Wednesday, September 4, 2002
Law Firm’s Use of Compulsory Arbitration for Employees Upheld
By KENNETH OFGANG, Staff Writer/Appellate Courts
An employer is not required to hire a potential employee who refuses to sign an agreement to arbitrate federal statutory claims arising from the employment relationship, the Ninth U.S. Circuit Court of Appeals ruled yesterday.
A divided panel overturned an order by U.S. District Judge Florence Marie Cooper of the Central District of California enjoining the law firm of Luce, Forward, Hamilton & Scripps from requiring that employees sign such agreements.
Judge Stephen Trott, joined by visiting District Judge James M. Fitzgerald of the District of Alaska, said an earlier Ninth Circuit decision barring compelled arbitration of statutory claims was “implicitly overruled” by a later U.S. Supreme Court holding. Judge Harry Pregerson dissented, arguing that the earlier ruling is still the law of the circuit.
Yesterday’s ruling came in a suit brought by the Equal Employment Opportunity Commission after Luce Forward withdrew its offer to employ Donald C. Lagatree as a full-time secretary in its Los Angeles office.
The firm acted on Lagatree’s third day of work after he told firm officials he would not sign Luce Forward’s standard employment agreement, including a provision requiring that the worker submit “all claims arising from or related to his employment” to binding arbitration.
The commission sued in February 2000, six months after this district’s Court of Appeal ruled Luce Forward and another firm sued by Lagatree, Long Beach’s Keesal, Young, & Logan, had the right to require their employees to sign arbitration agreements as a condition of continued employment.
Lagatree worked at Keesal for three years, but was fired in June 1997, three months before Luce Forward said it would hire him. While Keesal conceded that he was a good employee, it terminated him because he wouldn’t sign a form—which every other employee, including lawyers, agreed to, the firm’s managing partner said—requiring him to submit future claims involving his employment with the firm to arbitration.
Unlike the Luce Forward agreement challenged by the EEOC, Keesal’s agreement excepted “discrimination claims, wage and hour claims, and other related statutory claims.”
Appellate Court Affirms
Div. One of this district’s Court of Appeal, hearing consolidated appeals after separate trial judges ruled in favor of both firms, held that the agreements didn’t violate the constitutional rights of trial by jury and access to courts; constitute unfair business competition; or violate Civil Code Sec. 1668, prohibiting contracts which purport to excuse a party from the consequences of illegal acts.
The state court did not address whether an employee can be required to arbitrate discrimination claims arising under federal statutes vesting exclusive jurisdiction in federal courts. The EEOC based its suit on Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (1998), holding that federal anti-discrimination claims under Title VII of the Civil Rights Act of 1964, as amended in 1991, are not subject to mandatory binding arbitration
The panel reasoned that since arbitration is merely “encouraged” by the express language of the statute, and because laws granting civil rights remedies must be broadly construed, Congress did not intend to permit employers to compel employees to give up their right to jury trial in district court.
The reasoning of that decision, the commission argued, applies equally to claims under the Americans With Disabilities Act, the Age Discrimination in Employment Act, and the Equal Pay Act. Cooper, however, limited her ruling to Title VII claims and denied make-whole relief for Lagatree.
Trott, writing yesterday for the Court of Appeals, said the district judge’s ruling could no longer stand, under the intervening decision in Circuit City Stores v. Adams, 532 U.S. 105 (2001).
The judge noted that 10 federal appeals courts and the high courts of California and Nevada had repudiated Duffield, leaving it “like Bikini Atoll—ignominiously alone awaiting remediation.” He acknowledged that the three-judge panel would still have to follow the case in the absence of en banc or high court authority, but concluded that Circuit City was a sufficient basis on which to depart.
Circuit City, he explained, held that the Federal Arbitration Act applies to employment agreements outside the transportation industry, which is exempt. The court, he noted, explicitly said that “arbitration agreements can be enforced under the FAA without contravening the policies of congressional enactments giving employees specific protection against discrimination prohibited by federal law.”
The decision does not, he noted, leave workers who sign arbitration agreements outside the protection of the EEOC. Under a case decided by the Supreme Court last term, he noted, such workers may file complaints with the EEOC, which is not bound by the arbitration agreement and may sue to remedy discrimination.
Pregerson, dissenting, arguing that Circuit City’s comments on employment discrimination are dicta, since there were no discrimination claims in that case. “Duffield and Circuit City are cases of the proverbial apples and oranges: different law, different issues, and different, yet compatible holdings, he wrote.
Circuit City does not mention Title VII or the 1991 act that amended it, Pregerson noted. Even if federal statutory claims are generally subject to compulsory arbitration, he argued, the 1991 language relied on by Duffield reflects congressional intent that a waiver of the right to a judicial forum for Title VII claims not be made a mandatory condition of employment.
Pregerson also noted that Congress, before it passed the 1991 act, rejected an amendment that would have specifically authorized employers to include mandatory arbitration clauses in their agreements. He further pointed out that the Supreme Court denied review in Duffield
Attorneys on appeal were Charles A. Bird of Luce Forward’s San Diego office and Robert F. Walker of the Los Angeles office of Paul, Hastings, Janofsky & Walker for the law firm, and Dori K. Bernstein for the EEOC.
The case is Equal Employment Opportunity Commission v. Luce, Forward, Hamilton & Scripps, 00-57222.
Copyright 2002, Metropolitan News Company