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Employment arbitration agreements that trump federal punitive damages limits or shift arbitration costs to plaintiffs may have a tough time surviving, depending on which circuit has jurisdiction over the dispute. Circuits have split over the validity of arbitration agreements that violate public policy by foreclosing statutory remedies, such as punitive damages or attorney fees, under Title VII of the Civil Rights Act of 1964. This raises the specter of national companies with employment arbitration terms valid in some parts of the United States but invalid in others. “This can be a significant issue for companies with employees in different states where the arbitration agreement would be enforced in some but not others,” said Helen Adams, an employment attorney at Dickinson, Mackaman, Tyler & Hagen in Des Moines, Iowa, who represents employers. The chief judge for the U.S. District Court for the Southern District of Iowa, Robert W. Pratt, pointed out the problem in a May 3 ruling in Faust v. Command Center Inc., 2007 WL 1290586, a sexual harassment and retaliation case involving a Washington state-based employment company. Pratt ordered the case to an arbitrator. Cynthia Faust, a former staffing manager who worked in Iowa for the temporary employment company, claimed sexual harassment by a supervisor and retaliation by another after she reported the incidents. Pratt noted that 8th U.S. Circuit Court of Appeals case law requires an arbitrator to determine first whether the agreement is valid. The appeals court does not look to the terms of an individual arbitration agreement to decide whether it violates public policy. But the 9th and 11th circuits do the opposite. Those circuits have held that arbitration agreements that foreclose statutory remedies are entirely invalid. Graham Oil Co. v. Arco Prods. Co., 43 F.3d 1244 (9th Cir. 1995); Paladino v. Avnet Computer Techs. Inc., 134 F.3d 1054 (11th Cir. 1998). In addition, the 10th and D.C. circuits have found that arbitration agreements that require a Title VII plaintiff to pay all or part of an arbitrator’s fee are unenforceable because they deprive a plaintiff of a forum to vindicate statutory rights. Shankle v. B-G Maintenance Management of Colo. Inc., 163 F.3d 1230 (10th Cir. 1999); Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465 (D.C. Cir. 1997). But two other circuits, the 1st and 7th, have found that plaintiff fee obligations alone were insufficient to invalidate the agreement to arbitrate. One of Faust’s attorneys, Brooke Timmer, said, “We don’t believe the arbitrator will uphold the punitive damage clause. It was clear that Congress intended for there to be punitive damages available as a remedy in employment cases.”

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