Ninth Circuit Court of Appeals Rebuffs EEOC’s Quest to Prohibit Use of Mandatory Agreements to Arbitrate Title VII Claims: Is It Time To Consider Such Implementation?

Volume 2, Issue 15
October 3, 2003

On Tuesday, September 30, 2003, in an eagerly-awaited decision, the en banc Ninth Circuit Court of Appeals held that Title VII of the Civil Rights Act of 1964 did not prohibit employers from requiring, as a condition of employment, that their employees agree to arbitrate all future, potential claims that an employee might make against them, including race, color, national origin, religion, and sexual discrimination claims under federal law. Equal Opportunity Commission vs. Luce, Forward, Hamilton & Scripps, Nos. 00-57222 & 01-155321 (9th Cir. September 30, 2003). This decision overruled a contrary 1998 Ninth Circuit decision, Duffield v. Robertson Stephens & Co. and brought the Ninth Circuit - which includes Nevada - into line with the law in the other federal circuits across the rest of the country.

In the Luce, Forward case, a law firm required, as a condition of employment, an applicant to sign an agreement to arbitrate all claims, rather than litigate them in court. When the applicant refused to sign the agreement, the firm withdrew its offer of employment. The applicant then filed a Charge of Discrimination with the EEOC and sued the firm in California state court, arguing the practice was an unfair business practice. The California state courts rejected his claims, but the EEOC sued the firm in federal court, asserting that mandatory arbitration violated Title VII and that the withdrawal of the job offer constituted retaliation for the applicant's assertion of his rights. That court enjoined the firm from requiring these agreements, in reliance upon the Duffield case. A three-judge panel of the Ninth Circuit, however, overturned the district court, holding that Duffield was no longer good law in the wake of the Supreme Court's Circuit City decision, which held the Federal Arbitration Act could serve as a vehicle for enforcement of such agreements in the employment context.

At the EEOC's request, a majority of the judges of the Ninth Circuit Court decided to re-hear the case en banc, by a larger, eleven-judge panel. The new decision agrees with the first, expressly holding that Duffield was wrongly decided, and clearing the way for use of such agreements in the Ninth Circuit, as long as they are reasonable. The Nevada Supreme Court already approves of reasonable arbitration agreements to resolve employment disputes. See Kindred v. Second Judicial District Court, 116 Nev. 405, 996 P.2d 903 (2000).

The overruling of the Duffield case is good news for those companies desiring to lower the risks of large adverse jury verdicts by instituting arbitration programs. However, there are three main issues to consider:

  1. The battlefield in the Ninth Circuit will move to whether the agreements are reasonable and protect employees' rights to litigate their claims by matching the remedies and rights available in arbitration with those available in court. Already, there are Ninth Circuit decisions rejecting arbitration agreements on such grounds, including Circuit City's agreement. See Circuit City Stores, Inc. v. Mantor, No. 02-55230 (9th Cir. July 22, 2003); Ingle v. Circuit City Stores, Inc., No 99-56570 (9th Cir. May 13, 2003). Additionally, some judges are quite hostile to arbitration. Thus, any arbitration agreement that restricts available remedies or short-cuts employee rights (except for eliminating jury trials) is susceptible to judicial criticism.

  2. Before implementing a mandatory arbitration program, employers should consider carefully whether such a program is in the company's best interest. A number of important considerations are discussed in the reprint of Gregory Kamer's and Carol Zucker's 2001 article, found in the Library section of this website.

  3. The fight is not over, as EEOC likely will appeal. However, since the U.S. Supreme Court has encouraged use of arbitration to resolve employment disputes, it is likely the Court will uphold the Ninth Circuit Court's decision. The dissent by the Judge who wrote the Duffield decision exhorts Congress to legislatively overturn the Ninth Circuit, arguing that, "After today, we have a little less of a dream." It is likely such legislation will be introduced.

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.