Lack of Meaningful Choice Defined: Your Job vs. Your Right to Sue in a Judicial Forum

• Publication year: 2005

SEATTLE UNIVERSITY LAW REVIEWVolume 28, No. 3SPRING 2005

COMMENTS

Lack of Meaningful Choice Defined: Your Job vs. Your Right to Sue in a Judicial Forum

Sara Lingafelter(fn*)

I. Introduction

Employees today face a challenging job market, at best. According to Alan Greenspan, "[N]early 2 million of our workforce have been unemployed for more than a year."(fn1) Couple unemployment rates with a slow economic recovery,(fn2) add in slow job growth,(fn3) rising benefit costs,(fn4) increases in outsourcing and offshoring,(fn5) and a job market emerges wholly unlike the relative boom of the 1990s. Employers have replaced less than a tenth of the jobs cut since 2001 and have reigned in wage growth.(fn6) Some workers are even losing their employment battle to robots.(fn7) Employers receive piles of resumes and applications for each opening and are able to hire overqualified workers who have been unable to find work elsewhere. Those lucky enough to be employed have fewer coworkers but are expected to output the same amount of work, and yet real hourly wages are falling.(fn8) It is, as they would say in real estate, a buyer's market. Companies hold all the cards and employees feel lucky to not be drawing on dwindling unemployment benefits. In this employment landscape, the employer has a larger than usual bargaining advantage when it comes to the terms of an employment contract. The employer can decide on the terms of employment, and if an employee or prospect is not willing to sign on the dotted line, one of the country's many long-term unemployed would be happy to do so.

One such term that confronts new and existing employees is perhaps unfamiliar: a mandatory arbitration clause.(fn9) The parties agree to this clause prior to the time any dispute arises, indicating prospective agreement to arbitrate any claims that may arise between them. Mandatory arbitration in this context must be distinguished from post-dispute or voluntary arbitration, in which the parties may elect, after a dispute arises, to settle the dispute through binding or non-binding arbitration.

Since the United State Supreme Court decided Circuit City v. Adams, which made it clear that arbitration clauses should be enforced in employment contracts, academics and judges have argued over the fairness of this decision.(fn10) This Comment contributes to the ongoing argument that mandatory arbitration agreements should not be enforced in the employment context for federal statutory claims and highlights possible defenses to such contracts for employee plaintiffs.

Mandatory arbitration agreements subvert an employee's constitutional right to a judicial forum and generally place unfair burdens on plaintiffs. An employee faced with the option of either signing a mandatory arbitration agreement or losing a job often has no meaningful choice. The Supreme Court, however, has failed to recognize first that Congress did not intend for mandatory arbitration to extend to Title VII claims and second, that employers often leave employees with no meaningful choice regarding mandatory arbitration. Nonetheless, state and federal judges are increasingly recognizing that arbitration agreements may be the product of procedural unconscionability. Accordingly, when employees are forced to sign mandatory arbitration agreements and express reservations about being forced to do so, courts examine the doctrine of procedural unconscionability to determine whether such agreements are enforceable.

Part II of this Comment provides some background on the problems employees face with respect to mandatory arbitration agreements. Part III introduces relevant federal statutes, the Federal Arbitration Act, and Title VII of the Civil Rights Act of 1964. Part IV looks at the intersection of arbitration and employee Title VII claims in federal courts, paying particular attention to the Supreme Court and the Ninth Circuit Court of Appeals. Part V examines these courts' repeated misinterpretations of congressional intent and the legislative attempts to remedy the problem, and argues that employee plaintiffs should scrutinize recent state court decisions that have found arbitration agreements substantively and procedurally unconscionable for potential assistance in defending against the enforcement of arbitration clauses. Part VI concludes with the recommendations that courts should reexamine Congress' intent with respect to mandatory arbitration clauses and scrutinize the enforcement of such clauses under the state law doctrine of unconscionability.

II: Understanding the Problem

Imagine this scenario:(fn11) After a long, arduous, and stress-filled interview process, a college graduate receives an offer to work as a teller at a regional bank. She begins working at the bank, and after a few months of positive performance reviews, she is feeling good about her decision to accept the job.

After her first year, she is called into the human resources office and handed a piece of paper titled "Arbitration Agreement." The human resources manager explains that she has to sign the form and return it before her next shift. The teller scans the paperwork marked with a "sign here" tab at the bottom of the page. One of the clauses catches her attention:I agree that I will settle any and all previously unasserted claims, disputes or controversies arising out of or relating to my application or candidacy for employment, employment and/or cessation of employment with Regional Bank, exclusively by final and binding arbitration before a neutral Arbitrator. By way of example only, such claims include claims under federal, state, and local statutory or common law, such as the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, including the amendments of the Civil Rights Act of 1991, the Americans with Disabilities Act, the law of contract, and the law of tort.(fn12)

She re-reads the clause and vaguely wonders what Title VII is. She asks the human resources manager, "If the company breaks the law, I still have the right to sue, right?" The human resources manager explains that as a condition of continued employment, she has to agree to the contract, and tells her that if she does not agree to the company's terms of employment, he has a pile of resumes stacked a foot high from which he can choose another employee.

Like most individuals signing these types of contracts, she does not take the contract to an attorney for scrutiny. She does not appreciate the ultimatum approach taken by the human resources manager, but she needs to keep her job. The human resources manager has made it clear that she has no room to negotiate. The teller thinks to herself, "I'm sure nothing is going to happen to me-the last year has gone so well-and surely, if anything should happen, the clause cannot really mean what it says." She initials next to the clause, signs the rest of the contract, hands it back to the human resources manager, and returns to work.

Several months later she is unexpectedly terminated. Her supervisor tells her that she has had some cash drawer irregularities and management is just following their written policies by terminating her. The teller knows that other employees have had cash drawer irregularities, but she has observed different treatment of such episodes depending upon whether the teller is male or female. She mentions this to the supervisor, who tells her that his mind is made up and that she needs to clear out her desk.

The young teller just wants her job back. She tries to talk to the human resources manager, who says there is nothing he can do. Angry and frustrated, she points out the disparate treatment between male and female tellers with cash drawer irregularities. She tells the human resources manager that if there is nothing he can do, perhaps she will just have to call an attorney. He says, "Good luck. You signed an arbitration clause. You'll never see the inside of a courtroom."

Employees in a number of industries face variations of this scenario.(fn13) Specifically, employees of Credit Suisse First Boston, Anheuser-Busch, and Halliburton were required, under such clauses, to waive their right to sue in court for claims including wrongful firing, harassment, and discrimination.(fn14) Stockbrokers may have signed such clauses when joining the major exchanges.(fn15) Approximately 60,000 Circuit City employees agreed to such a clause upon accepting employment.(fn16) Thousands of employers and hundreds of thousands of employees may potentially be affected by such clauses.(fn17)

Arbitration clauses vary. They range from agreements to arbitrate all contractual claims arising specifically out of the employment relationship to agreements to arbitrate for any and all claims. These latter agreements generally encompass federal law claims such as antidiscrimination statutes. Such agreements are particularly important to legislators, courts, employees, and arbitration advocates, because an employee who has been discriminated against has certain statutory rights and remedies under Title VII of the Civil Rights Act of 1964.(fn18) However, when an employee's claim is relegated to arbitration, a private process that is not required to follow our statutory law to the letter, the employee may not receive the remedies Congress intended.

Employees agree to these arbitration clauses for a variety of...