Arbitration agreements are subject to scrutiny.

Byline: ON THE JOB by Dan Grinfas For The Register-Guard

Question: My new employer required me to sign an agreement to arbitrate any claims that arise in the course of my employment. I've been unemployed and really need this job, so I went ahead and signed. But is it legal for an employer to make an arbitration agreement a condition of employment?

Answer: It depends. The courts have upheld an employer's right to require arbitration of disputes, but many courts have found specific arbitration agreements to be unfair and unenforceable, and employees often challenge mandatory arbitration agreements by arguing that they are unconscionable.

This is a complicated area of the law because we've had a series of sometimes-conflicting decisions by the U.S. Supreme Court and other federal courts. The 9th U.S. Circuit Court of Appeals, which includes Oregon, has in the past struck down arbitration agreements as being oppressive. Recently, the 9th Circuit has ruled that such agreements are enforceable, but that decision is under review.

The U.S. Supreme Court decided in 1991 in Gilmer vs. Interstate Johnson Co. that an employer may compel job applicants, employees and former employees to arbitrate employment-related disputes, provided that the employer follows certain guidelines. The Supreme Court also held in Circuit City Stores Inc. vs. Adams in 2001 that agreements to arbitrate claims under federal discrimination laws are enforceable. Still, employees have argued that arbitration agreements are coercive.

In May 2002, the Texas Supreme Court held in a case involving Halliburton Co. that an employee, James Myers, agreed to binding arbitration of all employment claims simply by continuing to work after the employer advised workers that it was adopting an alternative dispute resolution program. Myers hadn't signed any agreement, but the court concluded that he accepted the company's offer by continuing to report for duty after learning of the change.

The court found that Halliburton's arbitration agreement wasn't unconscionable because the company as well as the employee was bound to arbitrate claims, and the agreement provided protections for the employee, including the employee's promise to pay most of the arbitration costs and to provide the employee up to $2,500 to consult with an attorney of his choice.

In another recent case, McMullen vs. Meijer Inc., the 6th Circuit Court of Appeals found an arbitration agreement to be unfair and unenforceable because it gave the employer unilateral control in picking the pool of arbitrators.

In July 2002, the 9th Circuit ruled that Countrywide Credit Industries employee Misty Ferguson had a right to sue in court for sexual harassment despite the arbitration agreement Countrywide had required her to sign at the time of her employment. The court found the agreement unconscionable because it was non-negotiable, was required as a condition of employment, and contained terms so one-sided as to show an "insidious pattern" created to provide the employer "with undue advantages should an employment-related dispute arise."

In September 2002, in EEOC vs. Luce Forward, the 9th Circuit decided to permit mandatory arbitration of claims under federal anti-discrimination law, reversing its decision in the 1998 case of Duffield vs. Robertson Stephens & Co. In the Luce Forward case, the Equal Employment Opportunity Commission sued the employer for retaliation in refusing to hire a job applicant who wouldn't sign an arbitration agreement. The 9th Circuit ruled that this refusal to hire the applicant was not retaliatory, but the court noted that arbitration agreements may still be subject to challenge under principles of contract law such as unconscionability. In February 2003, the 9th Circuit ordered a rehearing of the Luce Forward decision.

In May of this year, the 9th Circuit held in Ingle vs. Circuit City Stores that a mandatory arbitration clause was unconscionable and invalid because the agreement was required as a prerequisite to employment, because Circuit City didn't allow the employee, Catherine Ingle, to modify the terms of the agreement, and because the agreement was one-sided in that it was likely to apply only to claims brought by an employee.

The court also determined that the agreement was unenforceable because it imposed a one-year statute of limitations, prohibited class actions, required an unreasonable filing fee and allowed Circuit City to unilaterally modify the agreement.

On The Job is written by attorney Dan Grinfas of the Oregon Bureau of Labor and Industries. Contact BOLI at [phone], or BOLI, 800 N.E. Oregon St. No. 32, Portland, OR 97232.