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?
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.
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 supersedes 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.
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.
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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