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Philadelphia�In a decision that adds teeth to state arbitration laws, the 3d U.S. Circuit Court of Appeals has ruled that a worker who qualifies for an exemption under the Federal Arbitration Act (FAA) may nonetheless be forced under state law to submit her sexual harassment claim to arbitration. In Palcko v. Airborne Express Inc., No. 03-2227, a unanimous three-judge panel found that the exemption provisions of the act were never intended to have pre-emptive effects on state arbitration laws. The panel said Senior U.S. District Judge Thomas N. O’Neill Jr. was correct in finding that plaintiff Margaret Palcko was exempt under the act as a “transportation worker engaged in interstate commerce.” But O’Neill erred, the court said, when he went on to hold that such an exemption from the act pre-empts enforcement of Palcko’s arbitration agreement with Airborne under Washington state law. “There is no language in the FAA that explicitly pre-empts the enforcement of state arbitration statutes,” U.S. Circuit Judge Dolores K. Sloviter wrote in an opinion joined by 3d Circuit judges Marjorie O. Rendell and Ruggero J. Aldisert. Several key holdings The 12-page opinion by Sloviter also includes several other important holdings. Significantly, the court refused to take a narrow view of the act’s exemption for transportation workers, rejecting Airborne’s argument that Palcko didn’t qualify because she was a “management employee” who had no close contact with channels of interstate commerce. Instead, the court said Palcko’s post, as a supervisor of up to 35 drivers in the Philadelphia area, is work that qualified for the exemption because it “so closely related to interstate and foreign commerce as to be in practical effect part of it.” In a third key ruling, the court sided with Airborne and took an expansive view of appellate jurisdiction in the arbitration arena, rejecting Palcko’s argument that Airborne had no right to file an appeal after the lower court declared that she qualified for the FAA exemption. Instead, the court concluded that the act’s “plain language” allows for interlocutory appeals from all orders denying arbitration and that Congress clearly intended that refusals to compel arbitration would be “promptly reviewed by appellate courts.” Sloviter found fault in the logic of Palcko’s argument that appellate courts have no jurisdiction to review a lower court’s finding that an arbitration clause is exempt under the act.

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