The Court overturns Alexander v. Gardner-Denver and rules that employees may be compelled to arbitrate employment discrimination claims brought under the Age Discrimination in Employment Act. Moreover, the Court opens the door to forcing other employment claims into arbitration, and places the burden of proving Congress’ intent to preserve access to a judicial forum on the employee.

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Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)
 

Relevant Facts: A stockbroker brought suit in federal court alleging his employer had discriminated against him in violation of the Age Discrimination in Employment Act (ADEA). The NYSE representative application he was legally required to sign in order to work as a broker included an arbitration clause covering employment disputes. The employer moved to compel arbitration under the FAA, and was denied. The district court, relying on Alexander v. Gardner-Denver, concluded Congress intended to protect ADEA claimants from waiver of the judicial forum. The Court of Appeals reversed.

 

Question Before The Court: Whether forced arbitration clauses in employment contracts that prevent workers from bringing statutory claims against an employer in a judicial forum are enforceable.

 

The Opinion: It is worth noting that, as in Perry, despite the fact that the employee here did not have a direct arbitration agreement with the employer, the Court imputed the forced arbitration clause in the broker’s registration application in order to apply the FAA. The Court specifically acknowledged that the contract with the employee was with the stock exchange, not with the employer. Still, the Court allowed the employer to enforce the clause despite the fact it was not a party to the contract.

 

The Court placed the burden on the worker alleging discrimination to show that Congress intended to protect his right to go to court against his more-powerful employer. The employee raised many arguments against the appropriateness of arbitration procedures in ADEA cases. The plaintiff argued that compulsory arbitration is improper because it deprives claimants of the judicial forum provided for by the ADEA, and that the ADEA is not just about individual claims, but also furthers important social policies. The Court was unconvinced, providing, “Congress did not explicitly preclude arbitration or other non-judicial resolution of claims. . .. We do not perceive any inherent inconsistency between [the ADEA’s important social] policies, however, and enforcing agreements to arbitrate age discrimination claims. . .. So long as the prospective litigant effectively may vindicate their statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function.”

 

In response to the plaintiff’s expressed concerns that the arbitrator could be biased in favor of the employer the Court explained, “We don’t presume parties and the arbitral body will be unable to retain competent and impartial arbitrators.” Dismissing the broader implications of its ruling, the Court concluded that the arbitration clause in this particular case sufficiently protected the employee against bias as it provided the employee with one preemptory challenge and specified that the NYSE arbitration rules would be utilized. The worker also argued that since discovery is more limited in arbitration than federal court, it may be too difficult to prove an ADEA claim in arbitration. The Court observed that age discrimination claims likely require no more discovery than RICO or anti-trust claims, which the Court had recently held to be arbitrable despite their complexity. The plaintiff highlighted that the lack of written opinions and public scrutiny of arbitrators’ decisions would stifle important developments in ADEA case law, to which the Court implied that other ADEA cases will come along and those future cases will be public and contribute to that body of law.

 

Lastly, the worker objected to the enforceability of this forced arbitration clause on the grounds that the contract was a product of unequal bargaining power between an employee and employer. The Court was unmoved, providing that “mere inequity in bargaining power . . . is not sufficient reason to hold arbitration agreements are never enforceable in the employment context.”

 

Ignoring the fact that it was the Court, through its own opinions within that preceding decade, that had expanded the jurisdictional reach of the FAA to state courts, the majority contended that “concurrent state and federal jurisdiction . . . indicates Congress’ desire to ‘allow claimants a broader right to select the forum for resolving disputes.” The Court ruled that employees could be compelled to arbitrate ADEA claims, asserting, “It is by now clear that statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the FAA. . .. Although all statutory claims may not be appropriate for arbitration, having made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.”

 

Justice Thurgood Marshall expressed severe dismay about the impact the majority’s ruling would have in the workplace, noting, inter alia, “The Court’s holding today clearly eviscerates the important role played by an independent judiciary in eradicating employment discrimination.” Indeed, with this ruling the Court turned its back on the larger social purpose of the ADEA and other anti-discrimination laws elucidated by Congress, in favor of creating a nearly impossible standard for parties who do not wish to see statutory rights forced into arbitration. Now, not only must the person fighting to access a judicial forum show that a competing federal statute’s purpose would be frustrated by having that type of claim forced into arbitration, they must also show that Congress at the time the statute was passed intended to exclude arbitration as a possible forum for dispute resolution—a nearly impossible task given most workplace protections, including the Civil Rights Act of 1964, the Fair Labor Standards Act, and the Americans with Disabilities Act, were passed prior to the Court’s massive 1980’s expansion of the FAA. Failing such a showing, courts must assume that Congress considered arbitration to be an acceptable forum for adjudicating statutory claims.

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