Significant Decisions in Labor Cases

By Hukill, Craig | Monthly Labor Review, June 1990 | Go to article overview

Significant Decisions in Labor Cases


Hukill, Craig, Monthly Labor Review


Does an employee give up the right to sue his or her employer for age discrimination by agreeing to arbitrate all employment-related claims? According to a divided Court of Appeals for the Fourth Circuit in Gilmer v. Interstate/ Johnson Lane Corp.,' the answer to this question is yes because Federal policy, as expressed by the Federal Arbitration Act,2 favors arbitration.

When Richard Gilmer was hired as a manager of financial services by the Interstate/Johnson Lane Corporation, he was required to register as a securities representative with the New York Stock Exchange. At the time he registered, Gilmer agreed that any employment-related dispute between himself and his employer would be subject to the stock exchange's arbitration procedures. Six years after entering into this agreement, Gilmer's job was terminated. Believing that his former employer had fired him because of his age, Gilmer chose to file suit in Federal court under the Age Discrimination in Employment Act, rather than submit his dispute to arbitration. The employer objected, claiming that the Federal Arbitration Act required Gilmer to abide by his agreement to arbitrate.

Writing for a 2-1 majority of the Fourth Circuit panel, Judge J. Harvie Wilkinson agreed that arbitration, not Federal court litigation, was required. Arbitration agreements, he wrote, should be enforced unless the party opposing arbitration can show that Congress, by enacting specific legislation, intended to limit or prohibit parties from waiving a statutory right to judicial determination. Judge Wilkinson examined the text, legislative history, and purposes of the Age Discrimination in Employment Act and concluded that in enacting this law Congress had not provided the type of "affirmative guidance" that is needed to override the Federal Arbitration Act requirement that arbitration agreements ordinarily should be honored.

Courts of appeals that addressed this issue before the decision in Gilmer was issued all had held that employees can file age discrimination suits despite the existence of an agreement to arbitrate. In the most recent of these decisions, Nicholson v. CPC International Inc., the Court of Appeals for the Third Circuit held that arbitration agreements are inherently inconsistent with the Age Discrimination in Employment Act's enforcement scheme and should therefore not be enforced.1 The Third Circuit noted that primary enforcement authority under the Age Discrimination in Employment Act lies with the Equal Employment Opportunity Commission and that an individual's right to sue is subordinate to this authority. Thus, in the court's view, enforcing arbitration agreements would diminish the Commission's statutory role9 and encourage employers to prepare similar employment contracts so as to avoid that agency's scrutiny.

The Nicholson court also was persuaded by the legislative history of the Age Discrimination in Employment Act, which showed that Congress had deliberately opted for Federal court enforcement rather than a less formal administrative scheme." In the court's words, "[t]his suggests that Congress intended that extrajudicial methods of seeking resolution of age discrimination claims should not impede ultimate resolution of those claims in a judicial forum when extra judicial methods proved inadequate."

Finally, the Nicholson. court emphasized that an arbitrator's power to address workplace discrimination may be more limited than that of a Federal district court. As an example, the court noted that arbitrators are limited to resolving the disputes of particular grievants, whereas Federal court judges may address company wide discrimination by enjoining employers from committing future acts of discrimination.

The Supreme Court has not addressed the issue raised by the courts' decisions in Gilmer and Nicholson. Because the Gilmer decision creates a conflict between circuit courts, the High Court may now be more likely to consider this important issue. …

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