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The Supreme Court in a 5-4 split decision on March 21, 2001 reversed a Ninth Circuit ruling by finding that an arbitration agreement, signed by an employee as part of an application for employment, is binding and enforceable for the disposition of employment-related disputes.
The case, "Circuit City Stores v. Adams," involved a Circuit City sales person who signed an employment application form that included an arbitration provision. Two years later, he sued Circuit City, claiming he was harassed by co-workers for being gay. He filed a discrimination claim in court. However, the district court lawsuit was successfully blocked and the arbitration agreement was upheld. On appeal, the Ninth Circuit reversed the district court decision finding that the Federal Arbitration Act of 1925 does not apply to arbitration in employment contracts. The Supreme Court, in turn, reversed the Ninth Circuit decision, ruling that arbitration agreements are binding, except among transportation workers.
Until now, many companies have not used arbitration agreements, feeling that these agreements might not be upheld in court. In light of the Supreme Court decision, it is expected that more companies will initiate these agreements in the hope of avoiding expensive and disruptive litigation. Employers will have to consider a number of issues when implementing arbitration agreements. Should the agreement be a separate document, not a part of the employment application or contract? How will the arbitrator be chosen? How will the costs be apportioned? Will all employment disputes be arbitrated, or just discharges?
The Supreme Court on March 26, 2001, agreed to hear arguments on the appeal of a Fourth Circuit case, "EEOC v. Waffle House," as to whether the EEOC can represent an employee in its own discrimination suit in federal court, even if the employee has signed an arbitration agreement.
For more information on arbitration agreements or any of Krukowski & Costello's services, please call (414) 423-1330 or e-mail dlk@kclegal.com.
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