In a case involving one of San Diego’s oldest law firms, the Ninth Circuit Court of Appeals sided with employers on the issue of contractual arbitration. In the matter of EEOC v. Luce, Forward, Hamilton & Scripps, the law firm refused to hire an attorney because he had refused to sign an agreement to arbitrate claims arising from his employment under Title VII. The EEOC sued Luce Forward asserting that the refusal to hire Donald Lagatree was a violation of federal law. The trial court agreed with the EEOC and ordered the law firm to stop requiring employees to sign mandatory arbitration agreements.
However on appeal, the 9th Circuit reversed the trial court’s ruling in the Luce, Forward case and overruled its earlier 1998 ruling in Duffield v. Robertson Stephens & Co prohibiting mandatory arbitration of employment discrimination claims. The court correctly noted that the US Supreme Court implicitly overruled the Duffield decision in 2001, in the case of Circuit City Stores v. Adams. “The Supreme Court’s language and reasoning decimated Duffield’s conclusion the Congress intended to preclude compulsory arbitration of Title VII claims.” But the court cautioned that in order to be enforceable, arbitration agreements must fully comply with principles of contract law (and any applicable arbitration statutes). Lop-sided or onerous arbitration agreements are always subject to being challenged by an employee on the grounds of “unconscionability”.
There are at least two advantages to arbitration of employment claims. Contractual arbitration will usually save an employer a substantial sum in defense fees and costs. There is also less of a likelihood of an employer being hit with a large adverse judgment and a punitive damage award. This is because a trained arbitrator tends to be more dispassionate and objective about the facts of a case and liability issues than the typical lay jury. Any business desiring to draft and implement a compulsory arbitration program for employment-related claims should definitely consult with a legal expert. If you already have an arbitration agreement in place, but it was drafted more than two or three years ago, it should be carefully reviewed by a legal expert for purposes of compliance with state and federal law.
For any questions or comments regarding this Labor Law Update please contact attorney Michael Daly of the Daly Law Firm at (619) 525-7000 or firstname.lastname@example.org.