Amicus Curiae Brief — Gilmer v. Interstate/Johnson Lane Corp.

| Sopeme com, us

FILED

4) NOV 15 1999

No. 90-18 JOSEPH F. SPANIOL, UR. |

EE Se Hac

‘IN THE a

Supreme Court of the United States

OCTOBER TERM, 1990

ROBERT D. GILMER,

Petitioner,

v.

INTERSTATE/JOHNSON LANE CORPORATION,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit

BRIEF AMICUS CURIAE OF

AMERICAN ASSOCIATION OF RETIRED PERSONS

IN SUPPORT OF PETITIONER

STEVEN S. ZALEZNICK

CATHY VENTRELL-MONSEES *

SALLY DUNAWAY

ROBERT L. LIEBROSS

AMERICAN ASSOCIATION OF

RETIRED PERSONS

1909 K Street, N.W.

Washington, D.C. 20049

(202) 662-4957

Attorneys for Amicus Curiae

American Associatio of

Retired Persons

* Counsel of Record

SR rm gE SEES SEE

WILSON - Eras Printine Co.. Inc. - 789-0096 - WASHINGTON, D.C. 20001

TABLE OF CONTENTS

a

~

*

—

>

a

STATEMENT OF INTEREST

ISSUE PRESENTED

STATEMENT OF THE CASE

SUMMARY OF ARGUMENT .........

I. THE FEDERAL ARBITRATION ACT DOES

NOT APPLY TO EMPLOYMENT CON-

. COMPULSORY ARBITRATION INHER-

ENTLY CONFLICTS WITH THE PURPOSES

AND STRUCTURE OF THE ADEA

A. Compulsory Arbitration Conflicts with the

Congressional Purpose of Eradicating Em-

ployment Discrimination from Society

. The Statutory Purpose of Protecting Em-

ployees from the Inequalities of the Employ-

ment Relationship Warrants Against the

Use of Compulsory Arbitration

. Compulsory Arbitration Eliminates the Em-

ployee’s Choice of Forum Which the ADEA

a REQUIRING COMPULSORY ARBITRATION

‘j OF EMPLOYMENT CLAIMS WOULD ELIMI-

a NATE WHOLE CATEGORIES OF EMPLOY-

a EES AND STATUTORY CLAIMS FROM

re THE PURVIEW OF THE COURTS

- CONCLUSION

_ Me ee eS ee ee eee nn, s,s ee 2 ry ee

ii

TABLE OF AUTHORITIES

CASES Page

Albemarle Paper Co. v. Moody, 422 U.S. 405

(1975) ...... 16

Alexander v. Gardner-Denver Co., 415 U.S. 36

7 SERRE rE 8, 5, 7, 16, 17, 18, 19, 20, 22, 24, 25

Alford v. Dean Witter Reynolds, 905 F.2d 104

(5th Cir. 1990) 5, 24

American Postal Workers Union v. United States

Postal Service, 823 F.2d 466 (11th Cir. 1987) .... 15

Atchison, Topeka and Santa Fe Railway Co. v.

Buell, 480 US. 557 (1987) ....... . 16,19

Bacashihua v. United States Postal Service, 889

F.2d 402 (6th Cir. 1988) ............. 14, 15

Barrentine v. Arkansas-Best Freight System, Inc.,

GBD TEE. FR GID: eectecttcentennnsntamnaniettinnnninten 5, 18, 19, 22

Bernhardt v. Polygraphic Co., 350 U.S. 198

(1956) 7

Cooper v. Asplundh Tree Expert Co., 836 F.2d

1544 (10th Cir. 1988) 22... cece 24

Criswell v. Western Airlines, Inc., 729 F.2d 544

(9th Cir. 1983), aff'd on other grounds, 472

hei: See IE cnticie esis piteeteiintnieeenstadbanniaiaiaibentciias 24

Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 218

CHD cecdcisiadithcnsmnictiiinichisinidietcasumenie 18

Derwin v. General Dynamics Corp., 719 F.2d 484

(isd Gar. TOE cenit th 15

Dickstein v. DuPont, 448 F.2d 788 (1st Cir.

): y | nn CREE FE S| ES 5-6, 15

Duggan v. Board of Education, 818 F.2d 1291

(7th Cir. 1987) steatniciiuthiaaaantnaiiat ibid bie, 24

General Electric Co. v. Local 205, United Electri-

cal Radio and Machine Workers of America

(U.E.), 858 U.S. 547 (1957) .......-...-----cceee-eeceeeee 6

Goodall-Sanford, Inc. v. Textile Workers of Amer-

ica Local 802, 358 U.S. 550 (1957) ..................... 6

Hoffman-La Roche Inc. v. Sperling, —— U.S.

—, 110 S. Ct. 482 (1989) ......... 2. 18

Johnson v. University of Wisconsin-Milwaukee,

788 F.2d 69 (7th Cir. 1986) .........2.......0..200022.-0-. 24

iii

TABLE OF AUTHORITIES—Continued

Page

Kremer v. Chemical Construction Corp., 456 U.S.

RR 2 a 23

Lorillard v. Pons, Inc., 484 U.S. 575 (1978). .... 17

McDonald v. City of West Branch, 466 U.S. 284

iy EAC 5

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614 (1985) —............... 15

Nicholson v. CPC International, Inc., 877 F.2d

EE 5, 24

Perry v. Thomas, 482 U.S. 483 (1987) -.................. 7,21

Pietro Scalziti Co. v. International Union of Op-

erating Engineers, 351 F.2d 576 (7th Cir.

ES EES ES Tea 6, 15

Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

TS ec 7

Rodriguez de Quijas v. Shearson/American Ex-

press, Inc.. —— U.S. ——, 109 S. Ct. 1917

EE 18

Second Employers’ Liability Cases, 223 U.S. 1

ES 14

Service Employees International Union Local 36

v. Office Center Services, Inc., 670 F.2d 404 (3d

Se ee 15

Shearson/American Express, Inc. v. McMahon,

i TTL AE ATT 15, 18, 19

Signal-Stat Corp. v. Local 475, United Electrical

Radio and Machine Workers, 235 F.2d 298 (2d

Cir. 1956), cert. denied, 354 U.S. 911 (1957)... 6,15

Solimine v. Astoria Federal Savings & Loan

Assoc., 901 F.2d 1148 (2d Cir. 1990), petition

for cert. filed, No. 89-1895 (May 30, 1990)........ 23-24

Stillians v. State of lowa, 848 F.2d 276 (8th Cir.

EE SS es 24

Swenson v. Management Recruiters International,

Inc., 858 F.2d 1804 (8th Cir. 1988), cert. de-

nied, 110 8. Ct. 148 (1989) .................................. 5, 24

Tenney Engineering, Inc. v. United Electrical

Radio and Machine Workers, 207 F.2d 450 (3d

& aT serennnannaneeinanseuenmanenedotjestinbed 5, 14, 15

iv

TABLE OF AUTHORITIES—Continued

Page

Textile Workers Union of America «. Lincoln

Mills, 368 U.S. 448 (1967) -................................ 6

Tony & Susan Alamo Foundation v. Secretary of

Labor, 471 U.S. 290 (1985) 0... 21

United Paperworkers International Union v.

Misco, 484 U.S. 29 (1987) ..............................-.-. 14

University of Tennessee v. Elliott, 478 U.S. 788

SD trcctadibbicnaililmisieratcnepedeatdidinitiinentiintapences 23

Utley v. Goldman Sachs & Co., 888 F.2d 184 (ist

Cir. 1989), cert. denied, 110 S. Ct. 842 (1990)... 5, 24

STATUTES

Age Discrimination in Employment Act, as

amended, 29 U.S.C. § 621 et seq. (1967) —_.......... passim

Americans with Disabilities Act, 42 U.S.C. § 12101

ge RE SS Ts SR 24

Employee Retirement Security Income Act, 29

VF ioe Fe | eeerenene renee 24

Equal Pay Act, 29 U.S.C. § 206(d) et seq. (1963) .. 24

Fair Labor Standards Act, 29 U.S.C. § 201 et seq.

RS GRE Sel RETR SABE Sar ot Bee AE 19, 21, 24

Federal Arbitration Act, 9 U.S.C. §1 et seg.

I © eh titindiesinenitibntesnemeneneenntadsemntmatentnendslidanetabiticed passim

Labor Management Relations Act, 29 U.S.C. § 185

SE eteertetttiecennsestectcnanetintimncnicdntersusilivatititaittninsen 6, 19

Norris-La Guardia Act, 29 U.S.C. § 102 (1982)... 20

Older Workers’ Benefit Protection Act, Pub. L.

pe 22

Title VII of the Civil Rights Act as amended, 42

U.S.C. § 2000e et seq. (1964) _........ 16-17, 19, 23, 24, 25

LEGISLATIVE HISTORY

ne ar ~

ee 13

66 Cons. Ree. S761 (1985) ........................................... 12

183 Cong. Rec. 8.14383 (daily ed. Oct. 15, 1987) .. 20

Displaced Older Workers: Hearing Before the

Select Comm. on Aging, 99th Cong., 1st Sess.

I OS #7. FN 21

TABLE OF AUTHORITIES—Continued

Page

H.R. Rep. 96, 68th Cong., Ist Sess. (1924) ............. 8,10, 11

H.R. 646, 68th Cong., Ist Sess. §2 (1924) —.......... 11, 12

Joint Hearings Before the Subcommitiees of the

Committees on the Judiciary, 68th Cong., 1st

Sess. 10-11 (1924) on S. 1005 and H.R. 646__.... 12

S. Rep. 79, 101st Cong., Ist Sess. (1989) 20

S. Rep. 586, 68th Cong., Ist Sess. (1924) 12

S. 1005, 68th Cong., Ist Sess. § 2 (1924) ............ 11

Sales and Contracts to Sell in Interstate and For-

eign Commerce, and Federal Commercial Arbi-

tration: Hearing Before A Subcommittee on

the Judiciary on S. 4213 and S. 4214, 67th

ce 8, 10, 11

OTHER AUTHORITIES

a cscrsesessoassccetnnces x

50 A.B.A. Rep. 856 (1925) .....................-...----.-------...-- x

Fe eh . En 14

| Te 14

American Arbitration Association, Commercial

Arbitration Rule 17 (1981) —......................... 17

19 American Federation of Labor Weekly News

Service, No. 5 (April 18, 1929) — 14

Baxter and Hunt, Alternative Dispute Resolution:

Arbitration of Employment Claims, 15 Empl.

EE 21

Coulson, Fair Treatment: Voluntary Arbitration

of Employee Claims, 33 Arb. J. 23 (1978)....... 3, 18

Daily Lab. Rep. (BNA) No. 202, at A-3 (Oct. 18,

EEE SE ee 22

D. P. O’Meara, Protecting the Growing Number of

Older Workers: The Age Discrimination in Em-

TD ace csiceeenemncscnseceees 2

Proceedings of the Forty-Fifth Annual Conven-

tion of the American Federation of Labor

EEE SES LEE Ser a ee oo 13

Proceedings of the Twenty-Fourth Annual Con-

vention of the International Seamen’s Union of

PEE EE SE TE 9

TABLE OF AUTHORITIES—Continued

Proceedings of the Twenty-Sizth Annual Con-

vention of the International Seamen’s Union of

America (1928) nae

Report of the Secretary of Labor, Labor Market

Problems of Older Workers (1989)

Report of the Secretary of Labor, Older Worker

y= Saga Key Policy Issues for the Future

(1989)

Report of the Secretary of Labor, The Older

American Worker, reported in Legislative His-

tory of the Age Discrimination in Employment

PS TIE BE es

Shell, ERISA and Other Federal Employment

Statutes: When is Commercial Arbitration an

‘Adequate Substitute’ for the Courts?, 68 Texas

Se fg RTE. UE ae

Spencer’s Research Reports on Employee Bene-

fits at 6 (July 30, 1900) ........................................

Page

10

21

16

re ae a ee se ee — ” sy" + , a ae

IN THE

Supreme Court of the United States

OCTOBER TERM, 1990

No. 90-18

ROBERT D. GILMER,

Petitioner,

Vv.

INTERSTATE/JOHNSON LANE CORPORATION,

Respondent.

On Writ of Certiorari to the United States ’

Court of Appeals for the Fourth Circuit

BRIEF AMICUS CURIAE OF

AMERICAN ASSOCIATION OF RETIRED PERSONS

IN SUPPORT OF PETITIONER

STATEMENT OF INTEREST

The American Association of Retired Persons (AARP)

is a nonprofit membership organization of more than

thirty-two million persons age fifty and older. More than

eleven million of AARP’s members are employed, most of

whom are protected by the Age Discrimination in Em-

ployment Act of 1967, as amended (ADEA), 29 U.S.C.

§ 621 et seq.

The aging of the work force and the decreasing num-

ber of younger workers entering the work force is en-

hancing the importance of older workers as a valuable

source of labor.’ Despite these changing demographics,

1 See Report of the Secretary of Labor, Older Worker Task

Force: Key Policy Issues for the Future iv (1989).

- i tn A —_" eee eS |) ae ee le ee ere |? ee eee eee ee ee ee eee ee ee ee eee ~ ee (es —_—_. =e 'e' ) =

. . - — swe! eee ye ha "Se ¢ .

;

fi

older workers continue to face discrimination in em-

ployment.?

More than twenty years ago, Congress enacted the

ADEA to eradicate age discrimination in employment

and to promote the employment of older workers. 29

U.S.C. § 621(b). Compelling older workers to arbitrate

their ADEA claims in order to secure a job circumvents

these essential purposes. In this case, the entire securi-

ties industry has attempted to insulate its employment

practices from the purview of the courts. Older workers

will be easy prey for these and other employers who seek

to avoid the scrutiny of the courts and the Equal Em-

ployment Opportunity Commission (EEOC) by requir-

ing the older workers to sign away their rights to judi-

cial enforcement of the ADEA in order to obtain employ-

ment.

Compulsory arbitration provisions contained in em-

ployment contracts or applications threaten the protec-

tions Congress afforded older workers under the ADEA

and undermine the enforcement system Congress de-

signed to eradicate age discrimination from our society.

In light of these concerns, AARP respectfully submits

this brief amicus curiae.’

ISSUE PRESENTED

Whether a claim under the Age Discrimination in Em-

ployment Act (ADEA), 29 U.S.C. § 621 et seg. (1967),

is subject to compulsory arbitration pursuant to the Fed-

eral Arbitration Act, 9 U.S.C. § 1 et seg. (1925) (FAA).

2 See D.P. O’Meara, Protecting the Growing Number of Older

Workers: The Age Discrimination in Employment Act, 29 (1989)

(“[F]rom 1979 to 1983, the number of age discrimination charges

increased by 341 percent”); Spencer’s Research Reports on Em-

ployee Benefits at 6 (July 20, 1990) (Noting increase in age dis-

crimination charges over the first half of fiscal year 1990, EEOC

Chairman Evan J. Kemp stated he is “particularly alarmed at the

larger percentage of age discrimination complaints.”)

® The parties have consented to AARP’s filing of this brief; the

letters of consent are filed with the clerk.

STATEMENT OF THE CASE

AARP adopts the Petitioner’s statement.

SUMMARY OF ARGUMENT

The question presented by this case is whether em-

ployers may compel employees to arbitrate statutory

claims under the ADEA pursuant to a predispute arbi-

tration clause contained in an employment contract.‘ The

district court below held that compulsory arbitration of

ADEA claims was contrary to the ADEA and could

not preclude de novo judicial review based on this Court’s

decision in Alexander v. Gardner-Denver Co., 415 U.S.

86 (1974). Appendix to Petition for Writ of Certiorari

at 41a-42a. The Court of Appeals for the Fourth Circuit

reversed, finding that nothing in the language, legislative

history, or underlying purposes of the ADEA overrides

the policy favoring arbitration set forth in the Federal

Arbitration Act (FAA). Id. at 3a.

AARP respectfully submits that the FAA does not ap-

ply to employment contracts. Section 1 of the Federal

Arbitration Act excludes from the Act “contracts of em-

ployment of seamen, railroad employees, or any other

class of workers engaged in foreign or interstate com-

merce.” 9 U.S.C. § 1. When considered in its historical

context and viewed in light of its legislative history,

there is no doubt that Congress enacted this provision

for the express purpose of excluding all employment con-

tracts from the reach of the Act.

Even if the Court finds that the FAA applies to em-

ployment disputes, compulsory arbitration inherently

4 This case does not involve a voluntary agreement after a dis-

pute has arisen to resolve statutory claims by arbitration. In a

post-dispute agreement, the parties agree on the issues and claims

in dispute and the employee makes a deliberate choice of forums

in which to resolve his claims. See Coulson, Fair Treatment:

Voluntary Arbitration of Employee Claims, 33 Arb. J. 23, 29

(1978).

4

conflicts with the purposes and structure of the ADEA.

Congress enacted the ADEA to eradicate age discrim-

ination in employment. 29 U.S.C. §621(b). To best

accomplish this societal purpose, Congress gave the courts

broad injunctive authority to remedy and prevent dis-

crimination in employment. 29 U.S.C. $$ 626(b), (c).

Arbitration lacks this societal effect because it is typi-

cally limited to the particular dispute between the parties

and does not have far reaching effects on other members

of the protected class. Industry-wide arbitration of em-

ployment disputes prevents achievement of the congres-

sional objective of eliminating discrimination from our

society.

Congress designed the ADEA to provide victims of dis-

crimination the choice of a variety of forums in which to

resolve their claims. 29 U.S.C. §§ 626(b), (c), & (d).

Compulsory arbitration takes this choice away from the

employee and gives it instead to the employer, contrary

to the statutory scheme Congress established. The older

worker who needs a job has no choice but to acquiesce to

the employer’s demands in order to get the job.

The far reaching effects of the Court’s decision in this

case cannot be overstated. Whole industries will attempt

to remove themselves from the purview of the courts and

enforcement agencies by including compulsory arbitra-

tion provisions in employment applications and contracts.

The multitude of statutes protecting employees’ rights

will be subject to the vagaries of individual arbitrators.

Surely, Congress could not have intended such a result.

5

ARGUMENT

INTRODUCTION

Until the decision of the Court of Appeals for the

Fourth Circuit below, the circuit courts of appeals had

consistently held that employment discrimination claims

could not be subject to compulsory arbitration under the

Federal Arbitration Act, 9 U.S.C. § 1. See Alford v. Dean

Witter Reynolds, 905 F.2d 104 (5th Cir. 1990); Utley

v. Goldman Sachs & Co., 883 F.2d 184 (1st Cir. 1989),

cert. denied, 110 S. Ct. 842 (1990); Nicholson v. CPC

International, Inc., 877 F.2d 221 (3d Cir. 1989) ; Swen-

son v. Management Recruiters International, Inc., 858

F.2d 1304 (8th Cir. 1988), cert. denied, 110 S. Ct. 143

(1989). These courts had not questioned the underlying

issue of whether the FAA even applies to arbitration

clauses in employment contracts. Similarly, the parties

below did not question whether the FAA applies to dis-

putes between employers and employees.

The application of the FAA to employment contracts

has apparently not been an issue for two reasons. First,

this Court’s opinions in Alexander v. Gardner-Denver

Co., 415 U.S. 36 (1974), Barrentine v. Arkansas-Best

Freight System, Inc., 450 U.S. 728 (1981), and Mc-

Donald v. City of West Branch, 466 U.S. 284 (1984),

have been vi. wed as controlling authority on the issue of

whether arbitration clauses in employment contracts

could deny an employee de novo judicial review of claims

arising under employment or discrimination statutes.

Second, the early case law interpreting the FAA nar-

rowly construed the exclusion of employment contracts in

Section 1 to apply only to workers in the transportation

industry, based on an incomplete review of the legisla-

tive history of the FAA. Tenney Engineering, Inc. v.

United Electrical Radio and Machine Workers, 207 F.2d

450 (3d Cir. 1953) (en banc). See Dickstein v. DuPont,

443 F.2d 783 (1st Cir. 1971); Pietro Scalziti Co. v. In-

ternational Union of Operating Engineers, 351 F.2d 576

(7th Cir. 1965); Signal-Stat Corp. v. Local 475, United

Electrical Radio and Machine Workers, 235 F.2d 298

(2d Cir. 1956), cert. denied, 354 U.S. 911 (1957).

Thirty-three years ago, this Court was presented with

comprehensive arguments asserting that the exclusion of

employment contracts in Section 1 of the FAA was in-

serted into the Act for the express purpose of ensuring

that the FAA would not apply to any employment con-

tracts. See Briefs in General Electric Co. v. Local 205,

United Electrical Radio and Machine Workers of Amer-

ica (U.E.), 353 U.S. 547 (1957); Textile Workers Union

of America v. Lincoln Milis, 3538 U.S. 448 (1957);

Goodall-Sanford, Inc. v. Textile Workers of America

Local 802, 353 U.S. 550 (1957). Rather than resoiving

the issue under the FAA, the Court ruled that arbitra-

tion clauses in collective bargaining agreements were spe-

cifically enforceable under Section 301 of the Labor Man-

agement Relations Act, 29 U.S.C. § 185 (1947). Id. Jus-

tice Frankfurt + would have ruled explicitly that the FAA

simply did net apply ‘o collective bargaining agreements

based on the legislative history. Textile Workers of

America v, Lite: » Mills, 353 U.S. 448, 460, 466-69 (1957)

(Frankfurter, J., dissenting) .

Once again, the applicability of the FAA to employ-

ment contracts confronts the Court. Whether the FAA

applies to employment contracts depends on the interpre-

tation of Section 1 of the Act, which excepts certain con-

tracts, as well as on the interpretation of Section 2 of

the Act, which makes contracts tv arbitrate covered by

the Act enforceable. Thus, whether all employment con-

tracts are excluded from the FAA is a subsidiary issue

within the question on which certiorari was granted.

While the parties before the court of appeals below did

~~, —

7

not brief whether Section 1 applied to this case,° the is-

sue is central to the resolution of the case and to the

question upon which certiorari was granted.

I. THE FEDERAL ARBITRATION ACT DOES NOT

APPLY TO EMPLOYMENT CONTRACTS.

The Court has never squarely addressed the meaning

of the language in FAA §1 excluding contracts of em-

ployment from the Act.* The legislative history plainly

reveals that the exception for contracts of employment

in Section 1 of the FAA was added for the express pur-

pose of excluding all worker contracts from the Act.

5 Gilmer argued in the district court that Alexander v. Gardner-

Denver Co., 415 U.S. 36 (1974), controlled this case and prevailed.

In defending that ruling in the court of appeals, Gilmer did not

argue, as an alternative ground for affirmance, that Section 1 of

the FAA exchides employment contracts from the Act.

® The Court ieft open the meaning of the exclusion in Bernhardt

v. Polygraphic Co., 350 U.S. 198 (1956). The Court stated that an

employment contract was not covered by § 2 because there was no

evidence that in performing duties under the contract, the em-

ployee “was working ‘in’ commerce, was producing goods for com-

merce, or was engaging in activity that affected commerce, within

the meaning of our decisions.” 350 U.S. at 200-01. The Court

expressly did not reach the issue of the scope of the exclusion in

Section 1. 350 U.S. at 201 n.3.

In Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395,

402 n.9 (1967) the Court cited Section 1 as authority for the point

that “categories of contracts otherwise within the Arbitration Act

but in which one of the parties characteristically has little bar-

gaining power are expressly excluded from the reach of the Act.”

In Perry v. Thomas, 482 U.S. 483 (1987), the Court ruled that

the FAA preempted a California statute authorizing civil actions

for the collection of wages regardless of any agreement to arbitrate

such a dispute. The Court declined to address the argument that

the arbitration provision contained in the employment contract was

unenforceable as a contract of adhesion. 482 U.S. at 492 n.9. The

issue of the scope of the Section 1 exclusion for employment con-

tracts was not briefed by the parties nor addressed by the Court.

As an initial matter, there is no dispute that the ad-

vocates supporting the enactment of the FAA were busi-

nessmen whose sole concern was to overturn the common

law rule which denied specific enforcement of agreements

to arbitrate in contracts between businessmen.’ The Act

was drafted and sponsored by the Committee on Com-

merce, Trade and Commercial Law of the American Bar

Association,* acting upon instructions from the Associa-

tion to consider and report upon “the further extension

of the principle of commercial arbitration.” 45 A.B.A.

Rep. 75 (1920).

In December 1922, the Committee’s proposal was simul-

taneously introduced as a bill in the Senate (S. 4214)

and in the House (H.R. 13522). 64 Cong. Rec. 732, 797

(1922). :

As introduced, Section 2 of the bills made written “pro-

visions for arbitration” enforceable in “‘any contract or

maritime transaction or transaction involving commerce.”’

Id. Section 1 contained no exception for contracts of em-

ployment and defined commerce and “maritime trans-

actions.” The definition of maritime transactions in-

cluded agreements relating to “seaman’s wages” and

any other matter within admiralty jurisdiction.

At the Seamen’s Union Convention in 1923, Andrew

Furuseth, president of the Seamen’s union, announced

his concern that the Federal Commercial Arbitration bill

could be applied to preclude seamen from bringing dis-

TH.R. Rep. 96, 68th Cong., Ist Sess. 1-2 (1924). See Sales and

Contracts to Sell in Interstate and Foreign Commerce, and Fed-

eral Commercial Arbitration: Hearing Before A Subcommittee on

the Judiciary on S4218 and S. 4214, 67th Cong., 4th Sess. (1923),

at 9 (Statement of W.H.H. Piatt) (hereinafter “Senate hearing”).

8 See 50 A.B.A. Rep. 356-362 (1925) for a detailed history of the

American Bar Association’s efforts to overturn the common law

rule.

9

putes arising out of their employment to court.® He

warned :

Let a clause to arbitrate be placed in any contract

and any dispute about the meaning and enforcement

of the contract must be referred to arbitration and

the court with all the Saxon rule of procedure and

constitutional guarantees ceases to operate... .

Place in the contract to labor—that any disagree-

ment shall be attributed by the Shipping Commission

(under existing statutes this includes consuls) and

the seaman’s right to wages, to food, to damages

under the Jones Act together with his present right

to quit work in harbor becomes void. With the sea-

man, the machinery is there and ready. The ship-

owner only needs this bill to become law and slavery

is restored without any other noise, except such as

the victim may make...

®Seamen sign individual contracts of employment, and in the

early 1920’s, those contracts typically provided that any disputes

between an individual seaman and the ship owner or its agent

would be decided by a shipping commissioner and that decision

would be binding on the courts. Proceedings of the Twenty-Fourth

Annual Convention of the International Seamen's Union of America,

27-28 (1921).

Mr. Furuseth had taken issue with the arbitration clauses being

inserted into the shipping articles which individual seamen were

required to sign:

The one provision found in nearly all of these insertions to the

effect that the Shipping Commissioner shall act as arbitrator

of any or all disputes and that such decision as he may make

shall be final is intended to deprive the seaman of the right to

appeal to the courts. The Shipping Commissioners Act gives

no such power to the Commissioner, unless there is a submis-

sion in writing and such submission is made after the dispute

has arisen and not prior to entering into the agreement. It

has no right in the articles. I have discussed this clause with

the Commissioner of Navigation and he admitted that it is not

strictly according to law; but if the men are not willing to sign

such clause they need not. This is nothing short of inviting the

men to strike to get the law enforced. If the seaman does this,

all the blame is heaped on him.

Id. at 28-9.

es ae, Se Ae ee Sn ees

10

Proceedings of the Twenty-Sixth Annual Convention of

the International Seamen’s Union of America, 203-04

(1923) .?°

At the Senate Judiciary subcommittee hearings on the

bill, Chairman Sterling asked W.H.H. Piatt, chairman

of the ABA committee responsible for drafting the bill

to respond to the concerns expressed by Mr. Furuseth.

Mr. Piatt assured the Chairman that the bill was never

intended to apply to any employer-employee disputes. He

emphasized :

Now, it was not the intention of the bill to have any

such effect. It was not the intention of this bill to

make an industrial arbitration in any sense; and so

I suggest that in as far as the committee is con-

cerned, if your honorable committee should feel that

there is any danger of that, they should add to the

bill the following language, ‘but nothing herein con-

tained shall apply to seamen or any class of workers

in interstate and foreign commerce.’ Jt is not in-

tended that this shall be an act referring to labor

disputes, at all. It is purely an act to give the

merchants the right or the privilege of sitting down

and agreeing with each other as to what their dam-

ages are, if they want to do it. Now, that is all there

is in this.

Senate hearing, at 9 (Statement of W.H.H. Piatt) (em-

phasis added). Senate Judiciary Committee Chairman

Sterling and Senator Walsh shared both this concern and

Mr. Piatt’s understanding of the bill. Senate hearing, at

10-12 (Remarks of Sen. Sterling, Sen. Walsh).

At the Senate hearing, Senator Walsh was particularly

concerned that the Act not apply to contracts of employ-

ment. He stated:

10” Mr. Furuseth was also concerned that if the union agreed to

arbitration clauses in a collective bargaining agreement, the result

would bind the members. /d.

11

The trouble about the matter is that a great many of

these contracts that are entered into are really not

voluntarily [sic] things at all. Take an insurance

policy; there is a blank in it. You can take that or

you can leave it. The agent has no power at all to

decide it. Either you can make that contract or you

can not make any contract. It is the same with a good

many contracts of employment. A man says, “These

are our terms. All right, take it or leave it.’ Well,

there is nothing for the man to do except to sign it;

and then he surrenders his right to have his case

tried by the court, and has to have it tried before

a tribunal in which he has no confidence at all.

Senate hearing, at 9 (Remarks of Sen. Walsh).

To alleviate the concern that the commercial arbitra-

tion bill could apply to employment disputes, Secretary

of Commerce Herbert Hoover proposed language to ex-

empt contracts of employment from the bill. In a letter

introduced by Chairman Sterling, Secretary Hoover

recommended :

If objection appears to the inclusion of workers’

contracts in the law’s scheme, it might be well

amended by stating ‘but nothing herein contained

shall apply to contracts of employment of seamen,

railroad employees, or any other class of workers

engaged in interstate or foreign commerce.’

Senate hearing at 14.

While the original Senate bill was not reported out of

committee in the 67th Congress,"' an amended bill was

reintroduced in the 68th Congress as S. 1005 and in the

House as H.R. 646, 68th Cong., Ist Sess. (1924)."* At joint

11 There was no hearing in the House on the companion bill,

H.R. 13522, and it was not reported out of Committee, either.

2 As introduced in the 68th Congress and referred to the judici-

ary committees, the FAA made written provisions to arbitrate en-

forceable in “any contract or maritime transaction or transaction

involving commerce.” §.1005, 68th Cong., Ist Sess., §2 (1924);

12

before the Senate and House Judiciary Subcom-

err ghs Piatt testified that in light of the desire to

clearly exclude employment contracts as expressed by

Senators Sterling, Walsh and other members, the ABA

had redrafted the bill. Joint Hearings Before the Sub-

committees of the Committees on the Judiciary on S. 1005

and H.R. 646, 68th Cong., 1st Sess. 10-11 (1924) (Joint

Hearings).

As redrafted by the ABA and introduced into the 68th

Congress, the bill added the exact language to Section 1

that Secretary Hoover had suggested be used to exempt

workers’ contracts from the Act.”* Also, the inclusion of

“seamen’s wages” within the definition of maritime trans-

action in Section 1 was deleted.

The legislative proceedings of the Federal Commercial

Arbitration bill elearty Gemanatrate that the scope of the

bill was limited to arbitration involving commercial trans-

actions. At the Joint Hearings, more than seventy commer-

cial organizations—trade associations, chambers of com-

merce and bankers’ associations—that had endorsed the

bill were represented. Not a single labor union appeared.

There was no testimony nor any suggestion that the bill

was in any way intended to apply to individual contracts

of employment or collective bargaining agreements.

On the floor of the House Judiciary Com-

mittee Chairman Graham described the bill’s commercial

character :

. Ist Sess., §2 (1924). This language was

a at, “en eke Sates Committee to make enforceable

written provisions to arbitrate “any maritime transaction or a

contract evidencing a transaction involving commerce.” S. Rep.

536, 68th Cong., Ist Sess. (1924). The substitute language was

proposed by Sen. Walsh for grammatical, not substantive, reasons.

66 Cong. Rec. 2761 (1925) (remarks of Sen. Sterling).

18 Secretary Hoover sent another letter to the Senate Judiciary

Committee Chairman (Senator Brandegee), urging the adoption of

the bill, expressing the same views he had expressed to Senator

Sterling and enclosing a copy of the prior letter. Joint hearings, at

20-21. |

13

The bill simply provides for one thing, and that is to

give an opportunity to enforce an agreement in com-

mercial contracts and admiralty contracts—an agree-

ment to arbitrate, when voluntarily placed in the

document by the parties to it.

It creates no new legislation; grants no new rights,

except a remedy to enforce agreements in commercial

contracts and in admiralty contracts.

65 Cong. Rec. 1931 (1924) (emphasis in text).

At the time, the business, labor and legal interests most

affected by the FAA all viewed the Act as inapplicable

to contracts of employment. Business representatives did

not champion the FAA to create a federal law binding

employers to arbitrate employment disputes with indi-

vidual employees. Also, the American Federation of Labor

did not view the FAA as applying to union contracts. In

describing the FAA in its 1925 annual report, the Execu-

tive Council of the Federation stated:

Protests from the American Federation of Labor and

the International Seamen’s Union brought about an

amendment which provides that ‘but nothing herein

contained shall apply to contracts of employment of

seamen, railroad employees, or any other class of

workers engaged in foreign or interstate commerce.’

This exempts labor from the provisions of the law,

although its sponsors denied that there was any in-

tention to include labor disputes.

Proceedings of the Forty-Fifth Annual Convention of the

American Federation of Labor, 52 (1925).

The very next year, the same ABA Committee on Com-

merce which had drafted the FAA started work on a bill

that would similarly enforce agreements to arbitrate in

the labor arena. Noting that “Congress had already

enacted a statute providing a method for the settlement

of commercial disputes by means of arbitration,” the

Committee stated that “it was convinced that a similar

statute may properly be enacted by Congress providing

i ee Mi Die tl, ee i ee ke le

14

for the settlement in like manner of industrial disputes.”

51 A.B.A. Rep. 394 (1926). Organized labor opposed the

idea as another example of the hated labor injunction. 19

American Federation of Labor Weekly News Service, No.

5 (April 13, 1929). As a result, the ABA Comniittee on

Commerce concluded in 1930 that “public opinion is not

yet ready for this legislation” and that “it would be a

mistake to press it actively at the present time.” 55

A.B.A. Rep. 328 (1930).

The clear meaning of the legislative history of the FAA

is that Congress intended to exclude all employment

contracts from the reach of the FAA, both individual

contracts and collective bargaining agreements.”

Recent cases have addressed whether the FAA applies

to disputes arising under collective bargaining agree-

ments. In United Paperworkers International Union

v. Misco, 484 U.S. 29, 40 n.9 (1987), the Court indicated

that Section 1 excluded collective bargaining agreements

from the FAA, and did not limit the exclusion to workers

in the transportation industry as did early circuit courts

of appeals.’* Recent decisions of the courts of appeals

14 There can be no doubt that in his employment, Gilmer was

“engaged in interstate commerce.” The securities broker’s work

is the trading of securities in interstate commerce. The proper

inquiry is whether the class of workers to which the worker be-

longs engages in interstate commerce, not whether the individual

worker is actually engaged in interstate commerce. Bacashihua v.

United States Postal Service, 889 F.2d 402, 405 (6th Cir. 1988)

(postal workers are employees in interstate commerce within tne

meaning of Section 1 of the FAA). Thus, no issue is presented

here concerning the meaning of the phrase “engaged in commerce”

within Section 1 of the FAA. See Second Employers’ Liability

Cases, 223 U.S. 1, 51-2 (1912).

% See, Tenney Engineering, Inc. v. United Electrical Radio &

Machine Workers of America Local 437, 207 F.2d 450 (3d Cir.

1953) (en banc). In Tenney, the United States Court of Appeals

for the Third Circuit found only a reference in a 1923 ABA com-

15

for the First, Third, Sixth and Eleventh Circuits also

have not limited the exclusion to workers in the trans-

portation industry. See Derwin v. General Dynamics

Corp., 719 F.2d 484, 488 n.3 (1st Cir. 1988); Service

Employees International Union Local 36 v. Office Cen-

ter Services, Inc., 670 F.2d 404, 406 n.6 (3d Cir. 1982);

Bacashihua, v. United States Postal Service, 859 F.2d

402, 404-05 (6th Cir. 1988); American Postal Workers

Union v. United States Postal Service, 823 F.2d 466

(11th Cir. 1987).

Accordingly, as Section 1 of the FAA excludes Peti-

tioner’s contract of employment from the reach of the

Act, the court of appeals was incorrect in ruling that the

FAA requires compulsory arbitration of Petitioner’s em-

ployment discrimination claim.

II. COMPULSORY ARBITRATION INHERENTLY

CONFLICTS WITH THE PURPOSES AND STRUC-

TURE OF THE ADEA.

As this Court has recognized, not “all controversies im-

plieating statutory rights are suitable for arbitration.”

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, In: .,

473 U.S. 614, 627 (1985). To determine whether statu-

tory claims may be subject to arbitration, a court must

consider whether the text, legislative history, and pur-

poses of the underlying statute reflect an “inten[t] to

preclude a waiver of judicial remedies for the statutory

rights at issue.” Shearson/American Express, Inc. v.

McMahon, 482 U.S. 220, 227 (1987). While the Court

mittee report to the exclusion, and did not review any of the leg-

islative history discussed herein.

The federal courts of appeals for the First, Second, and Seventh

Circuits followed Tenney without independent analysis. See Dick-

stein v. DuPont, 443 F.2d 783 (1st Cir. 1971); Pietro Scalziti Co.

v. International Union of Operating Engineers, 351 F.2d 576 (7th

Cir. 1965) ; Signal-Stat Corp. v. Local 475, United Electrical Radio

and Machine Workers, 235 F.2d 298 (2d Cir. 1956), cert. denied,

354 U.S. 911 (1957).

16

has interpreted the FAA to require arbitration of com-

mercial disputes, the Court has also emphasized that the

statutory rights of employees raise significantly different

considerations which may override the policy encouraging

arbitration. See Atchison, Topeka and Santa Fe Railway

Co. v. Buell, 480 U.S. 557, 565 (1987). The purposes

and structure of the ADEA demonstrate that compul-

sory arbitration inherently conflicts with the ADEA.*

A. Compulsory Arbiiration Conflicts with the Con-

gressional Purpose of Eradicating Employment

Discrimination from Society.

Congress enacted the ADEA to “prohibit arbitrary age

discrimination in employment” because such discrimina-

tion was pervasive in society. 29 U.S.C. §§ 621(a), (b).’”

To achieve this objective, Congress provided for broad

prohibitions, extensive remedies, and administrative and

judicial enforcement. 29 U.S.C. §§ 626(b),(c),(d).

Authorizing the courts to issue broad injunctive relief

is the cornerstone to eliminating discrimination in society.

Albemarle Paper Co. v. Moody, 422 U.S. 405, 415 (1975).

Injunctions allow the courts to prevent employers from

discriminating against other employees and from engag-

ing in other unlawful employment practices. Class-wide

relief changes empioyment practices—a benefit to many

members of the protected class who may not even be

plaintiffs in the suit.

In .ilewander v. Gardner-Denver Co., 415 U.S. 36, 44

(1974), the Court relied on statutory provisions grant-

ing injunctive and affirmative relief in Title VII of the

1 Nothing in the text or legislative history of the ADEA refer-

ences resolution of claims pursuant to private arbitration.

17 “We do find substantial evidence of . . . discrimination based

on unsupported general assumptions about the effect of age on

ability ... .” See Report of the Secretary of Labor, The Older

American Worker, reported in Legislative History of the Age Dis-

crimination in Employment Act, at 5 (1965).

17

Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., to

demonstrate that Congress assigned to the courts “plen-

ary powers to secure compliance” with the statute. In

civil rights cases, “the private litigant not only redresses

his own injury but also vindicates the important con-

gressional policy against discriminatory employment

practices.” Alexander v. Gardner-Denver Co., 415 U.S. at

45. The Court viewed the significance of injunctive relief

in accomplishing the statutory purpose a5 strong evidence

of congressional intent that judicial resolution of dis-

crimination claims could not be displaced by arbitration.

Id.

The ADEA shares the same goal as Title VII of elim-

inating discrimination from the workplace, Lorillard v.

Pons, Inc., 434 U.S. 575, 584 (1978), and similarly au-

thorizes the courts to award broad injunctive relief to

achieve the purposes of the Act. 29 U.S.C. § 626(b). As

in other civil rights statutes, the provision for injunctive

relief in the ADEA reflects Congress’ intent to eliminate

age discriminatory practices on a sweeping, class-wide

basis. See Lorillard v. Pons, Inc., 484 U.S. at 584. Such

relief generally benefits other older workers in the pro-

tected class and achieves the congressional objective of

eradicating discrimination in employment.

In contrast, commercial arbitration of disputes lacks

the societal premise and broad purpose that underly the

civil rights statutes. Commercial arbitration is typically

limited to a specific dispute between the particular par-

ties. See American Arbitration Association, Commercial

Arbitration Rule 17 (1981); Shell, ERISA and Other

Federal E-sployment Statutes: When is Commercial Ar-

bitration an ‘Adequate Substitute’ for the Courts?, 68

Texas L. Rev. 509, 568 (1990). The available remedies

are usually limited to the individual and generally do not

provide for injunctive relief. See Shell, 68 Tex. L. Rev.

at 568.

18

Similarly, arbitration does not provide for class-wide

participation or relief to redress class-wide policies or

practices. Coulson, Fair Treatment: Voluntary Arbitra-

tion of Employee Claims, 83 Arb. J. 23, 29 (1978). The

representative class action mechanism is central to en-

forcement of the ADEA because it allows similarly situ-

ated individuals to join together in litigation. See

Hoffman-La Roche Inc. v. Sperling, —— U.S. ——, 110

S. Ct. 482 (1989). These limitations on the nature and

extent of the remedies available in arbitration make it

ill-suited for accomplishing the broad congressional pur-

pose of eradicating age discrimination from our society.

B. The Statutory Purpose of Protecting Employees

from the Inequalities of the Employment Relation-

ship Warrants Against the Use of Compulsory

Arbitration.

Nothing in the Court’s recent approval of arbitration

of commercial disputes'* suggests that the Court has

overruled or retreated from its previous holdings that ar-

bitration of an employment dispute may not bar employ-

ees from pursuing their statutory claims in court. Bar-

rentine v. Arkansas-Best Freight System, Inc., 450 U.S.

728 (1981); Alexander v. Gardner-Denver Co., 415 U.S.

36 (1974)."* Indeed, the Court’s most recent examination

18 See McMahon, 482 U.S. 220 (1987) (upheld arbitration agree-

ment between customers and brokerage firm; claims under the

Securities Exchange Act of 1934, SEC Rule 10b-5, and the Racket-

eer Influenced and Corrupt Organizations Act (RICO)); Rod-

riguez de Quijas v. Shearson/American Express, Inc., —— US.

——, 109 S. Ct. 1917 (1989) (upheld arbitration agreement be-

tween securities investors and brokerage firm; claims under the

Securities Act of 1988 and the Securities Exchange Act of 1934) ;

Dean Witter Reynolds Inc., v. Byrd, 470 U.S. 213 (1985) (upheld

arbitation agreement between securities investors and broker-

dealer; claims under State law.)

18 While Barrentine and Alexander involved the arbitration of

claims under collective bargaining agreements, the Court's analysis

of whether arbitration precludes judicial review is instructive in

the case of individual employment contracts. In Barrentine and

—_-——. eee e:hlULC OO Oe ee

19

of compulsory arbitration of an employment dispute re-

affirms the Court’s commitment to upholding judicial re-

view of claims deriving from statutes designed to pro-

vide workers with minimum federal protections.

In Atchison, Topeka and Santa Fe Railway Co. v.

Buell, 480 U.S. 557 (1987), a unanimous Court relied on

its previous holdings in Barrentine and Alexander to con-

clude that a claim under the Federal Employers’ Liability

Act for personal injuries was not precluded by the avail-

ability of arbitration under the Railway Labor Act.

While the Court gave due deference to the strong na-

tional policy favoring arbitration, it reiterated that

different considerations apply where the employee’s

claim is based on rights arising out of a statute de-

signed to provide minimum substantive guarantees to

individual workers.

480 U.S. at 565, quoting Barrentine, 450 U.S. at 737.

Alexander, the Court analyzed the inherent conflict between arbitra-

tion ad the purposes and structures of the statutes, which is

analogous to the current analysis used by the Court. See McMahon,

482 U.S. at 227. While the Court’s recent decisions call into ques-

tion the portions of Barrentine and Alexander that express a dis-

trust of the arbitration system and the authority of the arbitrator,

those considerations are not central to their analyses.

Nor is there any basis for distinguishing Barrentine and Alex-

ander because the claims subject to arbitration were contractual

and not statutory. The contractual claims mirrored the statutory

claims upon which the employees later brought suit. See Barren-

tine, 450 U.S. at 732 (claim for wages under the collective bar-

gaining agreement were compensable under the Fair Labor Stand-

ards Act, 29 U.S.C. § 201 et seg. (1938) ) ; Alexander, 415 U.S. at 42

(collective bargaining agreement prohibited race discrimination

similar to Title VII’s prohibition). In holding that arbitration of

contractual claims did not preclude litigation of the employee’s stat-

utory rights in Barrentine and Alexander, the Court implied that

statutory rights could not be subject to arbitration when arbitra-

tion was compelled by the collective bargaining agreement. Simi-

larly here, arbitration is compelled by the employer and the securi-

ties industry.

20

An essential difference between employment contracts

The foundation of this nation’s labor laws _— word

the inequality of bargaining power between individ-

ual employee and his employer. Congress recognized this

fundamental concern in enacting the Norris-LaGuardia

Act, finding that “the individual unorganized worker is

commonly helpless to exercise actual liberty of contract

and to protect his freedom of labor, and thereby to ob-

tain acceptable terms and conditions of employment . . .”

29 U.S.C. § 102 (1932). ~

More recently, Congress reiterated this concern in dis-

approving of waivers under the ADEA outside the super-

vision of a court or the Equal Employment Opportunity

Commission. Senator Melcher, Chairman of the Senate

Select Committee on the Aging emphasized the

inherently different bargaining power of employers

and employees. There will always be employees who

feel that if they do not sign a waiver they will not

only be out of a job, but also will forfeit any present

or future benefits to which they may otherwise be

entitled.

S. Rep. 79, 101st Cong., Ist Sess. 7 (1989) (quoting 133

Cong. Rec. 8.14883 (daily ed. Oct. 15, 1987) ).

This Court has similarly recognized the inherent in-

equality between employees and employers as a funda-

mental underpinning of employment statutes. Finding

20 Even when employees gain collective power by organizing un-

ions. the interests of the individual employee may not be adequately

protected. See Alexander v. Gardner-Denver Co., 415 U.S. at 59.

21

that a waiver of rights under the Fair Labor Standards

Act, 29 U.S.C. § 201 et seg. (1988) (FLSA), was contrary

to public policy, the Court admonished that “employers

might be able to use superior bargaining power to coerce

employees to . . . waive their protections under the Act.”

Tony & Susan Alamo Foundation v. Secretary of Labor,

471 U.S. 290, 302 (1985). Justice O’Connor shared this

concern in the case of a state statute intended to protect

employees “from the exploitative employer who would de-

mand that a prospective employee sign away in advance

his right to resort to the judicial system for redress of

an employment grievance.” Perry v. Thomas, 482 U.S.

483, 495 (1987) (O’Connor, J., dissenting) .

The “agreement” to arbitrate at issue in this case is

contained in the “Uniform Application for Securities

Industries Registration Form,” which all employees who

deal in securities before the exchanges must sign. Ap-

pendix to Petition at 40a. The arbitration provision

does not state that it applies to claims under federal or

state employment laws. Appendix to Petition at 41a.

Such arbitration provisions are typically mandatory and

non-negotiable. See Baxter and Hunt, Alternative Dis-

pute Resolution: Arbitration of Employment Claims, 15

Empl. Rel. L. J. 187, 191 (1989). An individual who

wants to work in the securities industry has no choice

but to sign the form or seek employment elsewhere—an

alternative that is not readily available to many o/der

workers.”

In an employment discrimination case, the very entity

accvsed of violating the employee’s rights, the employer,

dete»mines and controls the forum and the manner in

which, the employee’s civil rights will be resolved. This

glaring anomaly was of great concern to Chief Justice

21 See Report of the Secretary of Labor, Labor Market Problems

of Older Workers 21 (1989). The chance of reemployment declines

significantly with age. Displaced Older Workers: Hearing Before

the Select Comm. on Aging, 99th Cong., Ist Sess. 46 (1985).

22

Burger who explained his vote in Alexander v. Gardner-

Denver Co.:

Plainly, it would not comport with the congressional

objectives behind a statute seeking to enforce civil

rights protected by Title VII to allow the very forces

that had practiced discrimination to contract away

the right to enforce civil rights in the courts. For

federal courts to defer to arbitral decisions reached

by the same combination of forces that had long

perpetuated invidious discrimination would have

made the foxes guardians of the chickens.

Barrentine v. Arkansas-Best Freight System, 450 U.S.

728, 750 (1981) (Burger, C.J., dissenting).

The same concern applies here, where the employer ac-

cused of discrimination and the employer’s industry man-

date arbitration and unilaterally establish all of the rules

and terms of the process. Arbitrators in these cases are

members of the securities industry themselves and there-

fore may not be impartial. See Shell, at 569. In the

ADEA,” Congress sought to counteract the superior

power of the employer and the inherent bias in a system

controlled by the employer by establishing de novo judi-

cial review to insure an independent and objective resolu-

tion of the claim.

C. Compulsory Arbitration Eliminates the Employee’s

Choice of Forum Which the ADEA Safeguards.

The ADEA embodies a panoply of enforcement provi-

sions which make arbitration incompatible with the stat-

22 Recent amendments to the ADEA reaffirm the importance of

the protections Congress has consistently provided to employees to

insure that their rights are secure. The Older Workers’ Benefit

Protection Act, Pub. L. 101-438, Title II, amends the ADEA to

establish stringent standards for releases, settlements, and waiv-

‘ers. Id. The Act applies to waivers executed after the date of en-

actment, Pub. L. 101-433, Title II, § 202, and was signed into law

on October 16, 1990. President Signs Betts Bill Extending Age

Bias Protection to Benefit Plans, Daily Lab. Rep. (BNA) No. 202,

at A-3 (Oct. 18, 1990).

23

utory scheme. First and foremost, the ADEA grants the

individual plaintiff a variety of choices of forum to obtain

relief for the discrimination he has suffered. 29 U.S.C.

$§ 626(b), (c), (d), 633.

It is the employee, not the employer, who initiates the

administrative process either before the EEOC or a state

agency. It is the employee, not the employer, w 10 decides

when and where to seek judicial relief, as the ADEA per-

mits the employee to abandon the administrative process

and proceed in court any time after sixty days have

elapsed from the filing of the charge of discrimination.

29 U.S.C. § 626(d). It is the employee, not the employer,

who subsequently decides to proceed in federal or state

court. These choices are denied the employee and

awarded instead to the employer by the predispute arbi-

tration provision.

Congress sought to safeguard not only a wide range of

choices, but insured that even preliminary action taken

in a nonjudicial forum would not preclude an ultimate

decision by the courts. When Congress adapted Title

VII’s administrative scheme to the ADEA, it provided

that administrative review and determinations would not

affect the individual’s right to de novo review by the

courts. As the Court recognized in Kremer v. Chemical

Construction Corp., 456 U.S. 461, 470 n. 7 (1982):

Since it is settled that decisions by the EEOC do not

preclude a trial de novo in federal court, it is clear

that unreviewed administrative determinations by

state agencies also should not preclude such review

even if such a decision were to be afforded pre-

clusive effect in a state’s own courts.

Similarly, the courts have held that a state administra-

tive determination does not preclude a de novo federal

court action. Id.; University of Tennessee v. Elliott, 478

U.S. 788 (1986); Solimino v. Astoria Yederal Savings &

Loan Assoc., 901 F.2d 1148 (2d Cir. 1990); petition for

24

cert. filed, No. 89-1895 (May 30, 1990) ; Duggan v. Board

of Education, 818 F.2d 1291 (7th Cir. 1987); contra

Stillians v. State of Iowa, 843 F.2d 276 (8th Cir. 1988).

Enforcing a compulsory arbitration provision elimi-

nates the employee’s right to choose the appropriate

forum and precludes de novo judicial review. These ef-

fects of compulsory arbitration plainly conflict with the

multiforum structure Congress designed for the ADEA,

and make compulsory arbitration incompatible with the

Act.

III. REQUIRING COMPULSORY ARBITRATION OF

EMPLOYMENT CLAIMS WOULD ELIMINATE

WHOLE CATEGORIES OF EMPLOYEES AND

STATUTORY CLAIMS FROM THE PURVIEW OF

THE COURTS.

The Court’s decision in this case will have far-reaching

effects on the enforcement of numerous federal employ-

ment statutes such as Title VII, 42 U.S.C. § 2000e et seq.,

the Fair Labor Standards Act, 29 U.S.C. § 201 et seq.,

the Employee Retirement Security Income Act, 29 U.S.C.

§ 1001 et seq., the Equal Pay Act, 29 U.S.C. § 206(d)

et seq., and the newly enacted Americans with Disabili-

ties Act, 42 U.S.C. § 12101 et seg. (ADA). The circuit

courts of appeals that have considered this issue unani-

mously relied on Alexander v. Gardner-Denver to pre-

clude arbitration of Title VII claims and ADEA claims

until the decision below.” A ruling by this Court requir-

28 See Alford v. Dean Witter Reynolds, 905 F.2d 104 (5th Cir.

1990) ; Utley v. Goldman Sachs & Co., 883 F.2d 184 (1st Cir. 1989),

cert. denied, 110 8. Ct. 842 (1990); Nicholson v. CPC Internaticnal,

Inc., 877 F.2d 221 (3d Cir. 1989); Swenson v. Management Re-

cruiters International, Inc., 858 F.2d 1804 (8th Cir. 1988), cert.

denied, 110 8. Ct. 143 (1989) ; Cooper v. Asplundh Tree Expert Co.,

836 F.2d 1544, 15538 (10th Cir. 1988); Johnson v. University of

Wisconsin-Milwaukee, 783 F.2d 59 (7th Cir. 1986); Criswell v.

Western Airlines, Inc., T29 F.2d 544, 547-49 (9th Cir. 1983), aff'd

on other grounds, 472 U.S. 400 (1985).

ing compulsory arbitration of ADEA claims would have

to naturally restrict or overrule Alexander v. Gardner-

Denver due to the similarities between Title VII and the

ADEA.

Requiring compulsory arbitration of statutory employ-

ment claims would effectively exempt entire industries

from the scrutiny of the courts and enforcement agencies

regarding their employment practices. See Nicholson v.

CPC International, Inc., 877 F.2d 221, 231 (3d Cir.

1989). The securities induStry has made a concerted ef-

fort to enforce the arbitration provision in its registra-

tion form by making it mandatory and non-negotiable.

A ruling by this Court sanctioning the use of such con-

tracts of adhesion would encourage other industries and

employers to adopt similar arbitration provisions.

Since decisions of individual arbitrators do not have

precedential effect, employees would be forced to litigate

issues over and over again as there would be no legal

precedent te prevent employers from engaging in recur-

ring discriminatory practices. Enforcing compulsory ar-

bitration provisions contained in employment applications

or contracts would emasculate the ADEA and thwart the

congressional goal of eradicating discrimination. Only by

rejecting compulsory arbitration and preserving the em-

ployee’s right to de novo judicial review will the Court

give full effect to that laudable goal.

AARP respectfully submits that the decision of the

Fourth Circuit should be reversed and the case remanded

to the district court for further proceedings on Petition-

er’s ADEA claim.

Dated: November 15, 1990