American Arbitration Association Press Statement on Circuit City Stores, Inc. v. Saint Clair Adams.

Business Editors/Legal Writers

NEW YORK--(BUSINESS WIRE)--March 21, 2001

The United States Supreme Court today handed down a 5-4 decision in Circuit City Stores, Inc. v. Saint Clair Adams, reversing the Ninth Circuit and holding that pre-dispute arbitration clauses in most employment agreements are enforceable under the Federal Arbitration Act (FAA).

This holding, in accordance with the law in every other Circuit, narrows the exception to workers directly involved in interstate transportation.

Both the majority and dissenting opinions limited virtually all of their discussion to the interpretation of this statutory language in the FAA, although the majority also reinforced the Court's strong pro-arbitration position, noting the advantages of arbitration in resolving disputes, including employment disputes. Based on a Supreme Court case in 1991, Gilmer v. Interstate/Johnson Lane Corp., millions of workers have been covered by pre-dispute arbitration agreements.

The average employee never actually gets to exercise the right to a jury trial, as the majority of lawsuits are dismissed on summary judgment, most of which favor employers. Even with pre-dispute arbitration clauses, employees continue to have the right to file complaints with the Equal Employment Opportunity Commission, the National Labor Relations Board or any other government agency. And many employment arbitration programs have expanded the scope of arbitrable disputes to cover complaints that have no legal remedy and could therefore never have gone to trial.

The American Arbitration Association, the nation's leading dispute resolution provider, welcomes this clarification in arbitration law. The AAA filed an amicus brief in the case, supporting the use of the Employment Due Process Protocol, which provides guidelines for fairly designed arbitration processes. Although this issue was not discussed by the Supreme Court, some federal and state courts, such as the California Supreme Court in Armendariz v. Foundation Health, have set forth fairness guidelines to govern employment arbitration. The Association continues to strongly urge the inclusion of due process principles in employment arbitration agreements in order to preserve the integrity of the arbitration process.