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Arbitration Agreements OKd

Court says employers can require applicants to waive litigation in discrimination claims.

October 01, 2003|Henry Weinstein | Times Staff Writer

Employers can compel workers to sign arbitration agreements surrendering their right to sue in court over race and sex discrimination, the U.S. 9th Circuit Court of Appeals ruled Tuesday in San Francisco.

In the 8-3 decision, the court, which considers appeals from California and eight other Western states, explicitly overturned a ruling it rendered just five years ago.

Legal experts said Tuesday's decision could save employers in California and the other states millions of dollars in litigation costs and jury verdicts.

Until now, the 9th Circuit, generally viewed as the most liberal federal appeals court in the nation, had been the only circuit court to have ruled that employers could not force workers to sign arbitration agreements as a condition of getting a job.

But in a decision written by Judge A. Wallace Tashima, the majority found that the court's earlier ruling was contrary to Congress' endorsement of alternative dispute resolution when it passed the Civil Rights Act of 1991.

"It would be ironic to interpret statutory language encouraging the use of arbitration ... as evincing Congress' intent to preclude arbitration," Tashima wrote.

Judge Stephen Reinhardt, who wrote the 1998 decision that was overturned Tuesday, issued a blistering dissent.

"Today the majority announces precisely the type of callous anti-civil rights, pro-employer decision that Congress condemned when it enacted the Civil Rights Act of 1991," he wrote. The ruling "transforms Congress' cautious and partial encouragement of arbitration into an unequivocal and all-encompassing invitation to employers to refuse to hire, and even to fire, workers who wish to exercise their jury trial rights."

Most employers favor arbitration to jury trials in discrimination cases, believing that they are more likely to prevail in arbitration, and even if they lose, do not face the risk of a large jury verdict.

"Companies have a rampant fear of juries," said Theodore Eisenberg, a Cornell University law professor. "They think they can control things better before arbitrators."

L.A. lawyer Robert F. Walker, who filed a friend-of-the-court brief on behalf of an employers organization, countered that the decision "is great for employers and employees. You should be able to resolve employment disputes quickly, efficiently and without tremendous expenses."

Clifford Palefsky, a San Francisco attorney who specializes in representing workers including Lagatree, disagreed: "This ruling has very dire implications for the future of civil rights laws. Plaintiffs in discrimination cases do very poorly in arbitration."

The case that spawned Tuesday's decision arose when the Los Angeles office of Luce, Forward, Hamilton & Scripps, a large San Diego-based law firm, rescinded an employment offer to legal secretary Donald S. Lagatree after he refused to sign a mandatory arbitration agreement, giving up his right to sue. Lagatree said that compelling him to sign the agreement was "unfair."

He initially sued in state court, alleging that he had been wrongfully terminated in violation of public policy and California statutes. A Los Angeles County Superior Court judge dismissed the case.

Then, in February 2000, the Equal Employment Opportunity Commission sued Luce Forward in federal district court in L.A. on Lagatree's behalf. The agency contended that the firm violated Title VII of the Civil Rights Act of 1964, as amended in 1991, by rescinding its job offer to the legal secretary. The commission asserted that the firm broke the law because it withdrew the job offer solely because Lagatree refused to sign Luce Forward's standard employment agreement, which contained a clause requiring an employee to submit "all claims arising from or related to his employment" to binding arbitration.

U.S. District Judge Florence Marie Cooper issued an injunction prohibiting the law firm from requiring job applicants to agree to arbitrate Title VII claims and from enforcing existing agreements to arbitrate those claims.

Two years later, a three-judge panel of the 9th Circuit reversed Cooper 2 to 1. The majority held that the 1998 9th Circuit decision had "implicitly" been overruled because of a 2001 Supreme Court decision on a related issue. Because of the importance of the issue, the 9th Circuit voted to rehear the case with a larger panel of judges.

The case turned on the judges' interpretation of the Civil Rights Act of 1991, which provided for the first time a right to damages and to trial by jury in federal employment discrimination cases. The 1991 law also said that where "appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including

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