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Although clearly divided, it appears an en banc panel of the Ninth Circuit U.S. Court of Appeals is poised to protect employees who refuse to sign mandatory arbitration agreements. Or at least one employee, anyway. The court seems headed for a ruling that says axing employees for rejecting an arbitration agreement is, in fact, retaliation. But it may still overturn a precedent that has been the bane of employers. Donald Lagatree’s employment offer was rescinded by Luce, Forward, Hamilton & Scripps when he would not agree to submit all future employment disputes, including discrimination claims, to an arbitrator. The first question out of the box Thursday was whether the court could overrule the Ninth Circuit’s controversial decision, Duffield v. Robertson Stephens & Co., 144 F.3d 1182, and still hold that the law firm violated Lagatree’s civil rights when he was fired for refusing to sign. “I believe that if you agree with us on Duffield that ends the retaliation claim,” said Charles Bird, a lawyer at Luce, Forward. Bird said a string of employer-friendly U.S. Supreme Court rulings on arbitration cast doubt on Duffield, which held that employers cannot condition employment on an agreement to arbitrate Title VII claims. No other court has ever so ruled — in fact, the question does not arise often because most employees sign the agreements. Most litigation over arbitration agreements has been over the enforceability of the agreements once signed. Judge William Fletcher had tough questions for Bird, however, suggesting that an employment offer conditioned on a waiver of rights protected under Title VII of the 1991 Civil Rights Act amounted to a form of coercion. And if an employer withdraws the employment offer when an employee asserts those rights, “Why is that not retaliation?” That position is supported by the Equal Employment Opportunity Commission, which took up Lagatree’s cause and initiated the case, EEOC v. Luce, Forward, 00-57222. But the EEOC argued against rehearing the case even though it had lost a split three-judge panel decision. The Ninth Circuit took the unusual step of hearing it en banc without any of the parties calling for it. That is probably because the three-judge panel overturned Duffield based on Circuit City Stores v. Adams, 532 U.S. 105, a Supreme Court case which everyone concedes is not directly on point. One answer to why it wouldn’t be retaliation is that there is no pending proceeding. And without an assertion of the right to a judicial forum — which at the time of hiring is merely “hypothetical,” according to Bird — there’s nothing to retaliate against. Judge Richard Tallman picked up on the argument. “How is it retaliation if there is no pending proceeding?” he asked. Later, Tallman switched gears, wondering why an employer can’t ask an employee to waive his right. He compared it to the waiver of rights asked for in guilty pleas, including the right to appeal. EEOC lawyer Dori Bernstein said employers could ask — but if the employee says no, they can’t go ahead and fire the employee. Bird suggested that the EEOC had changed its position after the Bush administration took over. But the EEOC’s Bernstein said after the hearing that that’s not true — “no matter how many times they say it.” Bernstein, in fact, was so aggressive on Lagatree’s behalf (telling Tallman more than once that he was wrong), that Judge Stephen Reinhardt — who wrote Duffield — at one point leaned back in his chair and smiled. Because of the ambiguity over the EEOC’s position, Lagatree himself intervened in the case. He was represented by Cliff Palefsky of McGuinn, Hillsman & Palefsky. If the court permits employers to condition a job offer on the waiver of Title VII rights, “You are promoting the essential repeal of the civil rights laws,” Palefsky said. Tallman said siding with the employers in this case wouldn’t mean the loss of any right, but would merely affect the forum in which it can be asserted. In response, Palefsky said there are statistics showing that employees fare much worse in arbitration than they do in court — and pointed out that at least two major arbitration organizations oppose mandatory arbitration. But later, Bird returned to the language of Circuit City, saying the Supreme Court has said that arbitration and civil suits are absolutely on “equal footing.”

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