Can Workers Agree To Waive Workers Compensation Rights in Arbitration and
Waiver Agreements?
October 2002
Jim Pocius provides his response to the question:
Would the Federal Arbitration Act supersede any workers compensation state law
and allow these cases to be arbitrated?
by Jim Pocius
Marshall, Dennehey,
Warner, Coleman & Goggin
The subject of arbitration and waiver agreements has been getting more notice
within the business community during the last several years. More and more employers,
in an attempt to avoid long and expensive trials or compensation proceedings,
are requiring their employees to sign various arbitration and waiver agreements.
Arbitration and waiver agreements were authorized under the Federal Arbitration
Act (FAA). This Act basically allows 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
(9 U.S.C. § 2). Thus, arbitration provisions generally are enforceable.
Supreme Court Interpretation
This provision of the Federal Arbitration Act has also been interpreted relatively
broadly. In the case of Circuit City Stores, Inc. v
St. Clair Adams, 52 U.S. 105 (S Ct), the U.S. Supreme Court reiterated
and enforced this doctrine. In this case, an employee of a national electronics
retail store signed an agreement as part of her employment contract indicating
that she would agree to settle any and all previously unasserted claims, disputes,
or controversies arising out of or relating to her application or candidacy
for employment and/or cessation of employment, exclusively binding arbitration
before a neutral arbitrator.
After signing the agreement and working for 2 years, the plaintiff filed
an employment discrimination lawsuit against her employer under a State Fair
Employment and Housing Act. The employer responded that she was bound by the
terms and provisions of the arbitration agreement which she had signed when
she applied for employment. The matter proceeded to the U.S. Supreme Court.
The Court, in interpreting the waiver and arbitration agreement, first decided
that the Federal Arbitration Act did apply. Exclusions to the Federal Arbitration
Act did not concern the Court. Instead, the Court read the Act broadly and determined
that the Federal Arbitration Act would cover employment contracts as part of
transactions involving interstate commerce. The Court went on to hold that the
claimant was bound by her employment contract. The Court stated:
There are real benefits to the enforcement of Arbitration Provisions.
We have been clear in rejecting the supposition that the advantages of the
arbitration process somehow disappear when transferred to the employment
context. Arbitration Agreements allow parties to avoid the cost of litigation,
a benefit that may be of particular importance in employment litigation,
which often involves smaller sums of money then disputes concerning commercial
contracts. These litigation costs to parties would be compounded by the
difficult choice of law questions that are often presented in disputed arising
from the employment relationship.
Using this logic, the Court went on to conclude that the FAA also supersedeas
state laws on the same topic. The Court also noted that by agreeing to arbitrate
a statutory claim, a party does not forego the substantive rights afforded by
statute. It only submits their resolution to an arbitrator rather then to a
judge.
Does the Employee Waive Workers Compensation Rights?
The question now arises as to whether or not an employee, by signing one
of these contracts, could waive workers compensation rights. Recently, the author
reviewed an employment agreement containing the following language.
This Agreement regarding arbitration and waiver applies to any other
federal, state or local civil or human rights law or any other local state
or federal law, regulation or ordinance or any public policy, contract,
tort or common law.
When reviewing this waiver, a question arises as to whether or not the employee
waived his right to contest workers compensation claims in the state forum.
An argument could be made that the employee has waived his right to pursue the
judicial system for workers compensation benefits and instead, his claim must
be decided by an arbitrator.
In Pennsylvania, § 204 of the Workers Compensation Act essentially indicates
that no agreement or release of damages made before the date of injury shall
be valid or shall bar a claim for damages. Any such agreement is held to be
against the public policy of the Commonwealth of Pennsylvania. The author submits
that a majority of state laws include similar language.
Conclusion
In light of this fact, it would appear that an employee cannot waive his
workers compensation rights by signing an employment contract. However, there
is still an open question. Would the Federal Arbitration Act supersede any state
law in workers compensation and allow workers compensation cases to be arbitrated?
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