Apr 17, 2001 General Employment Issues

Proposed Federal Legislation Would Prohibit Arbitration Clauses Covering Statutory Employment Claims

On the heels of the United States Supreme Court’s ruling in Circuit City, Inc. v. Adams, No. 99-1379, proposed legislation has already been introduced in Congress to overturn the Supreme Court’s ruling. In Circuit City, the Court ruled that the Federal Arbitration Act (“FAA”) – the federal law authorizing federal courts to enforce agreements to arbitrate — applies to employment contracts, thereby allowing employers to require employees, as a condition of their employment, to sign agreements to arbitrate employment disputes. [For a more detailed discussion of the holding and the potential impact of Circuit City, see Supreme Court Determines That The Federal Arbitration Act Applies To Employment Disputes, March 22, 2001.]

The proposed legislation, introduced on April 4, 2001, by Rep. Edward Markey (D-Mass.) and entitled the Civil Rights Procedures Protection Act of 2001, H.R. 1489, seeks to curtail the use of pre-dispute arbitration agreements in the employment context. The legislation would amend Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the Rehabilitation Act in an effort to “prevent the involuntary application of arbitration” to claims arising under these statutes.

Accordingly, the bill would prohibit employers from requiring that employees, as a condition of their employment, agree to submit to arbitration claims under these laws. The proposed legislation would only permit post-dispute agreements between the employee and employer to resolve such disputes “through arbitration or another procedure.” In other words, under the proposed legislation, only after an employment dispute arose could an employee enter into a valid agreement to arbitrate the claims.

Similar legislation was previously introduced last year and earlier this year by Rep. Markey. Although last year’s version never made it out of committee, in light of the Circuit City decision the fate of this year’s proposals will likely be closely monitored by both labor and management.