Employers May Require Employees To Arbitrate Their Title VII Claims As A Condition Of Employment

The United States Court of Appeals, Ninth Circuit, recently addressed the issue of whether an employer may require compulsory arbitration of Title VII claims as a condition of employment. (Equal Employment Opportunity Commission v. Luce, Forward, Hamilton, & Scripps, 2002 WL 2004340).


The law firm of Luce, Forward, Hamilton & Scripps extended Donald Lagatree a conditional offer of employment. The firm’s offer of employment letter contained an arbitration clause requiring Lagatree to agree to submit all claims relating to his employment to binding arbitration. Lagatree refused to sign the arbitration agreement and the firm withdrew its offer of employment. Lagatree filed a complaint with the Equal Employment Opportunity Commission (EEOC). The EEOC sued the firm on Lagatree’s behalf, asserting that prior case law forbade the firm from requiring Lagatree to sign an arbitration agreement and that the firm unlawfully retaliated against Lagatree for asserting his constitutional right to a jury trial.

In a prior decision, the Ninth Circuit held that employers may not use compulsory arbitration agreements to “compel individuals to waive their Title VII right to a judicial forum.” (Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998)). Based on the holding in Duffield, the trial court issued an injunction enjoining the firm from requiring employees to arbitrate Title VII claims as a condition of employment and from enforcing previously executed arbitration agreements.

The Appellate Decision

The Court of Appeals held employers may require employees, as a condition of employment, to sign agreements to arbitrate claims arising under Title VII, which prohibits discrimination based on “race, color, religion, sex, or national origin.” In reaching its decision, the Court found that Duffield “no longer remains good law” because it has been implicitly overruled by Circuit City Stores v. Adams, 532 U.S. 105 (2001). The Court noted that, in Circuit City, the United States Supreme Court determined that the Federal Arbitration Act covers “all employment contracts except those of transportation workers.” The Supreme Court reasoned, “[B]y agreeing to arbitrate . . . a party does not forgo the substantive rights afforded by statute; it only submits to their resolution in an arbitral, rather than a judicial forum.”

However, the existence of an arbitration agreement between an employer and employee does not prevent an employee from filing a complaint with the EEOC. Because the EEOC is not a party to an arbitration agreement, it “remains free to seek appropriate victim-specific relief in any suitable forum.”

To prevail on his unlawful retaliation claim, Lagatree was required to prove that he was engaged in a protected activity and the law firm retaliated against him for engaging in the activity. The Court determined Lagatree was not engaged in a protected activity in refusing to sign the arbitration agreement because no federal law guaranteed him the ability to vindicate his rights under Title VII in a judicial forum.

NOTE: For further discussions of relevant opinions as referenced in this case, see our previous Legal Alerts: U.S. Supreme Court Disagrees with Ninth Circuit’s Interpretation of Exclusion Provision of Federal Arbitration Act, March 21, 2001; Ninth Circuit Upholds Binding Arbitration Provision In Employer’s Dispute Resolution Program, April 24, 2002; Claim Under FEHA May Be Subjected to Compulsory Arbitration, July 11, 2002.