Appeal from the United States District Court for the District of Columbia (No. 95cv01785)
Before: Edwards, Chief Judge, Silberman and Henderson, Circuit Judges.
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Opinion for the Court filed by Chief Judge Edwards.
Opinion concurring in part and dissenting in part filed by Circuit Judge Henderson.
This case raises important issues regarding whether and to what extent a person can be required, as a condition of employment, to (1) waive all rights to a trial by jury in a court of competent jurisdiction with respect to any dispute relating to recruitment, employment, or termination, including claims involving laws against discrimination, and (2) sign an agreement providing that, at the employer's option, any such employment disputes must be arbitrated. At its core, this appeal challenges the enforceability of conditions of employment requiring individuals to arbitrate claims resting on statutory rights. The issues at hand bring into focus the seminal decision of Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), and call into question the limits of the Supreme Court's holdings in that case.
In this case, the appellant, Clinton Cole, seeks to overturn an order of the District Court dismissing his complaint under Title VII of the Civil Rights Act of 1964, as amended, and compelling arbitration of his disputes with Burns International Security Services ("Burns" or "Burns Security"). Although Cole seemingly raised a viable action under Title VII, the District Court held that his statutory claims of employment discrimination should be dismissed pursuant to the Federal Arbitration Act ("FAA" or "Act"). The District Court held that section 1 of the Act does not exempt all "employment" contracts and that Cole's job was not in an exempt category, and, therefore, Cole was bound by the agreement he had signed with Burns allowing the employer to opt for arbitration. In reaching this conclusion, the trial court found that the arbitration agreement was a valid and enforceable contract.
We agree with the District Court that section 1 of the FAA does not exclude all contracts of employment from the coverage of the FAA. Every circuit court to squarely address this issue has held that section 1 excludes from the coverage of the FAA only the employment contracts of workers actually engaged in the movement of goods in interstate commerce. Additionally, the Supreme Court's interpretation of section 2 of the FAA in Allied-Bruce Terminix Cos. v. Dobson, 115 S. Ct. 834 (1995), strongly supports this narrow interpretation of section 1. Finally, although the Supreme Court did not address the issue of section 1's scope in Gilmer, the majority's decision suggests that the Court would be inclined to accept the narrow interpretation we adopt.
Second, we find that the disputed arbitration agreement is valid. In doing so, we are mindful of the clear distinctions between arbitration of labor disputes under a collective bargaining agreement and mandatory arbitration of individual statutory claims outside of the context of collective bargaining. We are also cognizant of the numerous concerns that have been voiced by arbitrators, legal commentators, the Equal Employment Opportunity Commission ("EEOC"), and National Labor Relations Board ("NLRB") regarding the potential inequities and inadequacies of arbitration in individual employment cases, as well as their concerns about the competence of arbitrators and the arbitral forum to enforce effectively the myriad of public laws protecting workers and regulating the workplace. Nonetheless, in this case, we are constrained by Gilmer to find the arbitration agreement enforceable. We do not read Gilmer as mandating the enforcement of all mandatory agreements to arbitrate statutory claims; rather, we read Gilmer as requiring the enforcement of arbitration agreements that do not undermine the relevant statutory scheme. The agreement in this case meets that standard.
We note that this case raises an issue not directly presented in Gilmer or any other Supreme Court case to date: can an employer require an employee to arbitrate all disputes and also require the employee to pay all or part of the arbitrators' fees? We hold that it cannot. In Gilmer and other securities industry cases, the employers routinely paid all arbitrators' fees, so the matter was not in dispute. However, there is no reason to think that the Court would have approved a program of mandatory arbitration of statutory claims in Gilmer in the absence of employer agreement to pay arbitrators' fees. Because public law confers both substantive rights and a reasonable right of access to a neutral forum in which those rights can be vindicated, we find that employees cannot be required to pay for the services of a "judge" in order to pursue their statutory rights. In this case, the parties' contract does not address explicitly the payment of the arbitrators' fees; however, because ambiguity in a contract should be resolved against the drafter-here, the employer-and ambiguity should be resolved in favor of a legal construction of the parties' agreement, we interpret the arbitration agreement at issue as requiring Burns to pay all arbitrators' fees associated with the resolution of Cole's claims. *fn1 So construed, the contract is valid.
The dissent objects to our reaching the question as to who bears the burden of paying for an arbitrator's services, presumably because in some cases an employee might not be required to pay the arbitrator's compensation. This argument clearly misses the point. In our view, an employee can never be required, as a condition of employment, to pay an arbitrator's compensation in order to secure the resolution of statutory claims under Title VII (any more than an employee can be made to pay a judge's salary). If there is any risk that an arbitration agreement can be construed to require this result, this would surely deter the bringing of arbitration *fn2 and constitute a de facto forfeiture of the employee's statutory rights. The only way that an arbitration agreement of the sort at issue here can be lawful is if the employer assumes responsibility for the payment of the arbitrator's compensation.
Cole has also argued that the arbitration agreement should not be enforced because the arbitrator's rulings, even as to the meaning of public law under Title VII, will not be subject to judicial review. Cole is wrong on this point. The nearly unlimited deference paid to arbitration awards in the context of collective bargaining is not required, and not appropriate, in the context of employees' statutory claims. In this context, the Supreme Court has assumed that arbitration awards are subject to judicial review sufficiently rigorous to ensure compliance with statutory law. Indeed, Burns has conceded such review in this case. Because the courts will always remain available to ensure that arbitrators properly interpret the dictates of public law, an agreement to arbitrate statutory claims of discrimination is not unconscionable or otherwise unenforceable.
Clinton Cole used to work as a security guard at Union Station in Washington, D.C. for a company called LaSalle and Partners ("LaSalle"). In 1991, Burns Security took over LaSalle's contract to provide security at Union Station and required all LaSalle employees to sign a "Pre-Dispute Resolution Agreement" in order to obtain employment with Burns. The Pre-Dispute Resolution Agreement ("agreement" or "contract"), in relevant part, provides:
In consideration of the Company employing you, you and the Company each agrees that, in the event either party (or its representatives, successors or assigns) brings an action in a court of competent jurisdiction relating to your recruitment, employment with, or termination of employment from the Company, the plaintiff in such action agrees to waive his, her or its right to a trial by jury, and further agrees that no demand, request or motion will be made for trial by jury.
In consideration of the Company employing you, you further agree that, in the event that you seek relief in a court of competent jurisdiction for a dispute covered by this Agreement, the Company may, at any time within 60 days of the service of your complaint upon the Company, at its option, require all or part of the dispute to be arbitrated by one arbitrator in accordance with the rules of the American Arbitration Association. You agree that the option to arbitrate any dispute is governed by the Federal Arbitration Act, and fully enforceable. You understand and agree that, if the Company exercises its option, any dispute arbitrated will be heard solely by the arbitrator, and not by a court.
This pre-dispute resolution agreement will cover all matters directly or indirectly related to your recruitment, employment or termination of employment by the Company; including, but not limited to, claims involving laws against discrimination whether brought under federal and/or state law, and/or claims involving co-employees but excluding Worker's Compensation Claims.
The right to a trial, and to a trial by jury, is of value. you may wish to consult an attorney prior to signing this agreement. if so, take a copy of this form with you. however, you will not be offered employment until this form is signed and returned by you.
Deferred Appendix ("D.A.") 12. On August 5, 1991, Cole signed the agreement and began working for Burns. *fn3
In October 1993, Burns Security fired Cole. After filing charges with the Equal Employment Opportunity Commission, Cole filed the instant complaint in the United States District Court for the District of Columbia, alleging racial discrimination, harassment based on race, retaliation for his writing a letter of complaint regarding sexual harassment of a subordinate employee by another supervisor at Burns, and intentional infliction of emotional distress. Burns moved to compel arbitration of the dispute and to dismiss Cole's complaint pursuant to the terms of the contract.
The District Court found that the arbitration agreement clearly covered Cole's claims. The court also rejected Cole's suggestions (1) that the Pre-Dispute Resolution Agreement was excluded from coverage under the Federal Arbitration Act under 9 U.S.C. Section(s) 1, and (2) that the agreement was an unenforceable and unconscionable contract of adhesion. As a result, the trial court granted Burns Security's motion to compel arbitration and dismissed Cole's complaint. Cole v. Burns Int'l Security Serv., No. 95-1785 (D.D.C. Jan. 31, 1996), reprinted in D.A. 4-11.
A. The Scope of Section 1 of the FAA
The Federal Arbitration Act was originally enacted in 1925 and then reenacted and codified in 1947 as Title 9 of the United States Code. Its purpose "was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." Gilmer, 500 U.S. at 24. To that end, section 2 of the FAA provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. Section(s) 2 (1994). Section 1 of the FAA, however, states 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." 9 U.S.C. Section(s) 1 (1994). Cole argues that section 1 exempts all contracts of employment that facilitate or affect commerce (even tangentially) from the provisions of section 2 and, therefore, that the Pre-Dispute Resolution Agreement (which the parties agree is part of Cole's contract for employment) is not valid and enforceable under the FAA. Burns Security argues, and the District Court found, that section 1 only exempts employment contracts of workers actually engaged in the transportation of goods in commerce. The parties agree that Cole, as a security guard, does not fall within that narrow class of workers.
This issue was raised, but not decided, in Gilmer. In that case, Gilmer had been required by his employer to register as a securities representative with the New York Stock Exchange ("NYSE"). The registration application contained an agreement to arbitrate any controversy arising out of Gilmer's employment or termination of employment. When Gilmer, age 62, was terminated, he brought suit in federal court alleging a violation of the Age Discrimination in Employment Act of 1967 ("ADEA"), and his employer sought to compel arbitration. See id. at 23-24. The Supreme Court acknowledged, but declined to resolve, the issue of the scope of section 1's exclusion of contracts of employment, finding that the arbitration agreement at issue was not part of a contract for employment. Id. at 25 n.2.
We hold that section 1 of the FAA does not exclude all contracts of employment that affect commerce. The rationale for the narrow reading of Section(s) 1 is straightforward and is based on two well-established canons of statutory construction. One of the canons holds that courts should "avoid a reading [of statutory language] which renders some words altogether redundant." Gustafson v. Alloyd Co., 115 S. Ct. 1061, 1069 (1995) (citing United States v. Menasche, 348 U.S. 528, 538-39 (1955)). Here, if the final phrase of the exclusionary clause-"any other class of workers engaged in foreign or interstate commerce"-extended to all workers whose jobs have any effect on commerce, the specific inclusion of seamen and railroad workers would have been unnecessary. See Rojas v. TK Communications, Inc., 87 F.3d 745, 748 (5th Cir. 1996) (" "[i]t is quite impossible to apply a broad meaning to the term "commerce' in Section 1 and not rob the rest of the exclusion clause of all significance.' " (quoting Albert v. National Cash Register Co., 874 F. Supp. 1324, 1327 (S.D. Fla. 1994))). A broad exclusion of all employment contracts could simply have said "nothing herein shall apply to contracts of employment."
The second applicable canon, the rule of ejusdem generis, "limits general terms which follow specific ones to matters similar to those specified." Gooch v. United States, 297 U.S. 124, 128 (1936); accord Harrison v. PPG Industries, Inc., 446 U.S. 578, 588 (1980). In this case, the general phrase, "any other class of workers engaged in foreign or interstate commerce," takes its meaning from the specific terms preceding it, "seamen" and "railroad employees," and, therefore, under the rule of ejusdem generis, [it] include[s] only those other classes of workers who are likewise engaged directly in commerce, that is, only those other classes of workers who are actually engaged in the movement of interstate or foreign commerce or in work so closely related thereto as to be in practical effect part of it.
Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, 598 (6th Cir. 1995) (quoting Tenney Engineering, Inc. v. United Elec., Radio & Machine Workers of America, Local 437, 207 F.2d 450, 452 (3d. Cir. 1953)). In addition to the canons of statutory construction, our research indicates that every circuit to consider this issue squarely has found that section 1 of the FAA exempts only the employment contracts of workers actually engaged in the movement of goods in interstate commerce. See Dickstein v. duPont, 443 F.2d 783, 785 (1st Cir. 1971) (Section 1 is limited to employees "involved in, or closely related to, the actual movement of goods in interstate commerce."); Erving v. Virginia Squires Basketball Club, 468 F.2d 1064, 1069 (2d Cir. 1972) (Section 1 applies "only to those actually in the transportation industry."); Tenney Engineering, Inc., 207 F.2d at 452 (Section 1 applies only to workers "who are actually engaged in the movement of interstate or foreign commerce or in work so closely related thereto as to be in practical effect part of it."); Rojas, 87 F.3d at 748 (Section 1 exempts only contracts of employment of workers engaged in the movement of goods in commerce.); Asplundh Tree Expert Co., 71 F.3d at 600-01 (Section 1 "should be narrowly construed to apply to employment contracts of seamen, railroad workers, and any other class of workers actually engaged in the movement of goods in interstate commerce."); Miller Brewing Co. v. Brewery Workers Local Union No. 9, 739 F.2d 1159, 1162 (7th Cir. 1984) (Section 1 applies only "to workers employed in the transportation industries."). But see United Elec., Radio & Machine Workers v. Miller Metal Prods., Inc., 215 F.2d 221, 224 (4th Cir. 1954) (questioning, in dicta, the narrow interpretation of section 1). We have no firm basis upon which to depart from the view endorsed by most of our sister circuits.
The narrow interpretation of the exclusionary clause in section 1 is also supported by the Supreme Court's decision in Allied-Bruce Terminix Cos., 115 S. Ct. at 834. Allied-Bruce Terminix involved the interpretation of section 2 of the FAA, specifically, whether the language-"a contract evidencing a transaction involving commerce"-extended the Act's reach to the full limits of Congress's commerce clause powers. In concluding that section 2 did reach to the limits of the commerce clause, the Court contrasted the phrase "involving commerce," found in section 2, with the term "in commerce," which is found in the exclusionary clause of section 1:
The initial interpretive question focuses upon the words "involving commerce." These words are broader than the often-found words of art "in commerce." They therefore cover more than " "only persons or activities within the flow of interstate commerce.' " United States v. American Building Maintenance Industries, 422 U.S. 271, 276, 95 S.Ct. 2150, 2154, 45 L.Ed.2d 177 (1975), quoting Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 195, 95 S.Ct. 392, 398, 42 L.Ed.2d 378 (1974) (defining "in commerce" as related to the "flow" and defining the "flow" to include "the generation of goods and services for interstate markets and their transport and distribution to the consumer"); see also FTC v. Bunte Brothers, Inc., 312 U.S. 349, 351, 61 S.Ct. 580, 582, 85 L.Ed. 881 (1941).
Allied-Bruce Terminix Cos., 115 S. Ct. at 839. This analysis strongly suggests that section 1's exclusion of "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce," covers only those workers actually involved in the "flow" of commerce, i.e., those workers responsible for the transportation and distribution of goods.
Finally, although the decision in Gilmer did not reach the issue of section 1's scope, see Gilmer, 500 U.S. at 25 n.2, and did not analyze the arbitration agreement at issue as an employment contract, see id., the majority opinion indicates that the Court would be inclined to read section 1 narrowly, as we do today. Gilmer enforced an agreement to arbitrate all employment-related claims that was entered into as a condition of employment. As Justice Stevens's dissent suggests, see Gilmer, 500 U.S. at 40, if the FAA actually excluded all employment contracts from the enforcement provisions of the FAA, it would be anomalous to compel arbitration of Gilmer's employment claims simply because the arbitration agreement was not formally part of a "contract for employment." We believe that the result reached in Gilmer implicitly suggests that the FAA does not exclude all contracts of employment.
We recognize that, as Justice Stevens argued in his Gilmer dissent, and as appellant argues here, the legislative history of section 1 of the FAA may be read to indicate that Congress intended to exclude all contracts of employment from the coverage of the FAA. Id. at 38-39. See Jean R. Sternlight, Panacea or Corporate Tool?: Debunking the Supreme Court's Preference for Binding Arbitration, 74 Wash. U. L.Q. 637 (1996) (analyzing history of FAA and its interpretation). Nevertheless, we believe that there are compelling reasons to hold that section 1 of the FAA only excludes from the provisions of the Act the employment contracts of workers engaged in the transportation of goods in commerce.
In a case such as this, where the statutory text does not admit of serious ambiguity, and where firmly established case law is absolutely clear on the meaning of the statute, legislative history is, at best, secondary, and, at worst, irrelevant. See, e.g., Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 808-09 n.3 (1989) ("Legislative history is irrelevant to the interpretation of an unambiguous statute."). Furthermore, it is unclear what difference it would make if this case were deemed to be outside the scope of the FAA. The parties' agreement would still be a contract that waives Cole's right to a judicial forum for employment-related claims and agrees to submit those claims to arbitration. Burns would still have the right to seek enforcement of that contract. Although the applicability of the FAA may be significant in the sense that the statute prescribes certain procedural rules that might not otherwise obtain, we have little doubt that, even if an arbitration agreement is outside the FAA, the agreement still may be enforced and the arbitrator's award still may be subject to judicial review. However, we need not resolve this issue in light of our holding that section 1 of the FAA excludes from the FAA only the employment contracts of workers engaged in the transportation of goods in commerce.
B. The Enforceability of Conditions of Employment Requiring Individual Employees to Arbitrate Claims Resting on Statutory Rights
We turn now to the heart of the problem in this case, i.e., the enforceability of conditions of employment requiring individual employees to use arbitration in place of judicial fora for the resolution of statutory claims. In considering this question, it is important to understand what this case is not about: (1) This is not a case in which an employee and an employer, in the face of a legal problem, have made an ad hoc, mutually voluntary decision to pursue arbitration or some other form of alternative dispute resolution in lieu of formal litigation. Rather this case involves a situation in which an employee has been required, as a condition of employment, to forego all access to jury trials *fn4 and (at the employer's option) to use arbitration in place of judicial fora for the resolution of statutory as well as contractual claims. (2) This is not a case involving the enforcement of arbitration under a collective bargaining agreement. The employee here is acting alone, without ties to union representation and without any limitations imposed by a collective bargaining contract.
In order to properly consider the validity of the arbitration agreement in this case, it is crucial to emphasize the distinction between arbitration in the context of collective bargaining and mandatory arbitration of statutory claims outside of the context of a union contract. These are vastly different situations, involving very different considerations. Arbitration in collective bargaining has a rich tradition in the United States, and a plethora of case law to support it. Arbitration of statutory claims, however, is the proverbial "new kid on the block," mostly an attempt to reduce the burdens and expenses of formal litigation. And arbitration of statutory claims is hardly legendary, for it is not only a new idea, but it comes in no clear form, and it has many detractors. Not surprisingly, because traditional labor arbitration is so celebrated in the United States, it is easy for the uninitiated to fall prey to the suggestion that the legal precepts governing the enforcement and review of arbitration emanating from collective bargaining should be equally applicable to arbitration of all employment disputes. This is a mischievous idea, one that we categorically reject.
We will first assess the unique context of mandatory arbitration of statutory claims (outside of collective bargaining), to give clear focus to the issues at hand. We will then consider the specific terms of the arbitration agreement in this case to determine the legality of the disputed arrangement.
1. The Role of Arbitration: Collective Bargaining and Statutory Claims Distinguished
American jurisprudence regarding the enforceability of arbitration agreements and the permissible scope of judicial review of arbitration awards has developed most fully in the context of collective bargaining. In that context, strict enforcement of arbitration agreements and minimal review of arbitration awards are both logical and desirable. But the collective bargaining context is quite different from a context in which individuals seek to vindicate statutory rights defined by Congress and arbitration serves merely as a substitute for litigation. As we shall ...