The enforceability of arbitration agreements as they apply to employment discrimination claims received attention in two recent cases, Wright v Universal Maritime Service Corp and DeCaminada v Coopers & Lybrand.
In Wright, a unanimous U.S. Supreme Court decided that an arbitration clause contained in a collective bargaining agreement ("CBA") did not obligate an employee covered by the CBA to arbitrate his disability discrimination claim asserted under the Americans with Disability Act ("ADA"). The court observed that generally, there exists a presumption that employee grievances must be arbitrated under a CBA's arbitration clause. This presumption is based on the idea that arbitrators are in a better position than courts to interpret the terms of a CBA. However, this presumption does not extend to disputes concerning the meaning of a federal statute.
The court also ruled that in a collective bargaining situation, a union's waiver of an individual employee's statutory right to a judicial forum for claims of employment discrimination must be "clear and unmistakable." Here, the arbitration clause covered, generally, all matters affecting the terms and conditions of employment. It did not expressly cover statutory claims. Because the arbitration clause did not clearly and unmistakably cover statutory discrimination claims, the employee was not required to arbitrate his disability discrimination claim.
In DeCaminada, the Michigan Court of Appeals decided that a stock broker was required to arbitrate his age discrimination claim under an arbitration agreement he had signed along with other new employee forms. The court determined that the employee's job had an effect on interstate commerce. As a result, his agreement to arbitrate all employment-related claims was governed by the Federal Arbitration Act ("FAA").
The FAA provides, in part, that an arbitration agreement contained in a written contract "evidencing a transaction involving commerce" is valid. Under the supremacy clause of the United States Constitution, state courts are required to enforce the FAA. Thus, in this case the employee was required to arbitrate his age discrimination claim.
The court distinguished two earlier decisions in which pre-employment arbitration agreements were ruled to be unenforceable. In Rushton v Meijer, Inc and Rembert v Ryan's Family Steak House the court had decided that Michigan public policy precluded enforcement of prospective arbitration agreements as they applied to statutory civil rights claims. Unlike Rushton and Rembert, DeCaminada involved the FAA because the employee's contract involved interstate commerce. In both Rushton and Rembert, the court decided that the FAA did not apply because the employees' jobs did not facilitate, affect, or arise out of interstate or foreign commerce.
Many employers have required their employees to sign arbitration agreements in an effort to reduce their employment litigation costs. Under DeCaminada, such agreements will be enforced if the employer can demonstrate that its employees are involved in interstate commerce.