. When drafting such clauses, it also will be helpful to recall the CBA provisions which the Court in Wright found to be insufficient.
First, the company unsuccessfully sought to rely upon a clause in the CBA which provided:
This Agreement is intended to cover all matters affecting wages, hours, and other terms and conditions of employment.
With respect to that clause, the Court stated, "even if this could, in isolation, be considered a clear and unmistakable incorporation of employment-discrimination laws (which is doubtful), it is surely deprived of that effect by the provision, later in the same paragraph, that 'anything not contained in this Agreement shall not be construed as being part of this Agreement.'"
Second, the company unsuccessfully sought to rely upon a clause in the CBA which provided:
It is the intention and purpose of all parties hereto that no provision or part of this Agreement shall be violative of any Federal or State Law.
The company argued that this required the arbitrator to "apply legal definitions derived from the ADA" in determining whether Wright was qualified for employment within the meaning of the CBA. The Court rejected that argument, explaining: " Perhaps so, but that is not the same as making compliance with the ADA a contractual commitment that would be subject to the arbitration clause. This becomes crystal clear when one contrasts Clause 17 with the provision of the CBA which states that "[t]he requirements of the Occupations [sic] Safety and Health Administration shall be binding on both Parties."Under respondents' interpretation of Clause 17, this OSHA provision would be superfluous. Clause 17 seems to us nothing more than a recitation of the canon of construction which would in any event have been applied to the CBA--that an agreement should be interpreted in such fashion as to preserve, rather than destroy, its validity (ut res magis valeat quam pereat)."
5. Application of Wright to Claims Under Other Statutes
It is notable that Wright stated that the test it announced applies to "claims of employment discrimination," which in Wright was a claim under the Americans with Disabilities Act. Considering Gilmer, it also seems likely to apply to claims under the Age Discrimination in Employment Act.
Does the Wright test also apply to Title VII claims? If so, how can that be reconciled with Gardner-Denver? If not, then is Gardner-Denver still good law? Although answers to these questions are needed, the Supreme Court refused to provide them.
What about employment discrimination claims under 42 U.S.C. Section 1983? In McDonald v. West Branch, 466 U.S. 284 (1984), the United States Supreme Court, relying in part on Gardner-Denver, rejected compulsory arbitration of Section 1983 claims under a collective bargaining agreement, stating, "although arbitration is well suited to resolving contractual disputes, ... it cannot provide an adequate substitute for a judicial proceeding in protecting the federal statutory and constitutional rights that 1983 is designed to safeguard." Has Wright now indicated that arbitration of Section 1983 claims under a CBA should be enforced, provided the waiver of the employee's rights to court access is express, clear and unmistakable?
What about claims under the Fair Labor Standards Act? In Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728 (1981), the United States Supreme Court, relying in part on Gardner-Denver, rejected compulsory arbitration of FLSA claims, stating:
Not all disputes between an employee and his employer are suited for binding resolution in accordance with the procedures established by collective bargaining. While courts should defer to an arbitral decision where the employee's claim is based on rights arising out of the collective-bargaining agreement, different considerations apply where the employee's claim is based on rights arising out of a statute designed to provide minimum substantive guarantees to individual workers.
If an employee, who is subject to a collective bargaining agreement that contains an express, clear and unmistakable requirement that FLSA claims be arbitrated, files suit under Section 15(a)(3) of the FLSA ("it shall be unlawful for any person ... to discharge or in any other manner discriminate against an employee because such employee has filed any complaint ...."), will that be permitted under Barrentine or barred under Wright?
What about claims of "employment discrimination" under other federal statutes, such as the Family and Medical Leave Act?
And what about statutory claims under state laws, such as the Virginia Human Rights Act, the Virginians with Disabilities Act, and the Virginia Payment of Wage Law? Lividas v. Bradshaw, No. 92-1920 (U.S. 1994), held that an employee subject to an arbitration provision in a collective bargaining agreement was not required to arbitrate her payment of wage claim arising under a California statute. Has Wright now made it possible to compel arbitration of such claims, provided the language in the collective bargaining agreement is sufficiently express, clear and unmistakable?
Unfortunately, Wright raises but does not answer each of these questions.
6. Arbitration of Statutory Claims of Non-Union Employees
Wright strongly suggests that the "clear and unmistakable" standard does not apply to arbitration agreements which are not part of collective bargaining agreements. In Wright, the Court stated:
The Fourth Circuit relied upon the fact that the equivalently broad arbitration clause in Gilmer--applying to "any dispute, claim or controversy"--was held to embrace federal statutory claims. But Gilmer involved an individual's waiver of his own rights, rather than a union's waiver of the rights of represented employees--and hence the "clear and unmistakable" standard was not applicable.
Thus, it appears that the test for enforceability of an arbitration agreement entered into between an individual and an employer (as opposed to an individual's union and an employer) is something of other than "clear and unmistakable."
What, then, is the standard for enforceability of individual arbitration agreements of statutory employment claims? It first should be noted that Wright (quoting Metropolitan Edison Co. v. NLRB), stated:
We will not infer from a general contractual provision that the parties intended to waive a statutorily protected right unless the undertaking is explicitly stated. More succinctly, the waiver must be clear and unmistakable.
The Court went on to say that, in contexts other than collective bargaining agreements, the "clear and unmistakable" standard does not apply. But what about the requirement that the waiver be "explicitly stated?" Does that still apply? What if an arbitration agreement is explicit, but not clear and unmistakable, perhaps because it contains excessive legalese, or perhaps because portions of it are contained in multiple documents such as the employment application, the employee handbook, and the employee handbook acknowledgment? Is the rule now that individual arbitration agreements must be explicit, but need not be clear or unmistakable?
The Supreme Court was presented with an opportunity to clarify the rules applicable to individual arbitration agreements in Duffield v. Robertson Stephens & Co., No. 97-15698 (9th Cir. 5/8/98). Unfortunately, the Supreme Court declined to do so.
7. DUFFIELD V. ROBERTSON STEPHENS & CO.
On November 9, 1998, the United States Supreme Court declined to review the decision of the Court of Appeals for the Ninth Circuit (which covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, and Guam) in Duffield v. Robertson Stephens & Co., No. 97-15698 (9th Cir. 5/8/98). In order to fully appreciate the current conflict in the law with respect to arbitration of individual statutory employment discrimination claims, it is necessary to understand Duffield.
As a condition of her employment, Tanya Duffield was required by the national securities exchanges to waive her right to resolve "employment related" disputes in court, and was required to agree instead to arbitrate any such disputes under the exchanges' rules. Like all other prospective employees, she was required to satisfy that condition by signing the Uniform Application for Securities Industry Registration or Transfer, commonly known as "Form U-4," which registers her with all of the securities exchanges with which their employers are members. Paragraph 5 of Form U-4, the arbitration clause, states:
I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations with which I register, as indicated in item 10 as may be amended from time to time.
Because her employer was a member of the New York Stock Exchange and the National Association of Securities Dealers, Duffield's "item 10" listed both of those organizations, and the form obligated her to abide by their rules, constitutions, and by-laws. Both the NYSE and the NASD have rules that compel employees to arbitrate any employment-related dispute at the request of their employers. NYSE Rule 347 provided:
Any controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative by and with such member or member organization shall be settled by arbitration, at the instance of any such party, in accordance with the arbitration procedure prescribed elsewhere in these rules.
The NASD Code of Arbitration Procedure provided:
[A]ny dispute, claim, or controversy arising out of or in connection with the business of any member of the Association, or arising out of the employment or termination of associated person(s) with any members...shall be arbitrated.
After signing her Form U-4 in 1988, Duffield began work. In 1995, she brought suit in federal court under Title VII, alleging sexual discrimination and sexual harassment, as well as other state law claims (violation of California's Fair Employment and Housing Act, breach of contract, deceit, intentional infliction of emotional distress, and negligent infliction of emotional distress), and sought a declaratory judgment that she could not be compelled to arbitrate her claims.
The Ninth Circuit ruled that the Civil Rights Act of 1991 "precludes compulsory arbitration of Title VII disputes." The Ninth Circuit explained:
Almost simultaneously with the Court's issuance of Gilmer, Congress enacted the Civil Rights Act of 1991, and, fortuitously, for the first time spoke directly to the arbitration of Title VII claims. While the Act was primarily designed to "overrule" hostile Supreme Court decisions in order to make discrimination claims easier both to bring and to prove in federal courts, and while it increased substantially the procedural rights and remedies available to Title VII plaintiffs in federal courts, it also stated that the parties could, " [w]here appropriate and to the extent authorized by law," opt to pursue alternative dispute resolution, including arbitration, to resolve their Title VII disputes. Pub. L. 102-166, S 118, reprinted in notes to 42 U.S.C. S 1981 (emphasis added).
In the wake of the 1991 Act, we have ruled that claimants who do not "knowingly" agree to arbitrate Title VII claims cannot be required to submit to arbitration. See Prudential Ins. Co. v. Lai, 42 F.3d 1299 (9th Cir. 1994), cert. denied, 116 S. Ct. 61 (1995). On the other hand, we also held in Nghiem v. NEC Electronic, Inc., 25 F.3d 1437, 1441 (9th Cir. 1994), that plaintiffs who "voluntarily initiate binding arbitration" of their Title VII claims are "bound by the arbitrator's decision." "Once a claimant submits to the authority of the arbitrator and pursues arbitration," we explained, "he cannot suddenly change his mind and assert lack of authority." We therefore rejected the argument that simply because the 1991 Act's amendments to Title VII provide for the right to jury trial, that right evinces a congressional intent to allow claimants to escape the binding effect of arbitrations that they initiated. See 25 F.3d at 1441. However, neither in Nghiem nor in any other prior case have we ever been required to consider the effect of the 1991 Act on the much more difficult question before us today: the enforceability of compulsory arbitration provisions that, as a condition of employment, compel persons to forego their statutory right to judicial relief with respect to future claims of Title VII discrimination, and to submit all such future claims to binding arbitration.
Duffield argues that Congress' intent to preclude the compulsory arbitration of Title VII claims is conclusively demonstrated in the text and/or legislative history of the Civil Rights Act of 1991, as well as by an examination of its purposes. That express congressional intent, Duffield contends, clearly serves to distinguish post-1991 Title VII claims from the pre1990 ADEA claim that the Supreme Court found arbitrable in Gilmer.5 The EEOC, in a Notice dated July 10, 1997 and in an amicus brief filed in this case, has adopted this same position. We agree with Duffield and the EEOC and hold that under the Civil Rights Act of 1991 employees may not be required, as a condition of employment, to waive their right to bring future Title VII claims in court.
Thus, according to the Ninth Circuit, the Civil Rights Act of 1991 imposes an absolute bar to requiring employees to agree in advance to arbitration of their Title VII discrimination claims as a condition of employment.
One problem with Duffield is that the same argument also should apply to claims under the Americans with Disabilities Act, since the ADA as well as Title VII was addressed in the Civil Rights Act of 1991, but Wright held that ADA claims could be subject to arbitration.
There is another problem with Duffield, at least in the Fourth
Circuit. In Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d
875, 70 F.E.P. Cases 272 (4th Cir. 1996), cert. denied, 117 S. Ct. 432
(1996) (discussed above), the Fourth Circuit looked at the Civil Rights Act of
1991 and reached a conclusion directly contrary to that reached by the Ninth
Circuit in Duffield. In fact, Duffield expressly recognized
that Austin was contrary to its position, but opined that "the
Fourth Circuit simply misconstrued the controlling law." In the Fourth
Circuit, however, the law as interpreted by the Fourth Circuit controls, unless
and until overturned by the Fourth Circuit or the Supreme Court.(1)
With this in mind, we now turn to the current state of the law in the Fourth
Circuit with respect to arbitration of individual statutory employment
discrimination claims.
8. ARBITRATION OF INDIVIDUAL STATUTORY EMPLOYMENT DISCRIMINATION CLAIMS IN THE FOURTH CIRCUIT
a. O'Neil v. Hilton Head Hospital
In O'Neil v. Hilton Head Hospital, 115 F.3d 272 (4th Cir. 1997), it became clear that the United States Court Appeals for the Fourth Circuit would support arbitration of statutory employment claims outside of the collective bargaining context. This, of course, was welcome news for Virginia employers.
In O'Neil, Diane O'Neil was an employee of Hilton Head Hospital who was terminated, allegedly in violation of the Family and Medical Leave Act. When she sued under the FMLA, the hospital sought to enforce an arbitration agreement she had signed. The agreement, which was part of the hospital's employee handbook acknowledgment, provided:
I understand that AMI makes available arbitration for resolution of grievances. I also understand that as a condition of employment and continued employment, I agree to submit any complaints to the published process and agree to abide by and accept the final decision of the arbitration panel as ultimate resolution of my complaints for any and all events that arise out of employment or termination of employment.
In opposing enforcement of the arbitration agreement, O'Neil first argued that the Federal Arbitration Act did not apply to arbitration of statutory employment claims. The Fourth Circuit rejected that argument, at least so far as the FMLA was concerned, stating:
In the [Federal Arbitration Act], Congress endorsed arbitration as a less formal and more efficient means than litigation of resolving disputes. In line with this congressional intent, the Supreme Court has repeatedly emphasized that the FAA represents "a liberal federal policy favoring arbitration agreements. Pursuant to that liberal policy, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.
The federal policy favoring the effective and efficient resolution of disputes through arbitration applies with equal strength to claims created by contract or by statute. By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum. Nothing in the Family and Medical Leave Act suggests that Congress wished to exempt disputes arising under it from the coverage of the FAA.
O'Neil next argued that her FMLA claim came within the FAA exemption for "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. Rejecting that argument, the Court of appeals stated:
The circuit courts have uniformly reasoned that the strong federal policy in favor of arbitration requires a narrow reading of this section 1 exemption. Thus, those courts have limited the section 1 exemption to seamen, railroad workers, and other workers actually involved in the interstate transportation of goods. We agree with this uniform body of precedent. If Congress had wished to exempt all employees from the coverage of the FAA it could have said so. Instead it enumerated an exempt class of employees, which is limited to workers engaged in the shipment and transportation of goods. Therefore, since O'Neil was not engaged in the interstate transportation of goods, she does not fall within the section 1 exclusion, and the FAA applies.
Next, O'Neil argued that her arbitration agreement was not an enforceable contract because it was not binding on the hospital and therefore lacked the essential element of "consideration" which is required for all contracts. Rejecting that argument, the Court explained:
Here the agreement to be bound by arbitration was a mutual one. The contract to arbitrate was proffered by the employer. Such a proffer clearly implies that both the employer and the employee would be bound by the arbitration process. If an employer asks an employee to submit to binding arbitration, it cannot then turn around and slip out of the arbitration process itself.
It is true that courts have refused to enforce arbitration agreements where the agreement specifically allows the employer to ignore the results of arbitration. That is not the case here, however. There is no such clause in the arbitration agreement signed by O'Neil, and we decline to read such a clause into the contract. A mutual promise to arbitrate constitutes sufficient consideration for this arbitration agreement.
O'Neil's argument that AMI has nowhere agreed to be bound by arbitration also ignores the multiple references in the AMI employee handbook, which indicate that AMI agreed that the arbitration process was binding. For, example, the handbook states:"As regards the Fair Treatment Procedure, AMI is committed to accepting the obligation to support and assure access to the binding arbitration procedure for solving disputes if necessary." Indeed, the arbitration agreement signed by O'Neil clearly states that the decision of the arbitration board is "final."
O'Neil's argument is especially misplaced in the circumstances of this case. Not only has the hospital consistently argued that it is bound by the arbitration agreement, it has, by virtue of this suit, shown its commitment to the arbitration process. Indeed, the only party to this case who has shown a desire to avoid binding arbitration is O'Neil herself
O'Neil argued that her "continued employment" was a condition precedent to the enforceability of the arbitration agreement under the language of the agreement. The Court of Appeals, however, found to the contrary. The Court observed that the agreement provided that "I also understand that as a condition of employment and continued employment, I agree to submit any complaints" to arbitration. That clause, according to the Court, placed no employment condition on the hospital, but rather imposed a condition upon O'Neil: if she wished to continue employment, she had to agree to arbitration. If the provision had been intended to create a condition relating to the effectiveness of the arbitration agreement, the court reasoned, it would have stated: "I also understand that as a condition of my agreement to arbitrate employment disputes, the Hospital agrees to provide me with continued employment." That, however, was not what the agreement said.
O'Neil, arguing further for the necessity of her "continued employment," attempted to rely upon the FMLA's provisions that a person who takes leave must be "restored to the position they had or a similar position." Rejecting that argument, the Appeals Court explained that in deciding whether to grant a stay under the FAA, a court "may consider only issues relating to the making and performance of the agreement to arbitrate." Accordingly, "it is for the arbitrator, not the district court, to determine whether the FMLA is even applicable to O'Neil's case."
Finally, O'Neil sought to rely upon an affidavit which stated that she had been told by an unnamed supervisor that she would be allowed to return to work if she filled out AMI's employment forms. The Court of Appeals rejected the affidavit as a sufficient grounds to avoid arbitration, finding that "whatever relevance that statement might have is related to O'Neil's underlying claim and thus is for consideration by the arbitrator, not the district court." Moreover, the Court explained, "even if the alleged statement had somehow been pertinent to the effectiveness of the arbitration agreement, allegations of a vague promise cannot overcome the binding language of a written arbitration agreement. Waiver and estoppel are disfavored under the FAA."
b. Johnson v. Circuit City Stores, Inc.
In Johnson v. Circuit City Stores, Inc., No.7-2408 (4th Cir. 7/1/98), the Fourth Circuit reaffirmed its support of arbitration of statutory employment claims, and clearly held that employment arbitration agreements need not require the employer, as well as the employee, top arbitrate its claims, so long as the employer was bound by the process of arbitration governing the employee's claims.
In Johnson, Ms. Demeka Johnson submitted a standard employment application which contained a "dispute resolution agreement." The employment application and the agreement stated:
This agreement requires you to arbitrate any legal dispute related to your application for employment or employment with Circuit City. Circuit City will not consider your application unless this agreement is signed.
The Dispute Resolution Agreement and the Dispute Resolution Rules and Procedures affect your legal rights. You may wish to seek legal advice before signing this Dispute Resolution Agreement.
I have read this Agreement and understand that I should read the Dispute Resolution Rules and Procedures over the next few days. I understand that I may withdraw my consent to this Agreement within three (3) days from the date on which I sign below by notifying the Applicant Screening Department in writing . . . that I am withdrawing my application for employment at Circuit City. . . . I understand that by so notifying the Applicant Screening Department, I will not be bound to this Agreement and that I no longer will be eligible for employment at Circuit City. I recognize that if I sign the Agreement and do not withdraw within three days of signing I will be required to arbitrate any and all employment related claims I may have against Circuit City, whether or not I become employed by Circuit City. This Agreement will be enforceable throughout the application process, my employment, and thereafter with respect to any claims arising from or relating to my application or candidacy for employment, employment or cessation of employment with Circuit City. I then must arbitrate all my employment-related claims, and I may not file a lawsuit in court.
Johnson's signature appeared immediately above a further provision that stated, "Circuit City agrees to follow this Dispute Resolution Agreement and the Dispute Resolution Rules and Procedures in connection with the Associate whose signature appears above." Underneath that provision appeared the signature of a Circuit City representative, after which appeared the following:
STOP!
IF YOU HAVE NOT SIGNED THE AGREEMENT ...
If you have decided not to agree to the terms of the preceding DISPUTE RESOLUTION AGREEMENT then you do not need to complete the balance of this application. We appreciate your interest in the company.
IF YOU HAVE SIGNED THE AGREEMENT ...
If you have decided at this time to agree to the terms of the preceding DISPUTE RESOLUTION AGREEMENT then you will need to complete the balance of this application so that we can continue with your application process.
Rule 2 of the "rules and procedures" that were incorporated into the agreement provided that "any and all employment-related legal disputes, controversies or claims of an Associate arising out of, or relating to, an Associate's application or candidacy for employment, employment or cessation of employment with Circuit City or one of its affiliates shall be settled exclusively by final and binding arbitration" and that "all previously unasserted claims arising under federal, state, or local statutory or common law shall be subject to arbitration, including claims arising under the Age Discrimination in Employment Act, Title VII, the Americans With Disabilities Act, the Fair Labor Standards Act, and 42 U.S.C. § 1981." Rule 4 of the "rules and procedures" provided for the means by which "[an] Associate shall commence an arbitration," and Rule 11 provided that the arbitrator's authority was "limited to deciding the case submitted by the Associate."
Johnson did not get the job she was seeking, and sued Circuit City under 42 U.S.C. Section 1981 for race discrimination. When Circuit City sought to enforce the arbitration agreement, Ms. Johnson argued that it was unenforceable because it was not binding upon the employer. The Court rejected that argument, explaining:
The contract to arbitrate was proffered by the employer. Such a proffer clearly implies that both the employer and the employee would be bound by the arbitration process. If an employer asks an employee to submit to binding arbitration, it cannot then turn around and slip out of the arbitration process itself.
Although ... Circuit City did not affirmatively agree to consider Johnson's application even if she signed the agreement, but rather, stated merely that her application would not be considered in the absence of her signature, no consideration above and beyond the agreement to be bound by the arbitration process was required. Here, the Dispute Resolution Agreement contained a provision stating, "Circuit City agrees to follow this Dispute Resolution Agreement and the Dispute Resolution Rules and Procedures in connection with the Associate whose signature appears above." Because Circuit City agreed to be mutually bound by the terms of the Dispute Resolution Agreement, it was not necessary that it agree to incur any additional detriment in exchange for Johnson's agreement to arbitrate her employment-related claims, regardless of whether that consideration was an agreement to actually consider her application or some other additional consideration. Rather, the agreement to be bound by the same rules was sufficient.
In rejecting Johnson's argument, the Court of Appeals also rejected the lower court's finding that under O'Neil an implied agreement existed on the part of the employer to arbitrate its claims, explaining:
O'Neil implied merely an agreement on the part of the employer "to be bound by the arbitration process." An agreement to "be bound by the arbitration process" does not necessarily mean an agreement to submit the employer's claims to arbitration; rather, it more likely means that the employer agreed, with respect to any claims the employer has agreed should be submitted to arbitration, to be bound by the rules of the arbitration procedure and to be bound by its results.
Outside the Fourth Circuit, decisions regarding arbitration of employment claims continue to lack consistency and continue to be decided on a variety of legal theories.
For example, in Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 98-1246, (1st Cir 12/22/98), the First Circuit (which covers Maine, Massachusetts, New Hampshire, Rhode Island and Puerto Rico) held that a financial consultant who signed a standard Uniform Application for Securities Industry Registration or Transfer ("U-4 Form") was not required to arbitrate her Title VII sex discrimination claims or her ADEA age discrimination claims, since the Form did not define the range of claims it covered and instead simply referred to the rules of the New York Stock Exchange, which Merrill Lynch did not give her or describe to her. The court reasoned that, under Wright, statutory claims under Title VII and the ADEA are subject to arbitration, but only if the employee is given "some minimal level of notice" that such claims fall within the arbitration agreement. Perhaps more significantly, in Rosenberg the Court rejected the lower court's ruling that the Civil Rights Act of 1991 renders arbitration agreements unenforceable with respect to Title VII and ADEA claims, and that the arbitration procedures adopted by the New York Stock Exchange are inadequate because it is dominated by employers.
In Shankle v. B-G Maintenance Management of Colorado, Inc., No. 97-1130 (10th Cir. 1/5/99), the Tenth Circuit held that a janitorial manager was not required to arbitrate his claims of wrongful discharge, race discrimination, age discrimination, and disability discrimination, even though he signed an agreement requiring arbitration of any employment disputes. The agreement was unenforceable, the Court ruled, because it required the employee to pay half of the arbitrator's fee, expected to be between $1,500 and $5,000. Since the employee could not afford that expense, the Court reasoned, enforcing the arbitration agreement would effectively deny the employee any forum for his statutory complaints. Notably, the Court indicated that the same reasoning would apply if the employee was required to pay any "portion" of the arbitrator's fee. It is not clear from the decision, however, whether a different result would have obtained if the expense of the arbitrator had been within the employee's financial means. In any event, in view of this decision the best course of action for employers may be to pay the entire arbitrator's fee, since doing so will in almost always be much less expensive than defending the case in court.
10. TIPS FOR MAKING ARBITRATION AGREEMENTS ENFORCEABLE
If you decide to require employees to agree to arbitration as a condition of employment, here are some tips for making the agreement more likely to be enforced:
1. Put it in writing. At the risk of stating the obvious, an unwritten "understanding" that the parties will use arbitration will not suffice.
2. Put the arbitration agreement a single, separate document. This will make it less likely the employee will be able to argue that he did not know what he was signing. See Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 98-1246, (1st Cir 12/22/98).
3. Write the arbitration agreement in plain English and bold print. This will make it less likely the employee will be able to argue that he did not understand what he was signing.
4. Specify the nature of the claims to be covered. You should include express references to the specific statutes (e.g., Title VII, ADEA, ADA, FMLA, Virginia Human Rights Act, Virginians with Disabilities Act) claims under which are to be arbitrated. You also should describe the types of disputes to be arbitrated, e.g., performance evaluations, promotion, demotion, discipline, discharge, wages, hours, working conditions, employee benefits, discrimination, harassment, and retaliation.
5. Do not require the employee to pay any portion of the cost of arbitration. See Shankle v. B-G Maintenance Management of Colorado, Inc., No. 97-1130 (10th Cir. 1/5/99).
6. Use arbitrators who are neutral and who gives the appearance of being neutral. A good place to start is the American Arbitration Association. Local ADR organizations also are available in most areas.
7. Use an established, fair procedure to govern the arbitration. The American Arbitration Association has developed, and has recently updated, its National Rules for the Resolution of Employment Disputes and its Due Process Protocol. These are good starting points.
8. Specify the selection method and the number of the arbitrators. Most employment arbitrations are heard by one arbitrator. However, your arbitration agreement may provide for more. For example, you may provide that cases with claims exceeding a certain dollar amount shall be heard by a panel of three arbitrators. Typically, each side will select one arbitrator, and the two arbitrators selected by the parties pick the third. There are advantages and disadvantages to either approach. Appointing an arbitrator and scheduling hearings is easier with one arbitrator than with three, and the expense is less. However, having more than one arbitrator may enhance the likelihood that the employer's arguments will be thoroughly understood and appreciated.
9. Specify the minimum qualifications of the arbitrators. You may wish to require the arbitrators to be lawyers with a minimum number of years of experience in cases involving the statutes at issue (e.g., Title VII, FMLA, ERISA). Retired judges, established labor arbitrators, and human resource professionals also may be good choices. Under no circumstances should you accept an arbitrator who is unfamiliar with the applicable law.
10. Give employees clear notice of their right of representation. Expressly provide that the employee may be represented by counsel or any person whom the employee designates at any stage of the external review process. You also may wish to consider providing a fair method for reimbursement of at least a portion of the employee's legal fees, especially for lower-paid employees, perhaps by tying a legal assistance benefit to the employment dispute ADR program. This will assure full representation and reduce the risk of appeals on procedural grounds.
11. Provide time frames for filing a claim that are consistent with applicable statutes of limitation. This is required by the AAA's National Rules for the Resolution of Employment Disputes and the Due Process Protocol, and probably is necessary to avoid the arbitration agreement being challenged successfully on constitutional and procedural grounds.
12. Provide for fair and adequate discovery. You should provide a fair and simple method by which the parties can obtain the necessary information to present their claim. The arbitration agreement should provide that any disputes regarding the extent of discovery will be decided by the arbitrator. You may wish to incorporate by reference external rules for which case decisions are readily available, such as the Federal Rules of Civil Procedure.
13. Allow for the same remedies and relief that would have been available to the parties had the matter been heard in court. Many of the cases rejecting compulsory arbitration of statutory employment claims do so because the arbitrator was not authorized to grant the employee as much relief as a court would be able to grant under the applicable statute. Accordingly, it is imperative that the arbitrator be authorized to grant at least as much relief as a court. Under the AAA's National Rules for the Resolution of Employment Disputes, the arbitrator may grant any remedy or relief that the arbitrator deems just and equitable, including any remedy or relief that would have been available to the parties had the matter been heard in court. This authority includes the right to award compensatory and exemplary (or punitive) damages, attorneys' fees, and other remedies to the extent those remedies would be available under applicable law in court. The National Rules for the Resolution of Employment Disputes do not permit programs to place restrictions on available remedies.
14. Have the agreement reviewed by legal counsel. As illustrated by the preceding discussion, the law governing compulsory arbitration of statutory claims is unsettled and in a state of flux. Your legal counsel should be able to review a proposed or existing arbitration agreement and provide you with recommendations which reflect the most recent developments in the courts and the legislatures.
1. Another interesting case from the Ninth Circuit is Kummetz v. Tech Mold, Inc., No. 97-15350 (9th Cir. 8/18/98). In Kummetz, an employee signed an acknowledgment that he received his employer's employee handbook and that he agreed to abide by its contents. That handbook contained an provision that stated the employee, by working for the company, agreed to arbitration of all employment-related disputes. When he later sued the employer under the Americans with Disabilities Act for an allegedly discriminatory demotion, the employer moved to compel arbitration. The Court of Appeals for the Ninth Circuit held that the agreement did constitute a valid waiver of the employee's right to bring suit under the ADA. According to the Court, the employee did not knowingly agree to arbitrate his claim and waive his right to litigate it, since the acknowledgment did not expressly refer to the arbitration agreement and disclaimed that the handbook constituted a contract.
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