High Court Limits Workers' Rights
To File Lawsuits
Harriet Chiang, Chronicle Legal Affairs Writer
Thursday, March 22, 2001
In a stunning decision affecting millions of
employees, the U.S. Supreme Court yesterday
cleared the way for employers to force workers to
give up their right to sue over on-the-job disputes.
By a 5-to-4 vote, the court ruled in a Santa Rosa
case that employees cannot rely on state laws to
challenge arbitration agreements preventing them
from going to court. Instead, the justices said that
these agreements were enforceable under federal
law.
Although the legal issues involved are relatively
obscure, the practical impact is monumental,
attorneys for businesses said.
"It's a tremendous victory for employers, especially
in California," said William J. Emanual, a Los
Angeles attorney who filed a brief on behalf of the
Employers Group, which represents 5,000
companies in the state. He said it would prevent
state lawmakers from trying to ban these types of
employment agreements.
The justices ruled against Saint Clair Adams, who
had sued Circuit City for discrimination, claiming he
had been harassed by supervisors at the chain's
Santa Rosa store because he is gay. Circuit City
said the former salesman was barred from going to
court because he had signed an agreement when he
was hired to take any dispute to arbitration.
25% REQUIRE ARBITRATION
The decision is expected to have a huge impact
because of the growing popularity of arbitration
agreements in virtually all industries. In California,
experts estimate that one-fourth of all businesses
require employees to take their disputes to
arbitration.
Employers prefer out-of-court arbitration because
they say it is a cheaper, faster, less disruptive way
to settle disputes with employees. But employees
say private judging is weighted against them,
decided by an arbitrator who often knows the
employers from prior cases and is likely to award
them lower damages than a jury.
The U.S. Chamber of Commerce and several
leading business groups had backed Circuit City,
urging the court to protect their right to enforce
these agreements.
STATES BACKED EMPLOYEE
California and 21 other states had sided with
Adams, insisting that the states should be able to
regulate employment contracts and enforce laws
forbidding discrimination.
"The decision is yet another green light to arbitration
contracts," said Paul Cane, a San Francisco
attorney representing management.
Sandra Michioku, a spokeswoman for the state
attorney general, said her office was disappointed
with the ruling. "We're concerned that this will place
further obstacles in the path of victims of
employment discrimination," she said.
Adams, who now lives in San Diego, said he was
shocked by the decision. The court is allowing
corporations "to abuse employees by forcing them
to give up their rights because they need a job," he
said.
CALLED A BLOW TO CIVIL RIGHTS
San Francisco attorney Cliff Palefsky, one of
Adams' lawyers, said the court prevented
employees from turning to state or federal civil rights
agencies for legal help.
"They have gutted the nation's civil rights and labor
laws," he said.
Adams went to work for Circuit City in 1995 as a
salesman. His job application included a clause
requiring him to settle any complaints out of court
through the arbitration process.
Two years later, he sued the retail electronics chain
for discrimination. A federal judge agreed with
Circuit City that Adams was barred from going to
court because of the arbitration clause.
The U.S. Court of Appeals in San Francisco sided
with Adams, ruling that a 1925 federal law
enforcing arbitration contracts did not apply to
employment contracts.
COURT'S CONSERVATIVES
PREVAIL
But the U.S. Supreme Court overturned that
decision, splitting along conservative-liberal lines in
ruling for the company.
"'There are real benefits to the enforcement of
arbitration provisions," Justice Anthony Kennedy
wrote in the majority opinion. He said arbitration
agreements allowed the parties to avoid costly
litigation and difficult legal questions that often
arose.
The ruling "is yet another pronouncement by the
U.S. Supreme Court that the judiciary favors
arbitration of disputes, including employment
disputes," said Jeffrey Wohl, a San Francisco
attorney for employers.
Michael Rubin, the San Francisco lawyer who
argued the appeal for Adams, said his client could
still go back to federal court and argue that Circuit
City's arbitration agreement was unconscionable
because it imposed a strict deadline by which he
could bring a claim and limited the amount of money
he could collect if he won.
OTHER ARGUMENTS POSSIBLE
The California Supreme Court last year allowed
employers to impose mandatory arbitration
agreements but imposed minimum requirements for
the proceedings.
Rubin said his client could also argue that his federal
civil rights were being violated because he had been
discriminated against because he is gay. A federal
appeals court in San Francisco ruled in 1998 that a
broker could sue a brokerage firm for sex
discrimination even though she had signed an
arbitration agreement when she was hired.
Experts for both employers and employees say the
high court left unanswered the question of whether
employees could be forced to arbitrate
discrimination rights protected by federal or state
civil rights laws. .
.
THE RULING
-- What the court did: Ruled that companies can
insist that workplace disputes go to arbitration
rather than to court.
-- Why employers like arbitration: They regard it as
a cheaper, faster and less disruptive way to settle
employee disputes.
-- Why employees don't like it: They argue that
private judges often are biased in favor of
companies.
-- What it means: "It's a tremendous victory for
employers, especially in California."
-- William J. Emanual, L.A. attorney