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The Supreme Court’s recent decision in Circuit City Stores v. Adams has been widely reported as an important victory for businesses wanting to have their workplace disputes settled by arbitration rather than in court. The ruling, however, should not be taken as a green light for all companies suddenly to adopt comprehensive arbitration programs to handle employment disputes with their rank and file, say both in-house and outside corporate lawyers and a senior attorney at the Equal Employment Opportunity Commission, the agency that helps enforce the nation’s anti-discrimination laws. According to these experts, Circuit City decided only the narrowest of statutory issues –that is, whether the Federal Arbitration Act (FAA) controls mandatory arbitration agreements between employers and employees as a starting principle. One of many important, but still unanswered, questions keeping employers cautious is what limits are placed on such mandatory arbitration contracts by Title VII of the Civil Rights Act, the Age Discrimination in Employment Act and the Americans With Disabilities Act (ADA). Also not addressed by Circuit City and causing ongoing consternation is whether arbitration can limit class actions or punitive damages involving the anti-discrimination laws. And until the uncertainty over these details is resolved by the high court, suggests Laura H. Allen, a partner at New York’s Brown & Wood, most fence-straddling employers will continue to maintain a wait-and-see stance rather than engage in what might turn out to be a futile exercise. Indeed, “the legal landscape in the federal courts on these points is still mostly up in the air, even chaotic,” says Robert Gregory, a senior attorney in the EEOC’s Office of General Counsel and the agency’s point man on the subject. Gregory concedes that the federal courts in most jurisdictions have already held that mandatory arbitration clauses in employment contracts generally are enforceable under the arbitration act, even though they try to limit litigation under the federal anti-discrimination laws. But, he adds, those same courts also have cautioned that such arbitration clauses must be entered into voluntarily and must be fair and simple enough for the average employee to understand. Moreover, says Gregory, a number of federal appeals courts, including the 9th U.S. Circuit Court of Appeals, which decided Circuit City before it was appealed to the Supreme Court, have adopted “flat-out” the EEOC’s long-standing position that such binding arbitration clauses are inherently unfair if required by the employer as a condition for getting or keeping a job. “This is still good law,” he warns. EEOC’S PERSISTENT APPROACH The EEOC’s perceived persistent and aggressive defense of its right to litigate discrimination disputes in the workplace is also causing many defense lawyers to hesitate to give corporate clients a clear-cut signal to consider a binding arbitration program. In fact, on March 26, the Supreme Court granted certiorari in EEOC v. Waffle House Inc., No. 99-1823, after the 4th Circuit ruled that the EEOC could seek injunctive relief to stop work actions that were illegal under the ADA, but could not ask for back pay or reinstatement on behalf of specific individuals who had signed lawsuit waivers. In its opinion, the appeals court, sitting in Richmond, Va., tried to strike a balance between private parties’ right to contract with each other and the EEOC’s statutory authority to enforce federal anti-discrimination laws. In doing so, the court rejected the 6th Circuit’s 1999 decision in EEOC v. Frank’s Nursery & Crafts Inc., No. 177 F.3d 448, in which the court held that a private arbitration agreement could not affect the scope of the EEOC’s power in a federal court suit. In his petition for cert in the Waffle House case, Gregory insisted that because the EEOC was not a party to such arbitration agreements, it should not be bound by them. “What the EEOC is really doing” by appealing that decision, says Allen, is “end-running” around the Supreme Court’s Circuit City decision. “The justices [just] told them they could not prevent mandatory arbitration clauses in employment contracts, so they are now saying, ‘Go arbitrate, but we can still take you, the employer, to court.’ “ In retrospect, some legal experts say they are at loss to explain the stir caused by the Circuit City decision. Michael Roster, general counsel for Oakland, Calif.’s Golden West Financial and chairman of the board of the American Corporate Counsel Association, says, “Not many more companies are going to rush into” mandatory arbitration programs because of Circuit City. “Those companies that already felt mandatory arbitration was a good thing already had their program in place. This case does tell those companies that they should stay on their present track,” he says. Bob Hilton, assistant general counsel for USX’s U.S. Steel Group, says he does not think the decision will change U.S. Steel’s approach to mandatory arbitration. Although most of their employees are union members and thus covered by a union collective-bargaining arbitration procedure, as for those employees who are not covered, Hilton says he does not anticipate the company changing its policy to impose arbitration on them. “It would take a change in our business practices,” he says, which he does not anticipate without a change in the law or a more significant court decision than Circuit City. On the other hand, notes Lawrence Lorber, a partner in the Washington, D.C., office of New York’s Proskauer Rose who filed an amicus brief on behalf of the U.S. Chamber of Commerce in Circuit City, the decision was “one more step” toward resolving the many outstanding legal issues that have been discouraging some major employers from creating their own arbitration programs. For instance, he says, the court clearly signaled in dicta that the FAA pre-empts any state law attempting to restrict the arbitration process between employer and employee. As for Virginia-based Circuit City Stores, the company’s 5-year-old mandatory arbitration program, which triggered the case, is well ensconced. “Mandatory arbitration has proven to be a less formal method for resolving employment disputes in less time and for less money,” says the company’s general counsel, W. Stephen Cannon.

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