The Federal Arbitration Act and individual employment contracts: a better means to an equally just end.

AuthorKolakowski, William F., III

INTRODUCTION

To fulfill our traditional obligation means that we should provide mechanisms that can produce an acceptable result in the shortest possible time, with the least possible expense, and with a minimum of stress on the participants. That is what justice is all about.

--Warren E. Burger(1)

In a 1982 speech, Chief Justice Warren Burger argued that arbitration represented one of the most promising mechanisms for the efficient achievement of justice and that its use "ha[d] been neglected"(2) in the private sector. Today, growing enthusiasm for all forms of alternative dispute resolution is replacing the neglect to which Burger referred. The increasing number of cases arbitrated in recent years reflects this enthusiasm.(3)

The many advantages that arbitration offers over typical courtroom litigation helps to explain this increase. Arbitration typically resolves claims more quickly and with less expense than traditional litigation.(4) Moreover, arbitration provides increased flexibility, which allows parties to adapt it to their particular situation.(5) Although arbitration does have several weaknesses(6) -- notably, the lack of a jury -- many litigants now see arbitration as a superior option to otherwise long and costly resolutions of their claims in court.(7)

In practice, most arbitrations have the following characteristics in common:

(1) [T]he parties choose to have a dispute or disputes decided by a

third party, called an arbitrator; (2) the parties choose the arbitrator

or a method for his or her selection; (3) the arbitrator hears the dispute;

(4) the arbitrator makes a binding award; (5) the arbitrator's

decision is, subject to very limited grounds of review, final and enforceable

. . . in the same manner as a judgment.(8)

Arbitration in this form was not uncommon at the turn of the century,(9) but federal courts generally refused to enforce arbitral agreements until the passage of the Federal Arbitration Act of 1925 (FAA).(10) In addition to making arbitration agreements "valid, irrevocable, and enforceable,"(11) the FAA provides for stays of proceedings pending arbitration(12) and orders to compel arbitration.(13) In recent years the Supreme Court has stated that, by enacting the FAA, Congress declared a national policy favoring arbitration.(14) The Court has expressed further support for arbitration by stating that federal courts should resolve doubts about the scope of arbitration agreements in favor of arbitration.(15)

Although arbitration could be useful in resolving individual employment contract disputes, confusion in the federal courts about the applicability of the FAA is hampering arbitration's development in this context.(16) The FAA can be used to enforce arbitration provisions in individual employment contracts because its coverage extends to all arbitration agreements in "contract[s] evidencing . . . transaction[s] involving commerce."(17) Some courts have been reluctant to use the Act to enforce arbitral provisions in individual employment contracts, however, because the definition of "commerce" in section 1 of the Act contains language exempting certain employment contracts. This language reads: "but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any class of workers engaged in foreign or interstate commerce."(18) Courts have split over whether they should read this exception broadly(19) -- effectively excluding all employment contracts from its coverage -- or narrowly(20) -- exempting only employment contracts of railroad employees, seamen, and analogous classes of workers in the transportation industries.(21)

Despite this split -- and despite the fact that the Supreme Court has frequently heard disputes concerning the FAA over the past two decades(22) -- the Court has yet to rule on the issue of the exceptions scope.(23) Gilmer v. Interstate/Johnson Lane Corp.(24) presented the most recent opportunity to address the issue. In a footnote in Gilmer, the Court took note of the fact that several amici curiae had argued that the employment contract exception in section 1 of the FAA excluded all contracts of employment from the coverage of the FAA.(25) The Court left the issue "for another day," however, because the parties did not raise the issue in the courts below or in the petition for certiorari and because it was beyond the scope of the case.(26) In his dissent, Justice Stevens decided to address the scope of the employment contract exception anyway and argued for a broad interpretation.(27) Stevens, however, is the only sitting Justice who has articulated an opinion on the subject.

This Note argues that courts should adopt a narrow reading of the employment contract exception to the FAA, thus making arbitration agreements in most individual employment contracts enforceable under the Act. Part I argues that a textual analysis of the FAA supports a narrow interpretation of the exception. Because some courts and commentators have argued that the text favors a broad interpretation, Part II examines the legislative history of the exception and demonstrates that no firm conclusions can be drawn about congressional intent regarding the exception's scope. Finally, Part III demonstrates that a narrow reading of the exception best serves the purposes behind the FAA by overriding judicial hostility toward arbitration, placing arbitration agreements on an equal footing with other contract provisions, and providing a more efficient method of adjudication in the workplace.

  1. SUPPORTING A NARROW INTERPRETATION THROUGH TEXTUAL ANALYSIS

    Courts begin interpreting a statute by first examining the statute's text.(28) In studying the text, courts "assume that the legislative purpose is expressed by the ordinary meaning of the words used."(29) Once a court is satisfied that the text of a statute mandates a particular interpretation, an inquiry into the text's meaning is generally finished.(30) In examining the text of the employment contract exception of the FAA, it becomes apparent that the text justifies only a narrow(31) interpretation of the exception.

    The FAA only applies to maritime transactions and those "contract[s] evidencing . . . transaction[s] involving commerce."(32) The language in section 1 of the FAA defining "commerce" is thus especially significant because "commerce" plays a key role in defining the scope of the FAA: "`[C]ommerce,' as herein defined, means commerce among the several States or with foreign nations . . . but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."(33) A cursory reading of this text allows at least two possible interpretations of the employment contract exception. First, the language of the final part -- "other class of workers engaged in foreign or interstate commerce" -- may be construed broadly as referring to the entire class of workers within the scope of Congress's power over interstate commerce.(34) Under this interpretation the exception would cover almost all employment contracts. A second, narrower interpretation results from reading "other class of workers" to reach only those classes of workers similar in kind to seamen and railroad employees.(35)

    An analysis of the text of the FAA produces three textually based arguments in favor of a narrow interpretation as the only reasonable reading of the exception. First, section I.A argues that Congress understood the words engaged in interstate commerce as referring only to those classes of workers involved in the transportation of commerce. Second, section I.B argues that the statutory interpretation canon ejusdem generis supports a narrow interpretation by limiting the general language of the exception. Third, section I.C argues that the traditional maxim that every part of a statute must be given effect also supports a narrow interpretation. Section I.D then responds to the argument that a narrow interpretation of the exception will result in inconsistent definitions Or commerce in sections 1 and 2 of the FAA. This section first contends that no such inconsistency exists and then argues that any inconsistency that might exist is explicable by analyzing the statute's text.

    1. Engaged in Interstate Commerce vs. Affecting Interstate Commerce

      An understanding of Congress's use of the word engaged in other contemporaneous legislation, along with the more limited view of the commerce power that prevailed at the time of the FAA's passage, indicates that a narrow interpretation of the employment contract exception in the FAA is the correct one. At the time of the FAA's passage in 1925, "Congressional power over individuals whose activities affected interstate commerce had not developed to the extent to which it was expanded in the succeeding years."(36) In fact, the Supreme Court routinely struck down federal statutes that sought to regulate economic activity beyond the interstate movement of goods.(37) It was not until the 1937 decision NLRB v. Jones & Laughlin Steel Corp.(38) that the Court held that Congress was able to regulate activity that had a "serious effect upon interstate commerce."(39)

      The limited reach of the commerce power was reflected in a distinction Congress made between those workers who were engaged in interstate commerce and those who affected interstate commerce.(40) The Federal Employers, Liability Act of 1908 (FELA)(41) provides a good example of this distinction. Initially, section 1 of the FELA contained language similar to section 1 of the FAA: "[E]very common carrier by railroad while engaging in commerce between any of the several States or Territories . . . shall be liable in damages to any person suffering injury while he is employed by such carrier in such commerce ...."(42) In the 1916 case Shanks v. Delaware, Lackawanna & Western Railroad Co.(43) the Supreme Court construed this language to...

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