Gray, John A.

English

University of Baltimore School of Law

University of Baltimore Law ForumVolume 29Number 1 Fall 1998 Article 41998Cole v. Burns International Security Services:Mandatory Arbitration of Statutory DiscriminationClaimJohn A. GrayFollow this and additional works at: http://scholarworks.law.ubalt.edu/lfPart of the Law CommonsThis Article is brought to you for free and open access by ScholarWorks@University of Baltimore School of Law. It has been accepted for inclusion inUniversity of Baltimore Law Forum by an authorized editor of ScholarWorks@University of Baltimore School of Law. For more information, pleasecontact snolan@ubalt.edu.Recommended CitationGray, John A. (1998) "Cole v. Burns International Security Services: Mandatory Arbitration of Statutory Discrimination Claim,"University of Baltimore Law Forum: Vol. 29 : No. 1 , Article 4.Available at: http://scholarworks.law.ubalt.edu/lf/vol29/iss1/4ArticlesCOLE V. B URNS INTERNATIONAL SECURITY SER VICES 1:MANDATORY ARBITRATION OF STATUTORY DISCRIMINATION CLAIMby John A. GrayINTRODUCTION AND BACKGROUNDClinton Cole ("Cole") worked for BumsInternational Security Services, Inc. ("BumsInternational") as a security guard assigned to UnionStation in Washington, D.C. Bums Internationalrequired its new and continuing employees to sign,as a condition of employment, an agreement underwhich (1) both the employer and the employeemutually waived the right to a trial by jury in theevent that there was employment related litigationbetween them, and (2) the employer had the right tocompel mandatory arbitration of any employmentrelated issue within sixty days of a complaint filedby the employee.' The terms of this agreement ineffect required an employee to initiate a lawsuitagainst the employer. The employer then had theoption to litigate the dispute or to compel arbitration.If the employer chose to litigate, the employee couldnot request a jury trial.Bums International fired Cole. After filingcharges with the Equal Employment OpportunityCommission ("EEOC"), Cole filed suit in federal1 105 F.3d 1465 (D.C. Cir. 1997). "This case raises importantquestions regarding whether and to what extent a person canbe required, as a condition of employment [sic], to (1) waiveall rights to a trial by jury in a court of competent jurisdictionwith respect to any dispute relating to recruitment,employment, or termination, including claims involving lawsagainst discrimination, and (2) sign an agreement that, at theemployer's option, any such employment disputes must bearbitrated." Id. at 1467.2 See id. at 1469 for the exact language of the "Pre-disputeResolution Agreement" signed by Cole.I The right to a jury trial in cases of intentional discriminationdid not exist until granted by the Civil Rights Act of 1991amending Title VII of the Civil Rights Act of 1964, the AgeDiscrimination in Employment Act of 1967, and the AmericanDisabilities Act of 1990.district court on the grounds of racial discriminationin violation of Title VII of the Civil Rights Act of1964. Bums International moved for dismissal ongrounds of lack of personal jurisdiction under theterms of the employment agreement with Cole. TheUnited States Court of Appeals for the District ofColumbia granted Bums International's motion tocompel arbitration and rejected Cole's claims thatthe Federal Arbitration Act ("FAA"), 9 U.S.C. § 1,excluded the agreement from coverage, and that theagreement was an unconscionable, unenforceablecontract of adhesion.4The United States Court of Appeals addressedthe following four issues: (1) whether Section 1 ofthe FAA excluded this employment agreement;5 (2)whether the agreement was enforceable6 because itmet the requirements of Gilmer v.Interstate/Johnson Lane Corporation;7 (3) whethera pre-dispute mandatory employment arbitrationagreement is enforceable if it requires the employeeto pay part or all of arbitrator-related expenses -- anissue raised sua sponte;s and (4) whether it wasunconscionable because the scope of judicial reviewof arbitral awards was adequate to assure an"effective vindication of statutory rights."9 Thecourt did not address the terms of the agreementunder which both the employer and the employeewaived their right to a jury in the event of a trialbecause neither party raised this issue.'Interesting aspects of this opinion are that itincludes a lengthy discussion of the differencesSee Cole, 105 F.3d at 1470.See id at 1470-72.6 See id at 1480-83.500 U.S. 20 (1991).See Cole, 105 F.3d at 1483-86.9 See id. at 1486-87."0 See id. at 1473 n.4.29.1 U. Bait. L. F. 29Articlesbetween arbitration in the collective bargainingcontext and the non-union context.1' It also reviewsthe positions of the EEOC, 2 the National LaborRelations Board ("NLRB"), 3  the DunlopCommission, 4  and a number of arbitralorganizations"5 on the issue of the legality andwisdom of pre-dispute employment agreementsrequiring arbitration of statutory employmentclaims.FIRST ISSUE: FAA §1 Exclusiod 6The issue was whether Congress, when itenacted the FAA in 1925, intended to exclude allemployment contracts from its coverage (broadconstruction) or to exclude only certain employmentcontracts (narrow construction). The Cole courtheld 7 that Section 1 of the FAA excluded from itscoverage only employment contracts of workersactually engaged in the movement of goods ininterstate commerce. Therefore, the federal policyin favor of arbitration 8 applied to this employmentagreement. The court adopted the narrowconstruction and articulated four reasons for itsholding.See id. at 1473-79.12 See id. at 1479.'3 See id."4 See id at 1483 n.l 1 and 1488. The Department of LaborCommission on the Future of Worker-Management Relations("Dunlop Commission")(1944)." Id. For example, the American Arbitration Association,JAMS/Endispute, the Center for Alternative DisputeResolution.16 FAA § 1 states that "nothing herein contained shall apply tocontracts of employment of seamen, railroad employees, orany other class of workers engaged in foreign or interstatecommerce." 9 U.S.C. §1 (1994).'7 See Cole, 105 F.3d at 1472.IS FAA §2 provides that arbitration agreements "shall be valid,irrevocable and enforceable, save upon such grounds as existat law or in equity for the revocation of any contract." 9 U.S.C.§2 (1994).First, the court relied on two "well-establishedcanons of statutory construction."' 9 One is thatcourts should avoid a reading that renders somewords altogether redundant. "Here if the final phraseof the exclusionary clause .. .extended to allworkers whose jobs have any effect on commerce,the specific inclusion of seamen and railroadworkers would have been unnecessary."2 Thesecond canon, the rule of ejusdem generis, limitsgeneral terms that follow specific ones to matterssimilar to those specified. Thus, in applying thecanon to this case, the interpretation would belimited only to those workers likewise actuallyengaged in the movement of interstate or foreigncommerce.2' Second, every circuit to consider thisissue has adopted the narrow construction of theexclusion.2 Third, while the Supreme Court has notaddressed this issue, the Cole court reasoned that thedecisions in Allied Bruce Terminex Cos. v. Dobson23and Gilmer v. Interstate Johnson/Lane 24 suggest thatthe Supreme Court also would adopt the narrowconstruction.25 Finally, the court recognized that thelegislative history could be read to support a broadconstruction, but took the position that "in a casesuch as this, where the statutory text does not admitof serious ambiguity, and where firmly establishedcase law is absolutely clear on the meaning of thestatute, legislative history is, at best, secondary, and,at worst, irrelevant."26The court also noted that even if it was incorrectin adopting the narrow construction, the agreementwas still a contract and probably enforceable underthe common law of contract and state arbitration19 Cole, 150 F.3d at 1470.20 Id.21 See id. at 1471.22 See id. The Court cited the 1st, 2nd, 4th, and 7th circuits.23 513 U.S. 265 (1995).24 500 U.S. 20 (1991).25 See Cole, 105 F.3d at 1472.26 Id.29.1 U. Bait. L. F. 30Articlesstatutes.27 The court, however, did not resolve thisissue in light of its FAA § 1 holding.SECOND ISSUE: Enforceability under Gilmer 8As a preamble to its searching examination ofthe details of the agreement in light of itsunderstanding of Gilmer, the court developed atlength its view on the differences betweenarbitration in the collective bargaining context andarbitration in the non-union context. It concludedthat courts do not owe the same degree of judicialdeference to arbitration agreements and awards inthe non-union context as they do to those in theunion, collective bargaining context. 9To this court, Gilmer stands for the propositionthat a pre-dispute employment agreement requiringbinding arbitration of statutory discrimination claimsas a condition of employment is as enforceable asany other contract provision, so long as the specificarbitration process under the agreement provides tothe employee a forum "to effectively vindicatestatutory rights."3 The Supreme Court in Gilmerupheld the New York Stock Exchange arbitrationprocedure as sufficient to provide such a forum.3'In Cole, the parties agreed to the following fivepropositions:32(1) the agreement allows the employer theoption of forcing statutory claims intoarbitration for the resolution of public lawissues;21 See id. For example, the Maryland Arbitration Statuteapplies to employment agreements. See also MD. CODE ANN.,CTS. & JUD. PROC., §3-206(a); Wilson v. McGrow, Pridgeon& Co., 298 Md. 66, 467 A.2d 1025 (1983).28 "We turn now to the heart of the problem in this case, i.e.,the enforceability of conditions of employment requiringindividual employees to use arbitration in place ofjudicial forafor the resolution of statutory claims." Id.29 See id. at 1473-78.10 Id. at 1481.3' See id at 1481-82 (citing Gilmer, 500 U.S. 20 (1991)).32 See Cole, 105 F.3d at 1480.(2) the agreement's waiver of a jury trial isabsolute, i.e., it operates even if theemployer does not seek arbitration;(3) the agreement does not affect anemployee's ability to seek relief from theEEOC;33(4) the arbitrator is fully bound to apply TitleVII and other applicable public law, bothas to substance and remedy, in accordancewith statutory requirements and prevailingjudicial interpretation; 34 and(5) the agreement provides for appointment ofa neutral arbitrator through the AmericanArbitration Association ("AAA") and forthe conduct of the arbitration proceedingin accordance with AAA rules.Since the agreement incorporated the AAA NationalRules for the Resolution of Employment Disputes,the court undertook a close examination of each andconcluded:We believe that all of the factors addressed inGilmer are satisfied here. In particular wenote that the arbitration arrangement (1)provides for neutral arbitrators, (2) providesfor more than minimal discovery, (3) requiresa written award, (4) provides for all the typesof relief that would otherwise be available incourt, and (5) does not require employees topay either unreasonable cost or anyarbitrator's fees or expenses as a condition ofaccess to the arbitration forum. Thus, an3 In Gilmer the court recognized the right of the plaintiff tofile a complaint with the EEOC to seek an administrativeaction against the employer but not the right to have the EEOCseek compensatory relief for the plaintiff because that wasavailable under the arbitration agreement.14 The agreement requires the arbitrator to apply substantivelaw, unlike those discussed in Murray S. Levin, The Role ofSubstantive Law in Business Arbitration and the Importance ofVolition, 35 AM. Bus. L.J. 105 (Fall 1997). The arbitrationprocess required by the Cole agreement seems to be more like"private judging" on the spectrum of dispute resolutiontechniques than traditional arbitration as analyzed by ProfessorLevin.15 See Cole, 150 F.3d at 1480.29.1 U. Bait. L. F. 31Articlesemployee who is made to use arbitration as acondition of employment "effectively mayvindicate [his or her] statutory cause ofaction in the arbitral forum."36THIRD ISSUE: Arbitrator Fees37The third issue addressed in Cole was raised bythe court sua sponte. The court found the AAA rulesto be ambiguous on the point of which party isresponsible for paying arbitrator fees and, using thecontra proferentum rule of contracts, held that theAAA rule was to be interpreted to require only theemployer to pay arbitrator expenses.38 The courtreasoned that when arbitration occurs only at theoption of the employer, and that option has beenimposed as a condition of employment by theemployer, the employer alone should bear the costof the arbitrator's expenses.3 9 Moreover, because aplaintiff does not have to pay the salary of a judge topursue statutory claims in court, the employeelikewise should not be required to pay any or all ofthe arbitrator's fees and expenses. However, theagreement may require the employee to pay otherreasonable administrative fees incurred by thearbitration.4" The court heldthat Cole could not be required to agree toarbitrate his public law claims as acondition of employment if the arbitrationagreement required him to pay all or partof the arbitrator's fees and expenses. Inlight of this holding, we find that thearbitration agreement in this case is validand enforceable. 436 Id. at 1482." "We use the term 'arbitrator's fees' to include not only thearbitrator's honorarium, but also the arbitrator's expenses andany other costs associated with the arbitrator's services." Id.at 1484 n.15." See id. at 1485-86.'9 See id. at 1485.40 See id. at 1484.41 Id.FOURTH ISSUE: Scope of Judicial Review42Cole argued that the arbitration agreement wasunconscionable because arbitrator's rulings were notsubject to judicial review. The court recognizedthree distinct bases for judicial review: (1) the FAA§ 10 (a) states four grounds for vacating an arbitralaward;43 (2) awards may be set aside when they arefound to be contrary to "some explicit publicpolicy";" and (3) awards can be vacated when theyare found to be in "manifest disregard of the law."45The court was of the opinion thatin the vast majority of cases, judicial reviewof legal determinations to ensure compliancewith public law should have no adverseimpact on the arbitration process.Nonetheless, there will be some cases inwhich novel or difficult legal issues arepresented demanding judicial judgment. Insuch cases, the courts are empowered toreview an arbitrator's award to ensure that itsresolution of public law issues is correct.4"CONCLUDING COMMENTWhom does this decision benefit? Althoughwaiver of the right to a jury trial was not addressed,this waiver probably benefits an employer-42 See id. at 1486-87.41 (1) Where the award was procured by corruption, fraud, orundue means. (2) Where there was evident partiality orcorruption in the arbitrators, or either of them. (3) Where thearbitrators were guilty of misconduct in refusing to postponethe hearing, upon sufficient cause shown, or in refusing to hearevidence pertinent and material to the controversy; or of anyother misbehavior by which the rights of the parties have beenprejudiced. (4) Where the arbitrators exceeded their powers,or so imperfectly executed them that a mutual, final, anddefinite award upon the subject matter was not made. SeeCole, 105 F.3d at 1486 (citing 9 U.S.C. §10 (a)).44 Id. at 1486.45 Id.46 See id at 1487.29.1 U. Balt. L. F. 32Articlesoption of the employer clearly benefits the employersince the employer is able to choose which disputesit prefers to litigate and which to arbitrate. However,because arbitration is selection of a forum and not asurrender of rights or remedies, an early arbitralaward in favor of an employee may be preferable toan award at the conclusion of administrative andjudicial proceedings. One may also wonder whetherthis court's understanding of the scope of judicialreview of pre-dispute employment agreementsmandating arbitration of statutory discriminationclaims does not, in effect, eliminate thecharacteristic trait of the finality of arbitral awards.Those who think that Gilmer and its progeny areunwise should (a) encourage Cole and similar losingplaintiffs to appeal to the United States SupremeCourt and submit amicus curiae briefs in support ofreversal and/or (b) form a coalition of employeeinterest groups to lobby Congress to amend the FAAto exclude all employment contracts from itscoverage and to state that all such conditions ofemployment are unenforceable as a matter of publicpolicy.About the Author: John A. Gray is currently aprofessor of Law and Social Responsibility atLoyola College of Maryland, and is a member of theMaryland and federal bars. Mr. Gray also serves asan arbitrator with the American ArbitratorAssociation and the National Association ofSecurities Dealers. Additionally, he volunteers forthe Maryland Human Relations Commission and theBaltimore District Office of the EEOC as amediator. His writings have been published inseveral journals, including The American BusinessLaw Journal, The Villanova Law Journal, and TheLabor Law Journal.29.1 U. Bait. L. F. 33Articles29.1 U. Bait. L. F. 34The University of Baltimore Law ForumArticles SolicitationThe University of Baltimore Law Forum is currently requesting articles for submissionrelating to issues of importance in Maryland and/or Federal law.Please contact or submit materials to:Articles EditorUniversity of Baltimore Law ForumThe John and Frances Angelos Law Center1420 North Charles StreetBaltimore, Maryland 21201(410) 837-4493E-Mail: UBaltLF@hotmail.com

Cole v. Burns International Security Services: Mandatory Arbitration of Statutory Discrimination Claim

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Cole v. Burns International Security Services: Mandatory Arbitration of Statutory Discrimination Claim

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