SAN FRANCISCO - Employers can require that workers give up the right to sue in court for discrimination and instead use private judges to settle disputes as a condition of being hired, a federal appellate court has ruled.
The 9th U.S. Circuit Court of Appeals' ruling, published yesterday, was hailed as a victory for businesses in California and other Western states because it can protect them from lawsuits by workers claiming sex, age or race discrimination. Companies are increasingly asking job applicants to take grievances to arbitration instead of court.
"It's a very important ruling, especially for people working in the planning stages of employment agreements," said Charles Bird, an attorney at Luce, Forward, Hamilton & Scripps LLP, a San Diego law firm sued by the federal government on behalf of a legal secretary who was fired shortly after being hired because he refused to sign an arbitration agreement.
The 2-1 decision says employment agreements apply to discrimination claims and brings California and other states in the 9th Circuit into step with federal courts that have made similar rulings. Attorneys who represent workers said the decision will harm civil rights protections.
"Businesses in the 9th Circuit can now opt out of anti-discrimination laws," said Cliff Palefsky, a San Francisco attorney. The ruling gives companies "the opportunity to never stand in a public courtroom in a sexual discrimination case."
Dori Bernstein, an EEOC attorney, said the agency is reviewing the decision and will consider whether to ask a larger group of the court's judges to consider the case.
In arbitration, disputes are taken to retired judges or outside experts who, at company expense, hold hearings, conduct investigations and issue rulings that are often binding.
The EEOC sued Luce Forward, the largest law firm based in San Diego, in 1998, saying it improperly required Donald Scott Lagatree to sign an arbitration agreement as a condition for being hired.
A district court granted the commission's request to stop the firm from making job applicants arbitrate discrimination claims, citing a previous 9th Circuit ruling that employees could press job-bias lawsuits under the U.S. Civil Rights Acts even though they promised to arbitrate claims.
Confronted with the same issue in the EEOC case, the 9th Circuit said its prior ruling had been superseded by a U.S. Supreme Court decision last year that allowed companies to enforce employee arbitration agreements.
The appellate court said its prior ruling "no longer remains good law."