South Carolina Lawyer
Vol. 13, No. 4, Pg. 14.
Mandatory arbitration: A cure-all for employment disputes?
14Mandatory arbitration: A cure-all for employment disputes?By William H. Floyd III and Phillip A. KilgoreAlthough certainly not a panacea, a good dose of employment dispute arbitration might cure your clients' ills. Properly drafted arbitration agreements that govern the employment relationship are essential medicine on an employment attorney's shelf. All who represent either employees or employers need to be familiar with the field of mandatory arbitration of employment related disputes.
The U.S. and South Carolina Supreme Courts recently endorsed the validity of arbitration agreements in all but a few very narrow areas of employment relationship; consequently, the scope of a valid arbitration agreement can cover most federal and state statutory and common law claims. With the probable exception of workers compensation and unemployment benefits claims, an employer and employee can agree to arbitrate almost any current or future employment related claims.
16 Federal Arbitration Act
Congress enacted the Federal Arbitration Act (FAA) in 1925. 9 U.S.C. §1 et seq. The FAA provides for arbitration of a wide array of disputes. Section 1 of the FAA provides that "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." As alternative dispute resolution became a more popular method of addressing employment disputes, courts began to consider whether the language of § 1 of the FAA excluded all contracts of employment from arbitration.
Until recently, courts were somewhat split over the interpretation of the exclusionary language of § 1. While most federal circuit courts had held that a valid arbitration agreement could force employment disputes to arbitration, the Ninth Circuit Court of Appeals disagreed, and held that § 1 excluded all employment contracts from arbitration. The U.S. Supreme Court addressed this split in 2001 and held that § 1 did not constitute a general ban on the arbitration of employment disputes.
In Circuit City Stores, Inc. v. Adams, 121 S.C. Ct. 1302 (2001), the Supreme Court held that the FAA permits employers to require employees to arbitrate employment related disputes. Saint Clair Adams completed and signed an employment application for a job at Circuit City that required him to:
... settle any and all previously unasserted claims, disputes or controversies out of or relating to my...