The main issue under consideration in this case is whether a claim under the Age Discrimination in Employment Act of 1967 (ADEA) can be subjected to compulsory arbitration pursuant to an arbitration agreement in a securities registration application. Gilmer contends that it is not.
Among the arguments raised by Gilmer are: a) the compulsory arbitration of claims under the ADEA pursuant to arbitration agreement is inconsistent with the purpose of the Federal Arbitration Agreement; b) the compulsory arbitration of claims will undermine the role of the EEOC in enforcing the ADEA; c) compulsory arbitration will deprive the claimant of the judicial forum provided for by the ADEA; d) compulsory arbitration should not be countenanced because of the inherent inequality in the bargaining power between the employers and the employees.
The Supreme Court affirmed the judgment of the United States Court of Appeals for the Fourth Circuit holding that an ADEA claim may be subjected to compulsory arbitration. The Supreme Court ruled that it does not see any inconsistency between the purpose of FAA and the enforcement of agreements to arbitrate under age discrimination claims. The Sherman Act, the Securities Exchange Act of 1934, RICO, and the Securities Act of 1933 all are designed to advance important public policies but claims under these statutes may still be subjected to compulsory arbitration.
Also, it is incorrect to argue that compulsory arbitration will undermine the role of EEOC in enforcing the ADEA because a claimant subject to arbitration agreement is still free to file a charge with the EEOC. Further, compulsory arbitration agreements will not deprive the claimants of their right to seek judicial recourse under ADEA rather it even broadens the right of the claimants as they now have the right to select the forum for resolving their disputes whether judicial or otherwise.
Mere inequality in the bargaining power between the employer and the employee is not sufficient to hold that arbitration agreements should not be enforceable as it is precisely the purpose of FAA to place arbitration agreements in the same footing as other contracts. In effect, the Gilmer case required claimants who are under compulsory arbitration agreements to comply with the said agreements before they seek judicial recourse even if it involves a claim under the ADEA.
In the dissenting opinion of Justice Stevens, he argued that arbitration clauses contained in employment agreements are specifically exempt from coverage of the FAA thus respondent corporation cannot compel petitioner to submit his claims arising under the Age Discrimination in Employment Act of 1967 (ADEA) to compulsory arbitration. One of the arguments raised is that the requirement of compulsory arbitration between the petitioner and the respondent is not embodied in the contract of employment.
In fact it was admitted by both parties that there was no contract of employment between them. Instead, the Compulsory Arbitration clause was embodied only in Gilmer’s application for registration before the NYSE. Moreover even if there was a contract of employment, the FAA should be not held to apply to employment-related disputes between employees and employers. It would be contrary to the spirit of the FAA to allow the same people who have practiced discrimination against an employee to bargain with them for the purpose of settling their disputes.
I agree with the majority opinion. In the first place, the injured party in discrimination suits is the employee. As the injured party, they have the freedom to seek judicial recourse for the purpose of obtaining relief for the damage done to them. However, they also have the freedom to opt for other alternatives. In an effort to settle their dispute with their employers, they may choose to enter into arbitration. Indeed, it would be more in keeping with the laissez faire doctrine to allow both the employers and the employees to settle their dispute among themselves.