Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

On Friday, the U.S. Supreme Court agreed to resolve whether a court or an arbitrator has jurisdiction to determine if an arbitration agreement is unconscionable, even when the parties to the contract have clearly and unmistakably given such authority to the arbitrator. In Rent-A-Center West, Inc. v. Jackson (No. 09-497), Antonio Jackson entered into an agreement with his employer, Rent-A-Center (RAC), in which both parties agreed to arbitrate claims arising out of the employment relationship. This agreement expressly stated that:

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On Saturday, the Senate approved by a vote of 88 to 10 the final version of the FY 2010 Defense Appropriations Bill (H.R. 3326). Embedded in this $636 billion spending measure is the contentious amendment submitted by Sen. Al Franken (D-Minn.) that restricts federal contractors and subcontractors working on large defense projects funded by the appropriations bill from requiring their employees and independent contractors to sign, as a condition of employment, agreements to arbitrate certain employment-related claims. The Senate first agreed to include a limit on arbitration in the appropriations bill in October. The House passed the amended spending bill last Wednesday.

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The House of Representatives approved a defense spending bill by a vote of 395 to 34 that extends jobless benefits as well as prevents most defense contractors and subcontractors from forcing their employees or independent contractors to sign, as a condition of employment, agreements to arbitrate certain employment-related claims. The Senate approved this provision – introduced by Sen. Al Franken (D-Minn.) as an amendment to the Fiscal Year 2010 Department of Defense Appropriations Act (pdf) (H.R. 3326) – in October.

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Today, the Supreme Court released its opinion in Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers And Trainmen General Committee of Adjustment, Central Region (pdf), which involved the ability to challenge a final decision by the National Railroad Adjustment Board (NRAB) under the Railway Labor Act (RLA). The Court declined to answer whether a final decision by the NRAB could be set aside for an alleged due process violation, instead affirming the Seventh Circuit’s granting of relief to the union challenging the NRAB’s dismissal of its arbitration petition on statutory grounds.

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The Senate approved by a vote of 68 – 30 an amendment (S.A. 2588) to the defense appropriations bill (H.R. 3326) that would prohibit federal contractors or subcontractors receiving defense department funds from forcing their employees or independent contractors to sign, as a condition of employment, agreements to arbitrate certain employment-related claims. Specifically, the amendment bans contractors or subcontractors at any tier that receive funds from the appropriations bill from enforcing mandatory, pre-dispute agreements to arbitrate “any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention.” The provisions of this amendment would not apply to employment contracts that are not enforceable in this country.

The appropriations bill including the above amendment was approved by a vote of 93-7. This version of the bill will now need to be reconciled with that approved by the House in July.

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On Tuesday, the Senate is scheduled to vote on an amendment (S.A. 2588) to the Defense Appropriations Bill (H.R. 3326) that would effectively prevent federal contractors or subcontractors at any tier that receive funding under the appropriations bill from using mandatory pre-dispute binding arbitration agreements with their employees or independent contractors in civil rights and sexual harassment matters.  Introduced by Senators Al Franken (D-Minn.) and Mary Landrieu (D-La.), the amendment would insert the following provision into the appropriations bill:

Sec. 8104. (a) None of the funds appropriated or otherwise made available by this Act may be used for any existing or new Federal contract if the contractor or a subcontractor at any tier requires that an employee or independent contractor, as a condition of employment, sign a contract that mandates that the employee or independent contractor performing work under the contract or subcontract resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention.

(b) The prohibition in subsection (a) does not apply with respect to employment contracts that may not be enforced in a court of the United States.
 

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Senator Patrick Leahy (D-VT), chairman of the Senate Judiciary Committee, announced on Tuesday that his committee will hold a hearing to examine two U.S. Supreme Court decisions that benefit employers. The hearing, “Workplace Fairness: Has the Supreme Court Been Misinterpreting Laws Designed to Protect American Workers from Discrimination,” will undertake a review of the Court’s 2001 decision in Circuit City Stores v. Adams, which extended the scope of the Federal Arbitration Act (FAA) to cover employment contracts, and thus sanctioned certain mandatory pre-dispute arbitration agreements, and the more recent opinion in Gross v. FBL Financial Services, Inc. (pdf), which toughened an employee’s burden of proof in bringing a mixed-motive discrimination claim under the Age Discrimination in Employment Act (ADEA). 

Among the witnesses scheduled to testify at the October 7 hearing is the plaintiff in Gross v. FBL Financials Services, Inc. The Court in this case held that a plaintiff bringing an ADEA claim must show by a preponderance of the evidence that age was the “but for” cause of the employer’s adverse employment decision. Unlike in Title VII discrimination cases, an employer does not need to prove that it would have made the same decision regardless of age, even if the employee were to produce some evidence that age may have been a contributing factor in the decision. In July, Rep. George Miller (D-CA), chairman of the House Education and Labor Committee, criticized this decision and also called for a committee hearing to examine its repercussions. Both Miller and Leahy have likened Gross to Lilly Ledbetter v. Goodyear Tire, a pay discrimination case that was subsequently overruled by the Lilly Ledbetter Fair Pay Act, signed into law earlier this year. Following next week’s hearing, it is possible that legislation to overturn the Supreme Court’s opinion in Gross will be introduced. Bills aimed at invalidating mandatory, predispute arbitration agreements validated by the Circuit City decision have already been introduced this session, but have thus far received little attention.

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On June 15, 2009, the United States Supreme Court granted certiorari in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 548 F. 3d 85 (2d Cir. 2008), cert. granted, 129 S. Ct. 2793 (2009). The question before the Supreme Court is whether an arbitration agreement that is “silent” on the question whether class arbitrations are permitted can ever be construed to permit such arbitrations.

The Second Circuit Court of Appeals had imposed class-wide arbitration on Stolt-Nielsen despite the silence of the underlying agreement to arbitrate on the question whether class arbitrations were permissible. Stolt-Nielsen asked the High Court to decide whether permitting class arbitration even when an agreement to arbitrate is silent on the issue violates the fundamental principle of the Federal Arbitration Act (9 U.S.C. §1 et seq.) (FAA) that courts must enforce arbitration agreements in accordance with their terms. Basically, Stolt-Nielsen argued, if an agreement is silent on something as significant as requiring a party to submit to a class proceeding and class-wide relief, how could that party ever have contemplated such to be the outcome? Silence, Stolt-Nielsen argued, cannot be construed to authorize something that the parties never agreed to, and indeed the FAA forbids courts from writing substantive terms into agreements that the parties did not themselves include.

If the Supreme Court agrees with Stolt-Nielsen, the implications might be far reaching. For one thing, if under the FAA an agreement that is “silent” on the question of class arbitration may not be interpreted as permitting such arbitration, then would the FAA preempt courts from ruling that express arbitral class waivers are unconscionable or otherwise unenforceable? Even if the Court rules that a silent agreement does not prohibit class arbitration, it may also touch on issues related to the enforceability of express class waivers. For example, if a “silent” agreement is open to interpretation, then an agreement containing an express class waiver may leave nothing to the imagination, and if the FAA requires that such an agreement be enforced as written, decisions refusing to enforce express class waivers may be undermined substantially.

Of course, application of the rules of contract interpretation do not necessarily answer the question of contract validity or enforceability, but if the Supreme Court structures its opinion around the mandates of the FAA, principles of federal preemption may require that express class waivers be enforced, contrary state public policies notwithstanding.

This entry was written by Henry D. Lederman.

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Senator Russ Feingold (D-WI) has reintroduced the Arbitration Fairness Act (S. 931), a bill that would render unenforceable predispute agreements mandating arbitration of employment, consumer, franchise or civil rights claims. A similar bill was introduced in the House by Rep. Henry Johnson (D-GA) on February 12 (H.R. 1020).  The Senate bill, however, contains an additional provision that would expressly overturn the recent Supreme Court decision in 14 Penn Plaza L.L.C v. Pyett, in which the Court held that a provision in a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate Age Discrimination in Employment Act (ADEA) claims is enforceable as a matter of federal law.  According to a press release issued by Sen. Feingold, the terms of the bill would not prohibit pre-dispute arbitration clauses in collective bargaining agreements, but would reverse Penn Plaza “to make it clear that such agreements may not waive employees’ rights to take federal and state statutory or constitutional claims to court.”

This bill has been referred to the Senate Committee on the Judiciary.
 

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In an opinion released today, the U.S. Supreme Court in 14 Penn Plaza L.L.C v. Pyett held that a provision in a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate Age Discrimination in Employment Act (ADEA) claims is enforceable as a matter of federal law.

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A bill introduced on February 12 would significantly restrict the ability for employers to arbitrate employment disputes. The Arbitration Fairness Act of 2009 (H.R. 1020) -- introduced by Rep. Henry “Hank” Johnson (D-GA) and cosponsored by 36 others – would amend the Federal Arbitration Act to invalidate all predispute arbitration agreements that require the arbitration of any employment, consumer, or franchise dispute, or conflict arising under any statute intended to protect civil rights. This Act would not apply to arbitration provisions contained in collective bargaining agreements.

This legislation broadly defines “employment dispute” as “a dispute between an employer and employee arising out of the relationship of employer and employee as defined by the Fair Labor Standards Act.” The definitions of “consumer dispute” and “franchise dispute” are similarly broad enough to encompass virtually any legal conflict. If enacted, this bill would essentially eliminate arbitration as a litigation alternative for employee claims – as well as those brought by clients/customers – unless the parties agree to the arbitral forum post-dispute. The provisions of this bill would take effect on the date of enactment, and would apply to any dispute or claim arising on or after that date.

This bill has been referred to the House Committee on the Judiciary.
 

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