California Case Tests Workers Right to Sue
Supreme Court Tackles Challenge To Arbitration
California case tests workers’ right to sue
Tuesday, February 20, 2001
Saint Clair Adams was looking for some holiday work when he applied for a sales job at Circuit City’s Santa Rosa store just before Thanksgiving 1995.
He got the job, but two years later he sued the electronics chain, claiming he had been sexually harassed because he is gay and that he was the target of retaliation for complaining. What Adams didn’t realize, he says, was that his job application included a clause barring him from taking his employer to court. Instead, any complaint had to go to arbitration.
The dispute would take Adams vs. Circuit City to the U.S. Supreme Court, which will tackle one of the most controversial issues in the workplace: whether companies can force workers to give up their right to sue. The court’s decision, which is expected any day, could affect millions of workers with agreements similar to the one Adams says he unwittingly signed.
COMMON CLAUSE
In the past decade, arbitration clauses have spread to virtually every corner of society. When you buy a computer, sign up with a health care plan, take out a mortgage or make a bank deposit, odds are you’re giving up your right to go to court if you have a complaint.
Arbitration is a private, out-of-court process in which the two sides argue their cases before an arbitrator who then makes a binding decision.
In the workplace, it has become as popular among employers as marketing studies. They say arbitration is a cheaper, faster, less disruptive way to settle disputes with employees. And it allows them to avoid facing a jury and a potentially costly verdict.
“You never know what 12 people on a jury will do,” said Paul Cane, a San Francisco lawyer who represents employers.
But employees say the arbitration system is weighted against them, decided by an arbitrator who often knows the employers from prior cases, is likely to award them far less damages than a jury, and whose fees can easily run in the tens of thousands of dollars.
UNFAIR SYSTEM
Arbitration, they say, is nothing more than “wild West justice.”
“It’s a private, secret system of judging,” said Michael Rubin, a San Francisco lawyer who argued Adams’ appeal against Circuit City. “Right now it’s pervasive throughout America.”
So pervasive, in fact, that if the court rules in favor of Adams, “We can expect a push for legislation in various states to limit these agreements,” said Joseph Grodin, an employment law professor at Hastings College of the Law in San Francisco.
In the past two years, an increasing number of workers suing over discrimination have challenged agreements they were required to sign as a condition of employment.
The courts were big supporters of these out-of-court arrangements, seeing them as a way to ease the backlog of cases. But judges are now beginning to set limits on a process critics say has spun out of control.
A CLOSER LOOK
“The trend in the last two years has been to cut back on the rubber- stamping of these agreements and look at them much more carefully,” said David Feller, a labor law professor at Berkeley’s Boalt Hall School of Law.
In August, the California Supreme Court established minimum standards for arbitration proceedings for the first time.
Arbitration has long been used to settle business disputes and over the past several decades has been part of collective bargaining agreements.
But in 1991, the U.S. Supreme Court issued a decision that many private employers say gave them the green light to impose arbitration agreements.
Since then, arbitration clauses have been appearing in employment contracts,
job application forms and employee handbooks.
A 1995 General Accounting Office survey of large companies found that 10 percent had some type of arbitration agreement. The American Arbitration Association, the largest private arbitration provider, says it serves 500 companies, covering 4 million employees.
RAPID GROWTH
Although no one knows for sure how many companies are turning to arbitration, both employers and legal experts say the number is growing at an astonishing rate.
In 1993, Rockwell International became one of the first major companies to require arbitration of on-the-job disputes. The company, which was based in Southern California at the time, had just gone through costly litigation involving a former executive who sued for wrongful termination.
After a three-week trial, Rockwell won the case, but it cost the company $1 million in attorney fees. “When you win a case and spend over $1 million to do it, that’s crazy,” said Marc Kartman, Rockwell’s vice president and associate general counsel. The firm came up with a contract requiring both workers and the company to take any disputes to arbitration.
The system benefits both the employer and employee, Kartman said, noting that many worker lawsuits are thrown out before they ever get to trial. In arbitration, he said, “the arbitrator is more likely to split the baby to give the plaintiff something.”
“If they win are they likely to get as much as if they sued?” he said. “No. But I don’t think people are necessarily entitled to win the lottery.”
Lawyers for workers agree that arbitration is an effective alternative to the lumbering legal system — as long as both parties agree to it.
LITTLE CHOICE
But they say there is nothing voluntary when job applicants are told that if they want to be hired they have to sign away their rights to sue.
“Without your consent it is illegal, it is immoral, it is unconstitutional, ” said Cliff Palefsky, a San Francisco lawyer who has spent the past several years fighting arbitration agreements.
Adams says that forcing him into arbitration is a gross violation of his rights. Within months after he took the job at Circuit City, he said he overheard co-workers making derogatory remarks about women, minorities and gays.
He said he complained to his supervisor, who did nothing. Eventually, Adams said, his co-workers started calling him a “fag,” and he was assigned bad shifts and stripped of his managerial duties.
He left the company after a year, found a lawyer, San Francisco attorney Angela Alioto, and sued. “I was so angry at what was happening to me,” said Adams, who is now active in gay rights and community groups in San Diego.
Circuit City countersued Adams, claiming he had given up his right to go to court and had to arbitrate his claim.
The U.S. Chamber of Commerce and several business and employment groups have weighed in on the side of Circuit City. In his corner, Adams has trial lawyers, civil rights groups and 21 states, including California.
Ultimately, companies say that if the high court rules that federal law prevails, it will prevent state legislatures from meddling with the private arbitration process. In California, bills have been proposed in the past two years banning mandatory arbitration for employees.
But lawyers for workers hope that the high court will realize that these crucial issues are best left to the states.
Regardless of how the court rules, both sides agree that there will be more skirmishes in court over the fine print in arbitration agreements.
E-mail Harriet Chiang at hchiang@sfchronicle.com.
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/02/20/MN83236.DTL
This article appeared on page A – 3 of the San Francisco Chronicle
The Supreme Court, of course, ruled against Adams stating that mandatory binding arbitration clauses in employment contracts are enforceable.