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Nov. 26, 2001

Fourth Circuit Decision on Arbitration a Setback for Employee Rights

Ruling in North Carolina Case Demonstrates Need for Reform; Pending Legislation Would Address Problems With Arbitration System

WASHINGTON, D.C. – A recent decision by the Fourth Circuit U.S. Court of Appeals was a setback for North Carolinians’ ability to vindicate workplace rights and further underscores the need for legislative reform, Public Citizen said today.

In the Fourth Circuit ruling, issued Nov. 14, the court held that restaurant employee Eddie Hightower had consented to arbitration of any discrimination claims against GMRI Inc. simply by showing up for work.

Hightower was the culinary manager of an Olive Garden restaurant in Fayetteville, N.C. In the summer of 1988, Olive Garden management told its employees that anyone coming to work after Aug. 3 would be considered to have agreed to binding arbitration of any future workplace disputes. After he was fired in November 1998, Hightower sued, alleging discriminatory conduct under the Civil Rights Act of 1964. GMRI argued that Hightower had agreed to give up his right to sue and had to submit any disputes to arbitration. The district judge ruled against the company, saying Hightower had not consented to arbitration. The Fourth Circuit reversed this decision, holding that an employee who continues to work after management imposes arbitration has implicitly agreed to give up his right to sue.

"This decision is disturbing for several reasons," said Public Citizen President Joan Claybrook. "It’s absurd for the court to suggest that people are voluntarily agreeing to arbitration simply by showing up for work the next day. How many people are in a position to walk off a job over this? With more and more employers doing it, there’s really nowhere else to go if you object."

Added Jackson Williams, legislative counsel for Public Citizen’s Congress Watch, "It allows employers to take away entirely your right to a public trial by jury. And it lets them seriously diminish your right to be free from workplace discrimination, because it’s so much harder to prevail in arbitration than in court."

Arbitration is a private judicial system in which disputes between employees and employers, or consumers and companies, are handled by an arbitrator – rather than a court. Arbitration clauses benefit companies because arbitration fees are paid by complainants, and those fees are much higher than court fees. The costs alone often discourage consumers and employees from pursuing complaints. Also, arbitration rulings generally favor businesses because arbitrators seek repeat business and so tend to side with companies.

Companies are increasingly inserting mandatory arbitration clauses into the fine print of employment and purchase contracts, including mortgage and credit card agreements, without the knowledge of employees and customers. Many people who want to take disputes to court find that they have unwittingly given up their right to do so. Stock market investors, franchisees and farmers also are increasingly forced to give up their right to sue as a condition of doing business with large corporations.

Legislation has been introduced in both houses of Congress to provide relief from arbitration for workers. The measures would prohibit employers from imposing arbitration on non-union workers. The bills are S. 163, the Civil Rights Procedures Protection Act, introduced by Sen. Russ Feingold (D-Wis.), and H.R. 2282, the Preservation of Civil Rights Protections Act of 2001, introduced by Rep. Dennis Kucinich (D-Ohio).

Also, Sen. Tom Harkin (D-Iowa) this week is expected to introduce an amendment to farm policy legislation that would ban agribusiness giants from imposing arbitration on farmers. This will be especially important to contract poultry growers in North Carolina, Williams said.

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