West Coast employers will have an easier time enforcing their employees' agreements to arbitrate discrimination claims under a Ninth Circuit decision this week that overturned a 1998 case that prevented many employers from arbitrating employee claims filed under discrimination statutes such as the Americans With Disabilities Act and Title VII of the 1964 Civil Rights Act. On September 3, the Ninth Circuit overruled the earlier case and held that employers may require employees to sign agreements to arbitrate all discrimination claims as a condition of their employment. EEOC v. Luce, Forward, Hamilton & Scripps, No. 00-57222 (9th Cir Sept. 3, 2002).

In Luce, the Equal Employment Opportunity Commission (the "EEOC") sued a law firm on behalf of an employee, Donald Lagatree, who had applied for a legal secretary position. The employer had made a conditional offer of employment to Lagatree. One condition required Lagatree to submit any future employment-related legal claims to arbitration. Lagatree objected, claiming that the arbitration provision was unfair. After Lagatree worked for two days without a contract, the employer withdrew its job offer, stating that signing the arbitration agreement was a nonnegotiable condition of employment. The EEOC argued that the Ninth Circuit's holding in Duffield v. Robertson Stephens & Co., 144 F3d 1182 (9th Cir 1998), prohibited the employer from making the arbitration agreement a condition of employment. The district court agreed with the EEOC and ruled against the employer. The employer appealed to the Ninth Circuit, arguing that the U.S. Supreme Court had overruled Duffield last year in Circuit City Stores, Inc. v. Adams, 532 US 105, 121 S Ct 1302, 149 L Ed 2d 234 (2001). The Ninth Circuit agreed with the employer, called Duffield a "fruitful error," and ruled that the employer could require employees to agree to arbitration agreements as a condition of employment. Federal courts in Oregon, Washington, Idaho, Alaska, Montana, Nevada, Arizona, and California are all in the Ninth Circuit.

What this means for employers in the Ninth Circuit

• One of the factors weighing against the use of arbitration agreements in employment has been that Ninth Circuit courts have not allowed arbitration of statutory discrimination claims like Title VII. That roadblock to enforcement has been removed and increases the likelihood that an arbitration agreement with an employee will be enforced.
• The Luce decision does not guarantee enforcement of arbitration agreements. An arbitration agreement is not enforced if an employee is able to show that the arbitration agreement is unfair or "unconscionable." Arbitration agreements that, for example, do not guarantee neutral arbitrators, substantially limit discovery, or limit the relief from what could be awarded in court can be challenged on contract law theories. Nor are arbitration agreements with employees binding on the EEOC, which retains its right to sue in federal court on behalf of an employee who signed an arbitration agreement. Thus, Luce is not carte blanche to force employees to arbitration.