One of the most controversial issues in employment law today is the conditioning of employment on the signing of an arbitration agreement. This type of arbitration agreement, known as a "pre-dispute," "mandatory" or "compulsory" agreement, requires newly hired employees to agree to arbitrate all future disputes. Plaintiffs’ attorneys and government policymakers are engaging in all out assault on these types of arbitration agreements.

Up until this year, these attacks had met with little success in the courts. For the first time, the Ninth Circuit Court of Appeals, in Duffield v. Robertson Stephens, struck down compulsory arbitration of statutory claims as a violation of federal law. Still, most state and federal courts continue to enforce compulsory arbitration agreements when the employee’s assent to the agreement was "knowing and voluntary" and the agreement protects the employee’s due process rights.

While the Duffield decision limits the type and scope of arbitration agreements that employers may use, it by no means sounds the death knell for such agreements. This article explains the scope of the Duffield decision and the possibilities for its reversal by the United States Supreme Court. It also discusses why you should consider using some form of arbitration agreement and explores the type of arbitration agreement that will best withstand attack. Finally, we tell you how to draft an agreement and provide you with a model policy.

In Duffield v. Robertson Stephens & Co., 144 F. 3d 1182 (9^th Cir. 1998), petition for cert. filed, (August 4, 1998), the Ninth Circuit addressed the issue of whether employers may require, as a mandatory condition of employment, that all employees waive their right to bring Title VII and other statutory claims in court and force them to agree in advance to submit all employment-related disputes to binding arbitration. The court held that, under the Civil Rights Act of 1991, employers may not compel individuals to waive their Title VII right to a judicial forum. The court did, however, reaffirm an employer’s right to require employees to arbitrate state-law tort and contract claims that are not brought under civil rights statutes.

The Duffield decision addressed the security industry's Form U-4 which requires employees to submit to what the court characterized as "compulsory arbitration." The court defined "compulsory arbitration" as a system under which employers compel their prospective employees, as a condition of employment or during the course of their employment, to waive their rights to litigate future employment-related disputes in a judicial forum.

The Ninth Circuit based its decision on its own unique interpretation of congressional intent. The court stated that Congress’ intent to preclude compulsory arbitration of Title VII claims was conclusively demonstrated in the text and/or legislative history of the Civil Rights Act of 1991, as well as by an examination of its purposes. The court stated that this congressional intent distinguished post-1991 Title VII claims from the pre-1990 ADEA claim which the Supreme Court found to be arbitrable in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).²

First, the court stated that compulsory arbitration was contrary to Congress' directive to read Title VII broadly so as to best effectuate its remedial purposes. The court stated that, in passing the 1991 Act, Congress explicitly directed courts interpreting Title VII to select the construction that most effectively advances the underlying congressional purpose of the Act.

The court then turned to the legislative history of the Act which it found "unambiguously confirms that Congress sought to codify the law as it stood at the time the section was drafted, and eliminates any possibility that Congress intended to write Gilmer into Title VII law or to leave the question of which forms of arbitration were permissible to the whims and presumptions of future court decisions."³ The court asserted that the committee reports and floor statements discussing the bill "plainly demonstrate Congress' intent to preclude enforcement of compulsory agreements to arbitrate future Title VII claims."

The court found the U-4 agreements to be especially violative of Congress' intent because every employer in the securities industry requires its employees to sign the Form. "This creates a take-it-or-leave-it offer for anyone wishing to work anywhere in the United States as a broker-dealer and forces individuals like Duffield to opt for one of two ‘choices’: sign the Form U-4 or seek another profession." The court stated that this sort of dilemma is fundamentally at odds with the Civil Rights Act of 1991, which was intended to help deter employment discrimination by increasing claimants' choice of courts.

In its decision, the Ninth Circuit did recognize that the Supreme Court sanctioned the use of compulsory arbitration to resolve statutory employment claims in Gilmer. The court also recognized the general federal policy favoring arbitration and acknowledged that, ordinarily, this policy would apply to the arbitration of civil rights claims. Ironically, the court ignored these well-established principles and stated that, since Congress manifested its intent not to permit arbitration of statutory discrimination claims in the Civil Rights Act of 1991, the court could not apply these legal principles in this case because the judiciary is not free to "legislate" its own contrary preferences.

Although the Ninth Circuit made a broad statement prohibiting compulsory arbitration of state and federal statutory claims, the holding actually applies only to Title VII claims. As discussed below, the prohibition of other statutory claims is contrary to the Supreme Court’s holding in Gilmer and is nothing more than unenforceable dicta.

In April 1997, the Equal Employment Opportunity Commission (EEOC) issued a policy guidance warning that provisions in employment agreements that prohibit employees from filing a charge or participating in an EEOC proceeding "are null and void as a matter of public policy." In addition, the EEOC stated that such agreements may also amount to separate and discrete violations of the anti-retaliation provisions of Title VII, the Age Discrimination in Employment Act (ADEA), the Equal Pay Act or the Americans with Disabilities Act (ADA).

In July 1997, the EEOC issued its 17-page Policy Statement on Mandatory Arbitration, signed by EEOC Chairman Gilbert Casellas. The policy statement, published as internal guidance for EEOC personnel, characterizes mandatory binding arbitration as "contrary to the fundamental principles" of employment discrimination laws. Further, the statement asserts that mandatory arbitration undermines public enforcement of federal employment discrimination laws and that such systems contain "structural biases" against employees when they are imposed as a condition of employment. The statement instructs EEOC personnel to "closely scrutinize each charge involving an arbitration agreement to determine whether the agreement was secured under coercive circumstances."

Of even greater concern, the EEOC has taken an aggressive position in enforcing this policy directive. Emboldened by the Duffield decision, the EEOC has taken the position that compulsory arbitration agreements are per se unlawful and an independent basis for a probable cause finding of discrimination. The EEOC field representatives have also begun to file federal lawsuits against employers who maintain compulsory arbitration systems applying to statutory claims.

This means that, even when the EEOC did not make a probable cause finding as to the employee’s charge of discrimination, an employer still be forced to defend against an EEOC administrative charge or lawsuit solely because it requires its employees to sign an arbitration agreement as a condition of employment. In California and other states within the jurisdiction of the Ninth Circuit, the EEOC could successfully force the employer to discontinue using a compulsory arbitration agreements. As discussed further below, employers in other jurisdictions should be able to withstand the EEOC’s challenge if they are willing to expend the cost of litigation.

Although the Ninth Circuit has stated its opinion on the issue, the Supreme Court will have the final say on whether compulsory arbitration of statutory claims violates Title VII. Duffield is presently being appealed and it is likely that the Supreme Court will consider the decision and issue its opinion during its next term.

There is reason to believe that the Ninth Circuit’s ruling may be overturned. First, the decision appears to be inconsistent with the policy favoring arbitration of federal statutory discrimination claims enunciated in Gilmer. Second, it is contrary to every other federal circuit court that has addressed the issue. Finally, the decision is contrary to most state court decisions (including California) which have endorsed the use of compulsory arbitration.

The Federal Arbitration Act (FAA) authorizes private agreements to arbitrate where the agreement is contained in a commercial contract and the arbitrable dispute arises out of that contract. In 1991, the United States Supreme Court announced its landmark decision in Gilmer, ruling that an employee who signed a compulsory arbitration agreement applicable to any dispute arising out his employment or termination was not entitled to a jury trial on his federal age discrimination claims. Basing its decision on the FAA, the Supreme Court concluded that an employee may chose to waive his right to a trial in exchange for the benefits associated with binding arbitration.

The Supreme Court’s holding in Gilmer conflicts with the Ninth Circuit’s broad prohibition of arbitration in Duffield. The Supreme Court in Gilmer unequivocally stated that the FAA policy favoring arbitration permits compulsory arbitration of statutory employment discrimination claims. The Supreme Court also stated that arbitration is consistent with the policy behind discrimination statutes and noted that arbitrators are competent to interpret and award the relief authorized by discrimination statutes. This decision was issued before passage of the 1991 Civil Rights Act which implies that, contrary to the Ninth Circuit’s decision in Duffield, Congress intended to codify this decision in the language of the Act.

The Ninth Circuit in Duffield attempted to circumvent Gilmer by seeking to distinguish it on the basis that it was an age discrimination claim decided under the ADEA rather than a Title VII claim under the Civil Rights Act of 1991. The Ninth Circuit also sought to distinguish other circuit court decisions upholding compulsory arbitration of statutory discrimination claims by using its own unique interpretation of the legislative history of the Civil Rights Act of 1991. These are nothing more than distinctions without a difference and will most likely not withstand review by the Supreme Court.

Since Gilmer, more than 200 lower court decisions have extended Gilmer’s teachings to all types of individual employment claims. The following is a brief summary of the law regarding arbitration agreements in the federal circuit courts outside of the Ninth Circuit.

The D.C. Circuit in Cole v. Burns International Security Services, 105 F. 3d 1465 (D.C. Cir. 1997), affirmed the compulsory arbitration of federal statutory claims. The D.C. Circuit found that the arbitration agreement was valid since it met all of the factors addressed in Gilmer, i.e., the agreement (1) provided for neutral arbitrators; (2) provided for more than minimal discovery; (3) required a written award; (4) provided for all types of relief that would otherwise be available in court; and (5) did not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum.

Noting that plaintiffs in court do not have to pay for the services of a judge, the D.C. Circuit opined that an employee could not be required to agree to arbitrate his public law claims as a condition of employment if the arbitration agreement required the employee to pay all or part of the arbitrator’s fees and expenses. In addition, the D.C. Circuit found that the agreement was not unconscionable or otherwise unenforceable, since meaningful, although limited, judicial review of arbitration awards was available.

The First Circuit in Bercovitch v. Baldwin School, 133 F. 3d 141 (1^st Cir. 1998), concluded that the ADA permitted the enforcement of a mandatory arbitration clause in a school enrollment agreement. The student was suspended from school after committing a series of offenses, allegedly as a result of Attention Deficit Disorder, and his parents contended that the school failed to accommodate him in violation of the ADA.

The court interpreted the legislative history of the ADA to permit mandatory arbitration stating that "[i]n light of the language in the ADA text itself, this legislative history is not sufficient to rebut the presumption in favor of arbitration." The court concluded that it did not find any inherent conflict between the mandatory arbitration of ADA claims and the policies behind the ADA, noting that the Supreme Court in Gilmer found that arbitrators are competent to interpret discrimination statutes and the policies behind them.

The Third Circuit Court of Appeals in Great Western Mortgage Corp. v. Peacock, 110 F. 3d 222 (3^rd Cir. 1997), affirmed compulsory arbitration of state law sex harassment claims under the FAA. The court found that Peacock signed an agreement to submit employment-related disputes to arbitration and he did not sign as a result of fraud or coercion. Further, the court rejected Peacock’s argument that the arbitration agreement violated public policy, since Peacock failed to demonstrate any New Jersey policy against arbitration of sexual harassment claims.

The Fourth Circuit in Zandford v. Prudential-Bache Securities, 112 F. 3d 723 (4^th Cir. 1997), affirmed the use of a Form U-4 arbitration agreement as a condition of employment in an action for breach of a settlement agreement. The court concluded that the disputes at issue involved "significant aspects" of the employment relationship and, therefore, were subject to arbitration under and the Form U-4.

The Fifth Circuit in Miller v. Public Storage Mgmt., Inc., 121 F. 3d 215 (5^th Cir. 1997), enforced a mandatory arbitration agreement, signed during a performance review, in a suit brought under the ADA. The court rejected the employee’s argument that the legislative history of the ADA evidenced Congress’ intent to prohibit arbitration of ADA suits. The court pointed out that the explicit language of the ADA advocates the use of alternative dispute resolution. The court emphasized that the Supreme Court and other decisions by the

Fifth Circuit had repeatedly held that suits brought under anti-discrimination statutes are subject to arbitration under the FAA.⁴

The Eighth Circuit Court of Appeals in Patterson v. Tenet Healthcare, 113 F. 3d 832 (8^th Cir. 1997), also affirmed an arbitration clause, set forth on the last page of an employee handbook, in a federal action alleging violations of Title VII and state discrimination laws. The court found that the arbitration clause constituted an enforceable contract. The court acknowledged that it was joining the majority of courts holding that Title VII claims are subject to individual agreements to arbitrate.

Finally, the Eleventh Circuit in Brisentine v. Stone & Webster Engineering Corp., 117 F. 3d 519 (11th Cir. 1997), held that a mandatory arbitration clause does not bar litigation of federal statutory claim, so long as certain procedural requirements (similar to those set forth in the D.C. Circuit’s decision in Cole) are met.

Most states’ courts have also approved mandatory arbitration of employment disputes. For example, the California Arbitration Act provides in relevant part: "A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable save upon such grounds as exits for the revocation of any contract." California Code of Civil Procedure § 1281. The California Arbitration Act expressly applies to employment agreements and contains detailed provisions regarding the conduct of arbitration hearings, discovery, representation by counsel, use of depositions, subpoena issuance, expense payments and corrections of the arbitrator’s award.

California’s judiciary has also affirmed the state’s public policy in favor of arbitration. Moncharsch v. Heily & Blase, 3 Cal. 4th 1 (1992) (the California legislature "has expressed a ‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution’"); Bayscene Resident Negotiations v. Bayscene Mobilehome Park, 15 Cal. App. 4th 119 (1993) (doubts concerning scope of an arbitration agreement are resolved in favor of arbitration).

Further, it is well settled law in California that disputes alleging violation of statutory prohibitions against discrimination are subject to binding arbitration. Brookwood v. Bank of America, 45 Cal. App. 4^th 1667 (1996) (enforcing an employment arbitration agreement for claims of sex discrimination under the California Fair Employment and Housing Act; Spellman v. Securities, Annuities & Ins. Services, Inc., 8 Cal. App. 4^th 452 (1992) (claim of race discrimination in violation of FEHA subject to arbitration).

Recently, in Cione v. Foresters Equity Services, Inc., 58 Cal. App. 4^th 625 (1997), the court approved the use of compulsory arbitration in a Form U-4 agreement. Cione signed a Form U-4 agreement which included a clause agreeing to arbitrate "employment related" disputes and later filed a suit for wrongful termination. The California Court of Appeal held that, as a matter of contract law, an agreement to arbitrate existed and the Form U-4 covered Cione’s wrongful termination claim.

In general, arbitration agreements are enforceable in California so long as they meet certain requirements designed to ensure fairness and a level playing field. In Cheng-Canindin v. Renaissance Hotel Associates, 50 Cal. App. 4^th 676 (1996), the defendants contended that plaintiff effectively waived her right to a judicial forum by agreeing to participate in the company’s "review committee" procedure set forth in the employee handbook. Defendants argued that the review committee procedure constituted an enforceable arbitration procedure.

The California Court of Appeal affirmed the order denying the motion to compel arbitration, holding that the parties had not entered into an arbitration agreement because of the nature and intended effect of the hotel’s review committee procedure. The court reasoned that "although arbitration can take many procedural forms, a dispute resolution procedure is not an arbitration unless there is a third party decision maker, a final and binding decision, and a mechanism to assure a minimum level of impartiality with respect to the rendering of that decision." The court found that the hotel’s internal review committee procedure did not contain these safeguards and that the parties did not intend to enter into a mandatory arbitration agreement.

In Stirlen v. Supercuts, Inc., 51 Cal. App. 4^th 1519 (1997), the court objected to the arbitration agreement because (1) Supercuts had the exclusive right to initiate a court action against employees for disputes concerning intellectual property rights, trade secrets, the recovery of corporate property, and non-competition, but the employee was required to submit any dispute arising out of his employment or termination to binding arbitration; (2) it restricted the remedies available in arbitration; (3) it prescribed the arbitration procedure and fee agreement.

The California Court of Appeal held that the arbitration clause, viewed in its entirety, was unconscionable. First, the court found that the employment agreement was a contract of adhesion since plaintiff had no realistic ability to modify its terms. Second, the court found that the arbitration clause provided the employer with more rights and greater remedies than would otherwise be available while, at the same time, depriving employees of significant rights and remedies. The court concluded that "[t]he one-sidedness in the arbitration clause before us here does not arise out of a single provision of that clause but out of so many provisions that we are obliged to invalidate the entire clause."

Most recently, in Davis v. Continental Airlines, Inc., 59 Cal. App. 4^th 205 (1997), the defendants did not move to compel arbitration for several months and, instead, engaged in extensive discovery. The Court of Appeal held that defendants had waived their right to compel arbitration because their discovery was not limited to issues relating to their motion to compel arbitration. Most of the discovery was related to the underlying facts of the case and would not be allowed in the arbitration proceedings. As a result, Davis was prejudiced because she had not completed equivalent discovery and would have been precluded from doing so if the court dismissed the case and compelled arbitration.

The Duffield decision and the EEOC’s enforcement policy does not mean you should not use arbitration agreements, but only that you need to be more careful in implementing or crafting the policy. Arbitration remains an effective tool for limiting your exposure to potential litigation. Until the Supreme Court rules on the issue, we suggest you continue using arbitration agreements with full knowledge of the benefits and risks.

Most state courts and federal jurisdictions other than the Ninth Circuit have affirmed the employers’ right to use compulsory arbitration agreements covering statutory claims. If your company is located in the Ninth Circuit and you are willing to assume some risk, you may continue to implement mandatory arbitration of statutory claims. The following is a summary of the types of arbitration agreements you may chose to implement.

Non-compulsory arbitration agreements carry little, if any, risk when properly drafted and accompanied by an additional, tangible job benefit. While asserting its opposition to binding arbitration as a condition of employment, the EEOC has also reaffirmed its support for voluntary arbitration and other alternative approaches to resolving employment discrimination disputes. The Ninth Circuit in Duffield also specifically approved employment arbitration procedures by which employees agree to submit disputes to arbitration. The court also permitted agreements in which employers give prospective or current employees the choice to sign an arbitration agreement covering all future employment-related disputes, including the statutory right to litigate such disputes.

The surest way to ensure enforceability of an arbitration agreement for new hires or current employees is to not require execution of the agreement as a condition of employment. Rather, you should openly discuss arbitration as part of the hiring process or encourage the execution of the agreement during the course of employment, but do not require the signing of an agreement as a condition of employment. You must also provide some sort of monetary or related job benefit as inducement to the employee for signing the agreement, such as additional vacation, changed schedule, or other tangible job benefit.

Employers may still require employees, as a condition of employment, to sign arbitration agreements related to non-statutory claims. Again, the court in Duffield specifically held that employers may require compulsory arbitration of state contract and tort claims. Arbitration of these claims would also not be challenged by the EEOC because state contract and tort claims are not within its jurisdiction.

For example, the National Association of Securities Dealers recently voted to recommend that the organization exclude Title VII discrimination claims from its mandatory arbitration agreements. Limiting your arbitration agreement to non-statutory claims would ensure that your agreement was fully enforceable and in compliance with all current legal requirements.

California and most other states have approved compulsory arbitration of statutory claims. Additionally, as discussed above, the other federal circuits addressing the issue have also approved compulsory arbitration of statutory claims.

If your organization is willing to accept an element of risk, you can design an arbitration agreement that applies to statutory claims filed in state court and federal courts outside the jurisdiction of the Ninth Circuit. This type of agreement would be fully enforceable in every state outside the Ninth Circuit. Further, employees filing claims in states within the Ninth Circuit would be forced to file in federal court which traditionally has been a more favorable venue for employers.

You should be aware that, if an employee files an EEOC charge or the EEOC otherwise becomes aware of your arbitration policy, it could challenge the compulsory arbitration of statutory claims. Although the EEOC would not prevail on such an action in most federal courts, you would still be forced to defend against an administrative charge or agree to discontinue the use of the arbitration agreement.

In April 1997, a survey of 530 Fortune 1000 companies found that, over the last three years, 79 percent of respondents had used arbitration and 88 percent had used mediation in employment disputes. Of the responding employers, 81 percent used alternative dispute resolution because it provides "a more satisfactory process" than litigation, 66 percent contended that alternative dispute resolution provides more "satisfactory settlements" than litigation, and 59 percent said that it "preserves good relationships." All these companies can’t be wrong!

Employers have good reasons to prefer final and binding arbitration over a judicial forum for employment disputes. The six main advantages of arbitration over traditional litigation are: (1) speed; (2) cost; (3) finality (the appeal process in courts can take years and arbitration awards can be appealed only on narrow grounds); (4) friendliness of the process; (5) confidentiality; and (6) choice of decision maker.

Despite the restrictions imposed by the Ninth Circuit and the EEOC, we still recommend that you maintain or implement some form of arbitration agreement. Whether you chose to provide an independent inducement to sign the agreement or limit the scope of the agreement, such arbitration agreements are still extremely useful and effective.

From a litigation strategy standpoint, an arbitration agreement makes potential claims less appealing to plaintiffs’ attorneys and discourages frivolous lawsuits. Further, if you are in the Ninth Circuit and chose to maintain a policy requiring compulsory arbitration of state statutory claims, employees will be forced to file claims in federal court which is a more favorable venue for employers.

What you include and what you do not include in an arbitration agreement might determine whether the agreement is enforceable in court. To minimize the chances that a court reviewing the arbitration agreement would find it "unconscionable" due to its one-sidedness, the agreement should create an arbitration procedure that is as court-like as possible. Don’t get too greedy and set up a procedure that grants additional rights to employers while denying rights and remedies to employees.

First you need to decide which type of agreement you want to use. The following is a brief summary of the pros and cons of the agreements described in Section III.

In addition to satisfying the above drafting tips, the agreement should make reference to any internal dispute/complaint resolution procedure the employer requires or suggests be used before resort to arbitration. Before implementation, the agreement should be reviewed by legal counsel to ensure that the minimum standards of fairness and integrity are met.

You should:

If you chose to use a compulsory arbitration agreement, state in the application and offer letter that assent to the company’s grievance and arbitration procedures is a condition of employment.

If you use a compulsory arbitration agreement, you can require applicants to sign the agreement before you agree to hire them. If you use the voluntary agreement, you must ask the employee to sign the agreement and you must provide some sort of monetary or related inducement to the employee for signing the agreement. You must also give the employee the option of not signing the agreement so there will be no question that the agreement was entered into voluntarily.

If you chose to have current employees sign any type of agreement, you must provide some form of inducement. Unlike new hires, who agree at the outset of the employment relationship that binding arbitration of employment-related disputes is a condition of employment, existing employees have been hired without that expectation. Thus, unilateral imposition of an arbitration policy by an employer would not be enforceable.

In enforcing an arbitration agreement, utilize the established procedural guidelines of a recognized alternative dispute organization or state statute. The American Arbitration Association (AAA), perhaps the best-known national dispute resolution organization, developed its own National Rules for the Resolution of Employment Disputes. These procedural rules may be incorporated into the language of any arbitration agreement.

These rules cover arbitration and mediation of employment disputes, including wrongful termination, sexual harassment and various kinds of discrimination. The AAA procedural guidelines are designed to ensure that the employee’s due process rights are comparable to those guaranteed by the courts and statutes. The rules include the following:

In sum, the AAA’s rules seek to ensure the employee’s due process rights in the arbitration of employment disputes. The arbitrator’s decision is then more likely to withstand charges of unfairness by plaintiffs’ attorneys or government agencies.

Make sure that you immediately demand that the employee submit his or her claims to arbitration. If the employee refuses, move to compel arbitration before engaging in extensive discovery. Any significant delay may result in a waiver of your right to compel arbitration.

The following arbitration policy is applicable to California law and incorporates the procedural rules of the American Arbitration Association National Rules for the Resolution of Employment Disputes which are referenced in the Agreement and should be made available to employees who sign the Agreement. If you decide not to utilize the services of AAA, the Agreement can be modified to reference the procedural rules of another association or your state’s arbitration statute.

This model policy is designed as a compulsory agreement applicable to all claims except Title VII claims filed in the Ninth Circuit. It can be modified for use as a voluntary agreement or for use with current employees by changing the language in the last paragraph to offer monetary or other employment benefits in exchange for the employee’s signature to the document. It can also be modified to apply only to non-statutory claims by eliminating reference to the federal and state statutes. The bracketed portions are optional language that can be used or excluded depending on which type of agreement you chose to use.

I agree to arbitrate any dispute, claim, or controversy ("claim") against the Company ("Company"), its current and former agents, owners, officers, directors, or employees, arising before an appropriate government administrative agency or in an appropriate court including, but not limited to, claims of [employment discrimination and harassment under Title VII of the Civil Rights Act, as amended, and the California Fair Employment & Housing Act, age discrimination under the Age Discrimination in Employment Act, as amended, the Americans with Disabilities Act, 42 U.S.C. section 1981, the Employment Retirement Income Security Act, the California Labor Code], breach of employment contract or the implied covenant of good faith and fair dealing, wrongful discharge, or tortious conduct (whether intentional or negligent) including defamation, misrepresentation, fraud, infliction of emotional distress, but excluding claims for workers’ compensation benefits to remedy work-related injury or illness or claims for wages before the California Department of Industrial Relations. [This agreement does not apply to Title VII claims filed in federal district courts within the jurisdiction of the Ninth Circuit.]

The arbitration shall be conducted by an arbitrator in accordance with the rules issued by the American Association ("AAA") for resolution of employment disputes. The Company will pay the arbitrator’s fee for the proceeding, as well as any room or other charges by AAA. The AAA’s National Rules for the Resolution of Employment Disputes are available for review from the Human Resources Department.

The decision or award of the arbitrator shall be final and binding upon the parties. The arbitrator shall have the power to award any type of legal or equitable relief that would be available in a court of competent jurisdiction including, but not limited to, the costs of arbitration, attorneys’ fees, and punitive damages when such damages and fees are available under the applicable statute. Any arbitral award may be entered as a judgment or order in any court of competent jurisdiction. I agree that any relief or recovery to which I am entitled arising out of my employment or cessation of employment shall be limited to that awarded by the arbitrator.

Nothing in this Agreement precludes me from filing a charge or from participating in an administrative investigation of a charge before any appropriate government agency. However, I understand I cannot obtain any monetary relief or recovery from such a proceeding.

I agree to file my demand for arbitration within the time limit established by the applicable statute of limitations for the asserted claims or within one year of the conduct that forms the basis of the claim if no statutory limitation is applicable. Failure to demand arbitration within the prescribed time period shall result in waiver of said claims.

I understand that neither the terms nor the conditions described in this Agreement are intended to create a contract of employment for a specific duration of time. Since employment with the Company is voluntarily entered into, I am free to resign at any time. Similarly, the Company may terminate the employment relationship without cause or notice at any time.

This Agreement, as well as all terms and conditions of my employment, shall be governed by and shall be interpreted in accordance with the laws of the State of California. The terms of this Agreement shall not be orally modified. This Agreement can be modified only by a written document signed by the [Chief Executive Officer] [President] of the Company and me.

A court or other entity construing this Agreement may administer, modify, or interpret it to the extent and such manner as to render it enforceable. If, for any reason, this Agreement is declared unenforceable and cannot be administered, interpreted, or modified to be enforceable, I agree to waive any right I may have to a jury trial with respect to any dispute or claim against the Company relating to my employment, my termination from employment, or any terms and conditions of my employment with the Company.

[I understand that I would not be hired by the Company if I did not sign this Agreement. I have signed it in consideration of my employment by the Company. I have been advised of my right to consult with counsel regarding this Agreement.]

EMPLOYEE ________________________________ Signature ________________________________ Date ________________________________ Print Name

EMPLOYER ________________________________ Signature ________________________________ Date ________________________________ Print Name ________________________________ Title

Footnotes

1. The Ninth Circuit has jurisdiction over federal district courts in California, Nevada, Arizona, Oregon, Washington, Idaho, Montana, Alaska and Hawaii.

2. The court also relied on the EEOC policy notice (described below) and the EEOC's amicus brief in Duffield to support its argument that employees may not be required, as a condition of employment, to waive their right to bring future Title VII claims in court.

3. The court acknowledged, but ignored, the fact that the 1991 Civil Rights Act (passed after the Gilmer decision) provides that: "Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolutions including, . . . arbitration is encouraged to resolve disputes arising under the Acts or provisions of Federal law amended by this Title."

4. For example, the Fifth Circuit in Rojas v. TK Communications, Inc, 87 F. 3d 745 (5th Cir. 1996), held that claims brought under Title VII are within the bounds of the FAA and are subject to mandatory arbitration.