Justices Halt Right to Sue Over Job Bias

In a major victory for corporate America, the Supreme Court on Wednesday repealed the right of American workers to go to court over job bias, ruling that their employers may force them to take their complaints to private arbitration.

The court’s 5-4 ruling could shift the balance of power in favor of management and weaken job protections for millions of American workers. With this decision, employers can now require their workers to sign an arbitration agreement as a condition of employment.

Employment arbitration has grown rapidly in the last decade, and surveys have shown that as many as 1 in 12 U.S. workers is covered by an arbitration clause. But until now, there have been legal doubts about whether unwilling workers could be forced to accept arbitration.

In Wednesday’s ruling, the court’s conservative majority said that the Federal Arbitration Act of 1925 trumps an employee’s right to sue under more recent workplace anti-discrimination laws.

Stephen Bokat, an attorney for the U.S. Chamber of Commerce, predicted that more companies will adopt arbitration.

“Some have been holding back, awaiting a decision on this issue. Now that it’s clear, I think they will move forward,” he said. “It is a very good decision for business.”

Employers have long complained that discrimination lawsuits are costly and time consuming. They say arbitration offers a quicker and cheaper way to resolve disputes.

Most workers’ rights lawyers say arbitration tilts the system in favor of employers. They say juries are more likely to award money damages to an aggrieved worker. And many companies pay large sums to settle lawsuits out of court and avoid a jury trial.

One advocate of workers’ rights said arbitration is not inherently unfair, but he worried that the law does not require fair procedures.

“This is a sad day for workplace justice in America,” said Lewis Maltby, counsel for the National Workrights Institute in Princeton, N.J. “The Supreme Court has given employers carte blanche to set up a private justice system, without any provision to say it must be fair and voluntary.”

The ruling will have an immediate effect in California. The U.S. 9th Circuit Court of Appeals, which is based in San Francisco, had insisted that job bias victims had a right to take their claims before a jury.

But most other federal appeals courts have upheld arbitration agreements.

The Supreme Court took up the case of a Northern California computer salesman to resolve the dispute over the law.

Saint Clair Adams, 37, who is gay, said he had been harassed repeatedly by co-workers and a store manager at a Circuit City outlet in Santa Rosa.

He sued under California’s civil rights law and sought a jury trial. But the company went to court to have his claim thrown out and sent to arbitration. Adams, like all Circuit City employees, had signed an arbitration agreement as a condition of being hired.

In Circuit City vs. Adams, 99-1379, the Supreme Court relied on the 1925 arbitration law to reverse the 9th Circuit Court.

This law was originally passed to require courts to honor arbitration verdicts in disputes involving shipping firms and other businesses that moved goods. But the conservative justices said that the law also can be read to cover other arbitration agreements, including “contracts for employment.”

Chief Justice William H. Rehnquist and Justices Sandra Day O’Connor, Antonin Scalia, Anthony M. Kennedy and Clarence Thomas formed the majority.

Ten years ago, the court upheld an arbitration clause that was standard for stockbrokers and ruled that it prevented an older worker from suing his brokerage firm for age discrimination.

“The court has been quite specific in holding that arbitration agreements can be enforced under the FAA,” Kennedy said, despite the “specific protections against discrimination” written into federal law.

Now, all employers are free to require their workers to sign an agreement to arbitrate their disputes. And employers can use these agreements to block workers from going to court.

“There are real benefits to the enforcement of arbitration provisions,” Kennedy said. It “allows parties to avoid the cost of litigation.”

Companies that are sued will see a real cost benefit in arbitration. They can avoid the expense of a long jury trial as well as discovery orders that seek information from company files. Arbitration also does away with the possibility of a huge damages verdict.

The cost benefit is not so apparent for workers. Some arbitration systems require both parties to split the cost of the proceeding, meaning that a disgruntled employee might have to pay thousands of dollars just to have a claim heard.

By contrast, workers have been able to go to court for no cost because plaintiff’s lawyers will take cases with the understanding that they will be paid only if their client wins.

Studies that have compared private arbitration and jury trials have yielded mixed results. Workers rarely win a large money award through arbitration, but some studies have found that they are slightly more likely to win some money through arbitration than from going to court.

Maltby, though a critic of arbitration in general, praised the American Arbitration Assn. for insisting on fair procedures.

“There are arbitration systems that produce very good results, but I’m pessimistic. The [U.S.] Supreme Court has shown no interest in requiring fairness, and employers are not likely to do it out of the goodness of their heart,” he said.

Unionized workers have long used arbitration to settle disputes with management. Those systems are seen as fair because both sides have bargaining clout in setting the rules.

California experts said Wednesday’s rulings could affect not just discrimination lawsuits but workers who sue for a wrongful termination or other job complaints.

Last year, the California Supreme Court said it would not enforce arbitration clauses that were not fair to workers, and some lawyers predicted a new round of litigation.

“I think the courts will have to look at this again. It has to be fair to both parties,” said Art Silbergeld, a management lawyer in Los Angeles.

For its part, the Supreme Court majority has shown little interest in civil rights for workers.

Ten years ago, Congress took up a civil rights bill to reverse a series of conservative rulings from the Rehnquist Court that made it hard for workers to win claims of job bias. After a long battle, Congress passed the Civil Rights Act of 1991, which gave workers the right to a jury trial.

In Wednesday’s ruling, the court essentially erased that law by saying the Federal Arbitration Act had given employers a way to do an end-run around the legal system.

In dissent, Justice John Paul Stevens accused his colleagues of ignoring the obvious “disparity in bargaining power” between an individual employee and a large company.

“When the court simply ignores the interest of the unrepresented employee, it skews its interpretation with its own policy preferences. That’s the sad result in this case,” said Stevens, who was joined by Justices David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer.