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Rubin: Court made anti-federalist decision

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CNN: How does this decision effect your client, and workers in general.

Rubin: Saint Clair Adams' case will not be significantly affected because he still has two compelling reasons why arbitration cannot be compelled. First, his gender discrimination claims are not subject to arbitration under the 9th Circuit's Duffield decision, which holds that Congress in 1991, by creating the right to jury trial for victims of discrimination, intended to preclude employers from compelling mandatory pre-dispute employment arbitration involving state or federal gender discrimination claims.

Mr. Adams' second argument, which also survives today's decision, is that the overwhelming one-sidedness of Circuit City's Draconian mandatory arbitration agreement makes it unconscionable and unenforceable under Section 2 of the Federal Arbitration Act.

Circuit City's agreement limits the statute of limitations, caps front pay and punitive damages, forces workers to arbitrate claims without imposing a corresponding obligation on employers, and has other one-sided and unfair provisions that no court would enforce.

More generally, though, today's decision holds that Congress in 1925 did not carve out all employment contracts from the Federal Arbitration Act, and as a result federal law rather than the law of individual states governs the enforceability of those arbitration agreements.

CNN: What does that mean for other cases in the future?

Rubin: Except for the undefined "transportation workers," who the court held were excluded from the act, non-union employees contracts of agreement containing arbitration clauses are enforceable, or not, as a matter of federal law, just as union contracts would be.

The practical implication is that no state law that creates specific protections from compelled arbitration can be enforced, and workers are left to argue either that the arbitration is procedurally or substantially unfair or that Congress protected the workers' right to a jury trial.

CNN: Was the fairness of an arbitration process an issue in the case?

Rubin: It was an issue in Mr. Adams' case, and we have been returned to the lower federal court where we will argue the unfairness. I'm certain that given the extreme one-sidedness of Circuit City's agreement we will prevail. But that issue was not before the Supreme Court.

CNN: How does the ruling affect states' arbitration laws?

Rubin: No state can enforce a law that provides protections against arbitration in the employment context. [That] is the significance of today's decision.

CNN: Is the Federal Arbitration Act more restrictive than state laws?

Rubin: Many courts have interpreted the Federal Arbitration Act as reflecting a federal policy in favor of arbitration. We demonstrated in our brief that there was no such policy in 1925 and in fact the policy that is reflected both in the statutory language the legislative history was exactly the opposite.

[Although] Justice Anthony Kennedy concluded for the majority that our historical arguments were "not insubstantial," the court decided not to consider the historical basis for the exclusion, and therefore at least implicitly endorsed the notion of there being a federal policy favoring arbitration in employment disputes.

Nonetheless, the Supreme Court's previous cases have made clear that mandatory arbitration agreements in the employment context may not be enforced if they are so unfair and one-sided as to be unconscionable.

So that the federal rule will uphold a great many arbitrations and induce employers to draft their employment agreements in a way that make them fairer, because if employers draft agreements like Circuit City's here they will presumably be struck down under the Federal Arbitration Act as unconscionable.

CNN: Which workers will be excluded under the decision?

Rubin: The court characterizes the excluded workers as transportation workers, but does not define the term transportation workers, and there is great confusion among the lower courts as to what constitutes a transportation worker.

Is it someone who physically transports goods in interstate commerce? Does it include airline employees, which was a category of employee that didn't exist in 1925 when the Act was passed? Does it include baggage handlers, those who are instrumental in the transportation function? Those were questions left unanswered by the court's opinion.

The court also indicated that its opinion might lend some clarity to this area, but the result is that we may have employees in a company like Circuit City standing side by side, some of whom will be covered by the Federal Arbitration Act and some will not.

CNN: Were you surprised that court's conservative wing voted to support the Federal Arbitration Act when it often votes to give states more authority?

Rubin: This is an anti-federalist opinion. Despite 22 state attorneys general strongly urging the Supreme Court to regulate the employment, the Supreme Court said no. This is actually the first case in a long time when the Supreme Court has put the brakes on the rush to federalism.

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