A federal court in Louisiana ruled that an employee of a church school was required to have her sex discrimination and sexual harassment claims resolved through binding arbitration rather than litigation as a result of an arbitration clause in her employment contract.
A woman ("Jill") was hired by a church school, and signed an employment contract specifying that "any claim or dispute arising out of, or related to, [the contract] or to any aspect of the employment relationship" was to be submitted to binding arbitration. A few years after being hired, Jill filed a lawsuit against her employer in which she alleged sex discrimination, sexual harassment, and breach of contract.
The church school filed a motion asking the court to compel Jill to submit her claims to binding arbitration, pursuant to the employment contract. The court agreed with the school, and ordered Jill to arbitrate her claims.
It based its decision on the Federal Arbitration Act ("FAA"). The FAA was enacted in 1925 as a response to the hostility of American courts to the enforcement of arbitration agreements. To give effect to this purpose, the FAA compels judicial enforcement of a wide range of written arbitration agreements. The FAA specifies that
a written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
The FAA excludes from coverage "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." As a result, arbitration cannot be mandated in employment contracts for these workers.
But does this exemption apply only to employment contracts of seamen, railroad employees, and other "transportation" employees, or does it apply to the employment contracts of all employees regardless of their occupation?
In a landmark 2001 case, the United States Supreme Court ruled that this exemption applied only to employment contracts of transportation workers, and not other employment contracts. Circuit City Stores, Inc. v. Adams, 121 S.Ct. 1302 (2001). As a result, the Louisiana federal court ruled that the FAA compelled Jill to arbitrate her claims.
The Supreme Court's decision in the Circuit City case is addressed in a feature article in the July-August 2001 issue of this newsletter. The Louisiana case represents the first time that a court has applied the FAA to an employment contract involving an employee of a church or church school. Church leaders should review the previous article in this newsletter in order to evaluate the desirability of inserting arbitration clauses in employment contracts. Prescott v. North Lake Christian School, 2001 WL 740506 (E.D. La. 2001).