"Arbitration attacked in front of high court"

"Justices disagree on expanding its reach "

Thursday, October 11, 2001

Washington -- Mandatory arbitration came under attack before the U.S. Supreme Court yesterday, with an attorney arguing that the private, quasi-legal system of resolving disputes should not be allowed to restrict the power of agencies that protect the public from employment discrimination

For almost two decades, the high court has encouraged the steady expansion of mandatory arbitration into virtually every industry, allowing companies to block employees, patients and other consumers from taking their complaints to court.

But yesterday, several justices sounded reluctant to extend arbitration's reach by stopping the federal Equal Employment Opportunity Commission from suing an employer for firing a disabled worker who had unwittingly signed away his right to a jury trial. "

Justice Ruth Bader Ginsburg pressed an attorney representing Waffle House, the employer in the case, to explain how an arbitration agreement could affect an agency that did not sign it.

"I cannot see," said Ginsburg, "how the EEOC can be bound."

But Justice Antonin Scalia, joined by Chief Justice William Rehnquist and other members of the court's conservative block, seemed more than willing to strengthen arbitration's presence in the American workplace.


"It doesn't seem to me reasonable . . . ," declared Justice Antonin Scalia during often contentious questioning, "for the agency to bring a lawsuit when the individual can't."

The case is a pivotal test for mandatory arbitration. Companies have embraced the practice as faster, cheaper and more efficient than litigation, imposing it on employees and customers as a routine -- and often unnoticed -- condition of doing business.

But in a series of stories this week, The Chronicle reported that arbitration lacked the legal safeguards of the court system and could be tainted with conflicts of interest that might skew a case's outcome. And if Waffle House wins before the high court, arbitration clauses that bind employees could also bar the EEOC and other agencies from using employee cases to seek monetary damages that, in the words of the EEOC's attorneys, "send a powerful message" to the public "that discrimination will not be tolerated."


The case began in 1994, when Waffle House fired Eric Scott Baker, a short- order cook, after he suffered a seizure at work. Baker took his complaint to the EEOC and, in 1996, the agency sued Waffle House in federal court, claiming the company had illegally fired Baker because of his disability.

Waffle House moved to force the case into arbitration, arguing that Baker was bound by an arbitration clause in a job application he had signed for another Waffle House restaurant, one at which he had declined to work.

The agency countered that, whatever Baker had done, it wasn't bound by the clause and could independently pursue its case against Waffle House in court.

A U.S. District Court judge in Columbia, S.C., ruled that the arbitration clause was invalid because Baker hadn't worked at the second Waffle House. But the U.S. Court of Appeals reversed the ruling and decided that, although the EEOC could represent the public in seeking an order to stop Waffle House from firing any workers illegally, the agency could not act on Baker's behalf by suing the company for his alleged damages -- the very damages covered by the arbitration clause.


Yesterday, the justices tried to define how far Congress had intended the EEOC to go in enforcing anti-discrimination laws with lawsuits.

Chief Justice William Rehnquist asked Deputy Solicitor General Paul Clement, who represented the EEOC before the court, whether the agency could sue Waffle House, even if Baker had settled his dispute with the company.

Clement acknowledged the EEOC could file its own lawsuit because Congress, under "a remarkable statute," had given the agency "an independent cause of action."

"An EEOC . . . action serves as a valuable safety valve," he explained, for protecting the public when workers settle or decline to pursue their own cases.


Robert Gordon, an attorney for Waffle House, argued however that "the public's interest can be vindicated just as effectively in arbitration."

"To allow (employees) to find ways around these agreements," he argued, "goes against the . . . strong federal policy favoring arbitration."

Although the high court has consistently upheld the validity of arbitration clauses in recent years, the decisions have closely divided the justices.

In March, for example, the court ruled 5-4 that most arbitration clauses signed by employees were enforceable under the Federal Arbitration Act. The majority consisted of Justices Kennedy, Rehnquist, O'Connor, Scalia and Thomas.

In the minority were Justices Stevens, Ginsburg, Breyer and Souter. O'Connor, though, has harshly criticized several of the court's past arbitration decisions, and -- as is often the case -- her vote could decide the outcome this time around as well.