Ninth Circuit Refuses to Enforce Agreement
Requiring Employee to Arbitrate Sex Harassment Claim
Duffield vs. Robertson Stevens, 98 C.D.O.S. 3492 (May 8, 1998) held that employers couldn't require workers to arbitrate their civil rights claims as a condition of their employment. In Duffield, the plaintiff sued her employer in court for sexual harassment, despite having signed an agreement to arbitrate all employment disputes. The court found that under the federal Civil Rights Act of 1991 (the "Act"), employers may not compel employees to waive their Title VII right to a judicial forum, including a jury trial.
At first blush, this decision seems to contradict the decision in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), in which the U.S. Supreme Court upheld the compulsory arbitration of an age discrimination claim. The Ninth Circuit Court of Appeals noted, however, that with the passage of the Act, Congress intended to expand employees' rights and remedies, not limit them, and that Gilmer was decided before Congress enacted the Act.
While the court held that employers could not force workers to arbitrate civil rights claims as a condition of employment, it still allows for a mutual agreement to arbitrate claims after a dispute arises. The court further held that state tort and contract claims, such as defamation and breach of contract, still could be subject to an arbitration agreement entered into as a condition of employment.
Court Refuses to Compel Arbitration Under Agreement
That Requires An Employee to Pay One-half of the Arbitration Fees
A Federal District Court in California, Davis v. LPK Corp., Case No. C-97-3998MMC, (Mar. 10, 1998), ruled that a former employee, who alleged the Company fired her in retaliation for refusing the sexual advances of a supervisor, did not have to submit her claim to arbitration because the agreement she signed required her to pay one-half of the arbitrator's costs. In Davis, the plaintiff signed an agreement to submit any and all claims relating to her employment to arbitration. Nevertheless, the Court held that because the agreement required her to pay half of the arbitrator's costs, it would impose substantial expenses on her as a prerequisite to the pursuit of her claims.
The court noted that arbitration under the auspices of the Judicial Arbitration and Mediation Service (JAMS) would cost substantially more than $2,000 per day, far more than the cost of a court trial. Although the Company offered to pay the entire amount of the arbitration, the Court still refused to enforce the arbitration agreement. In sum, the Court found that the imposition of one-half of the arbitration costs acts as a disincentive, "if not an insurmountable barrier," to the plaintiff in submitting her Title VII claims to arbitration.
The Davis court relied, in part, on two other federal cases decided in different circuits. The first, Cole v. Burns International Services, 105 F.3d 1465 (D.C. Cir. 1997), required an employer to pay all arbitration costs where the arbitration agreement was silent as to who was responsible for such costs. The court also relied on Paladino v. Avnet Computer Technologies, Inc., 1998 WL 41578 (11th Cir. Feb. 4, 1998), where the Court voided an agreement purporting to bind the plaintiff to arbitrate disputes because employees could be liable for at least half the cost of arbitration.
What Should Employers Do Now?
Even after these recent decisions, a company and an employee may always choose to voluntarily arbitrate employment-related claims after a dispute arises. But an employer which requires its employees to agree to arbitration as a condition of employment has to carefully analyze its policy. As the law now stands (and barring any contrary decision by the U.S. Supreme Court), employers in the Ninth Circuit may not be able to compel employees to arbitrate federal Title VII claims. Duffield, of course, does not address arbitration of civil rights claims under state laws such as the California Fair Employment & Housing Act, which leaves the law surrounding employment arbitration agreements very unsettled at this point in time.
Based on Duffield and Davis, and like cases, employers should give renewed scrutiny to their arbitration agreements. Thus, if employers want arbitration clauses in their employment agreements, such clauses should make it clear that they will pay all administrative costs imposed by the arbitration service. Additionally, one approach to Duffield, which has been criticized and may be overturned, is to include language in an arbitration clause that all claims relating to employment will be subject to arbitration "to the fullest extent permitted by law." This language provides maximum flexibility to employers, whether Duffield is overturned or not. Other issues, such as a specific designation of who will arbitrate a claim, confidentiality, the availability of injunctive relief pending the outcome of an arbitration, and which discovery and evidence rules will apply in an arbitration, are also important to consider. Further, to the extent employers attempt to limit the remedies available to an employee in an arbitration, such limitations may undercut the enforceability of an arbitration clause.
We urge anyone with mandatory ADR programs to consult with legal counsel to discuss these and other options and issues surrounding arbitration agreements.