In a decision that could affect millions of employees, the Supreme Court ruled Wednesday that employers can compel workers to give up their right to sue by requiring them to handle employment claims through arbitration. The closely watched ruling is expected to accelerate employers' adoption of arbitration clauses, which require workers to take claims to a third party whose decisions are generally binding. The decision stems from a former Circuit City Stores employee who sued his employer over alleged harassment despite having signed an agreement to arbitrate. It takes away the big issue of whether employment agreements can be enforced under federal law.
Arbitration is quite widespread, and more and more employers are interested in it.
Though the ruling covers most employment disputes, an earlier decision by the 9th U.S. Circuit Court of Appeals in San Francisco held that civil-rights cases are exempt from mandatory arbitration in that district. Subsequent lawsuits are expected to test whether workers covered by that ruling have to abide by arbitration instead. Arbitration has become increasingly common in the employment context. Many companies, including Travelers Group, Hooters of America and The Olive Garden, have used arbitration agreements. Supporters praise the process as a way to quickly resolve employment cases without clogging up the courts.