Justices beef up employer authority

Court rules workers can be compelled to accept arbitration


WASHINGTON -- In a ruling affecting millions of workers across the country, the Supreme Court declared yesterday that employers can compel employees to take job-related disputes to arbitration.

The 5-4 decision means that companies can require employees to give up the opportunity to file lawsuits over disagreements linked to their work and, in fact, can make the surrender of that opportunity a condition of hiring.

The case, Circuit City Stores Inc. v. Adams, had been watched by businesses and workers across the nation. The attorneys general of 22 states, fearing that the high court would undercut state employment laws, had filed amicus curiae, or friend of the court, briefs in an unsuccessful attempt to persuade the justices not to rule as they did yesterday.

Many companies favor arbitration on the grounds that it ends disputes relatively quickly and cleanly and without time-consuming and costly litigation. Many workers' groups contend that arbitration is rigged in favor of the companies, who in effect get to write the rules for it.

St. Clair Adams, the plaintiff in the case, went to work at a Santa Rosa, Calif., outlet of Circuit City, the nationwide electronics giant, in 1995. Contending that he was being harassed at work because he was gay and eventually had to resign, he sued in California state court.

After he sued, Circuit Cities invoked a clause in an agreement Adams had signed upon being hired, in which he agreed to arbitrate "any and all" claims or disputes involving his job.

Yesterday's ruling hinged on what Congress meant in 1925, when it passed the Federal Arbitration Act and made agreements to arbitrate commercial disputes generally enforceable in federal court. The act applies widely to any "transaction involving commerce," but a separate section excludes "contracts of seamen, railroad employees or any other class or workers engaged in foreign or interstate commerce."

Exactly what those lawmakers of long ago had in mind has been the subject of debate in the lower courts. Until fairly recently, all federal appeals courts that were called upon to interpret the law did so rather narrowly, holding that arbitration agreements were generally enforceable in the workplace except for those involving maritime and railroad workers and others engaged in the actual movement of goods across state lines.

But in November 1999, the 9th U.S. Circuit Court of Appeals, in San Francisco, interpreted the exclusion clause to mean that the 1925 act did not apply to employment contracts at all. The Supreme Court heard arguments in November.

The 9th Circuit was wrong, the court said in an opinion written by Justice Anthony M. Kennedy and joined by Chief Justice William H. Rehnquist and Justices Sandra Day O'Connor, Antonin Scalia and Clarence Thomas. The majority said the 9th Circuit's interpretation is unworkable and the phrase "engaged in commerce" had to be read narrowly and on its face.

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