No. S075942
	________________________________________

	IN THE SUPREME COURT 
	OF
	THE STATE OF CALIFORNIA

	________________________________________

	MARYBETH ARMENDARIZ and
	DOLORES OLAGUE-RODGERS,
	Plaintiffs/Respondents

	v.

	FOUNDATION HEALTH PSYCHCARE SERVICES, INC., 
	Defendant/Appellant.

	________________________________________


	On Appeal after a Decision of the
	Court of Appeal, First Appellate District, Division One

	________________________________________

	BRIEF AMICUS CURIAE OF THE
CALIFORNIA EMPLOYMENT LAWYERS ASSOCIATION,
	IN SUPPORT OF PLAINTIFF/RESPONDENT
	
	________________________________________

Cliff Palefsky (State Bar No. 77683)
Keith Ehrman (State Bar No. 106985)
McGUINN, HILLSMAN & PALEFSKY
535 Pacific Avenue
San Francisco, CA 94133
(415) 421-9292

Attorneys for Amicus Curiae

	TABLE OF CONTENTS

I.	INTEREST OF AMICUS CURIAE	1

II.	INTRODUCTION & SUMMARY OF ARGUMENT	1

III.	LEGAL ARGUMENT	5

AA	Public Policy Does Not “Favor” Arbitration of Statutory Claims	5

1a	The Historic and Constitutional Roots of Public Policy	6

aA	The Declaration of Independence	6

bA	Article III of the Constitution	6

cA	The Bill of Rights	6

d.	The California Constitution	7

2a	The Public Policy Underlying the Civil Rights Laws	7

aA	Title VII	7

bA	The California Fair Employment & Housing Act	9

3a	The Federal Arbitration Act Did Not--And Could Not--Create A Public Policy 
“Preferring” Arbitration Over Litigation	11

4a	Especially Where The Employment Relationship Is One of Unequal Bargaining 
Power, Public Policy Does Not Favor Permitting Coercive Arbitration 
Agreements Which Threaten Statutory Protections	12

5a	The United States Supreme Court Has Recognized That Any “Policy” In 
Favor of Arbitration Only Exists With Respect to the Scope of Arbitration 
Agreements Which Have Been Entered Into “Voluntarily”	15

B.	Mandatory Arbitration Is Not “Just Another Forum” For Resolution of 
Statutory Claims	16

1.	Employees Lose The Substantive Right to Have the Statutory
Employment Laws Enforced Correctly, Since Arbitrators Are Not
Obligated To Follow Or Apply The Law, And Arbitrators’ Decisions 
Are Virtually Unreviewable	17



aA	Arbitrators Are Sometimes Expressly Instructed That They Are Not 
Obligated To Follow Statutory Law	18

bA	The Applicable Standard of Review Makes It Virtually Impossible to 
Overturn Arbitrators’ Errors of Law	19

cA	Since Arbitrators Often Give No Written Explanation or 
Opinion For Their Award, Overturning The Award Is 
Virtually Impossible	19

2.	The Costs To An Employee To Vindicate His or Her Rights Are 
Exorbitant	21

3.	In Arbitration, Significantly Limited Discovery Unfairly Burdens Employees 
Attempting to Vindicate Statutory Rights	25

4.	Employees Lose the Benefit of Evidentiary Protections	26

C.	Developments Since Gilmer Have Demonstrated That Mandatory Arbitration 
of Statutory Employment Claims Is Inappropriate	26

1.	Repeat User Bias	27

2.	Surveys Show That Employers Are Far More Successful In
Arbitration	27

3.	Counsel For Employers Repeatedly Recommend That Employers 
Use Mandatory Arbitration Because They Will Win More 
and Pay Less	28

4.	Government Agencies, Professional Organizations and Legal
Scholars Have Strongly Opposed and Condemned Mandatory
Arbitration of Statutory Employment Claims	29

aA	The Equal Employment Opportunity Commission	29

bA	The National Academy of Arbitrators	30

cA	The Dunlop Commission	31

dA	The National Labor Relations Board	31

e.	The Department of Labor	31

f.	The Society for Professionals in Dispute Resolution	32


eA	Academics and Legal Scholars	32

D.	Unilaterally Imposed Arbitration is Inconsistent with the Consensual
Underpinnings of Arbitration, and Forces the Courts to Constantly 
Review the Validity and Fairness of Agreements	33

1.	From Both a Legal And a Policy Perspective, “Voluntariness” Is the
Key to The Enforceability of Arbitration Agreements	33

2.	Arbitration Agreements Drafted and Imposed by Employers Are 
Subject to Abuse	34

3.	Courts Are Constantly Being Required to Determine The Validity
of Involuntary Employment Arbitration Agreements	35

IV.	CONCLUSION	36


	TABLE OF AUTHORITIES

	Cases


Aetna Life Ins. v. Lavoie 
475 U.S. 813 (1986)	27

Albermarle Paper v. Moody 
422 U.S. 405 (1975)	29

Alexander v. Gardner-Denver
415 U.S. 36 (1974)	8, 14, 17, 20

Anaconda v. District Lodge 
693 F.2d 35 (6th Cir. 1982)	19

Asare v. Hartford
(1991) 1 C.A.4th 856, 869, 2 C.R.2d 452	10

California Teachers Association v. State of California
99 C.D.O.S. 3376 (filed May 10, 1999)	23, 24

Carlsbad Municipal Schools v. Harrell 
118 N.M. 470, 882 P.2d 511 (1994)	20

Cheng-Canindin v. Renaissance Hotel 
(1996) 50 Cal.App.4th 676	34, 35

Cole v. Burns Intern’l Security 
105 F.3d 1465 (D.C. Cir. 1997)	14, 21, 22, 23, 30

Commodore Home Systems v. Superior Court
(1982) 32 C.3d 211, 185 C.R. 270	10

Craft v. Campbell Soup
161 F.3d 1199 (9th Cir. 1998), 
rehearing denied en banc 177 F.3d 1083 (9th Cir. 1999)	11

DiRussa v. Dean Witter 
121 F.3d 818 (2d Cir. 1997)	19, 24

Duffield v. Robertson Stephens
144 F.3d 1182 (9th Cir. 1998)	9



EEOC v. Children’s Hospital 
719 F.2d 1426 (9th Cir. 1983)	8

EEOC v. Commercial Office Products Co. 
486 U.S. 107 (1988)	29

First Options v. Kaplan 
514 U.S. 938, 115 S.Ct. 1920 (1995)	16, 19

Fuentes v. Shevin 
407 U.S. 67, 92 S.Ct. 1983 (1972)	34

Gantt v. Sentry
(1992) 1 C.4th 1083, 1095, 4 C.R.2d 874	6

Gibson v. Berryhill 
411 U.S. 564 (1973)	27

Gilmer v. Interstate/Lane Johnson Corp. 
500 U.S. 20 (1991)	passim

Gould v. Maryland
(1995) 31 C.A.4th 1137, 1147, 37 C.R.2d 718	15

Graham v. Scissor-Tail 
(1981) 28 Cal.3d 807, 623 P.2d 165	34

Graham Oil v. ARCO 
43 F.3d 1244, 1247-48 (9th Cir. 1995)	1, 34, 35

Great Western Mortgage Co. v. Peacock
110 F.3d 222 (3rd Cir. 1997)	34

Health Services Management v. Hughes 
975 F.2d 1253 (7th Cir. 1992)	19

Hooters of America v. Phillips 
Case No. 4:96-3360-22 (D.S.C., March 12, 1998)	26, 34, 35

KMC v. Irving Trust 
757 F.2d 752 (6th Cir. 1985)	34

Leasing Service v. Crane 
804 F.2d 828 (4th Cir. 1986)	34



Lingle v. Norse
486 U.S. 399, 108 S.Ct. 1877 (1988)	14

Maciejewski v. Alpha Systems Lab
1999 Daily Journal D.A.R. 8045 (Aug. 5, 1999)	24, 36

Mastrobuono v. Shearson-Lehman 
514 U.S. 52 (1995)	33

Mitsubishi Motors v. Soler Chrysler-Plymouth 
473 U.S. 614, 105 S.Ct. 3346 (1985)	15, 16

Moncharsh v. Heily & Blase 
3 Cal.4th 1,  832 P.2d 899 (1992)	17, 18, 19

Moore v. Conliffe
(1994) 7 C.4th 634, 659-60, 29 C.R.2d 152 	4

Morrissey v. Brewer 
408 U.S. 471 (1972)	27

NBC Subsidiary v. Superior Court
1999 D.A.R. 7575 (July 28, 1999)	18

Nelson v. Cyprus Bagdad Copper Corp. 
119 F.3d 756 (9th Cir. 1997)	34

Newman v. Piggie Park Enterprises
390 U.S. 400 (1968)	8

O.R. Securities v. Prof. Planning Assoc. 
857 F.2d 742 (11th Cir. 1988)	20

Paladino v. Avnet Computer 
134 F.3d 1054 (11th Cir. 1998)	23, 24, 25

Patterson v. ITT
(1993) 14 C.A.4th 1659, 1665	23, 34

Payne v. Superior Court
(1976) 17 C.3d 908, 911, 132 C.R. 405	7

Perry v. Thomas
482 U.S. 483, 107 S.Ct. (1987)	15



Prudential v. Lai 
42 F.3d at 1299 (9th Cir. 1994)	8, 26, 34

Remmey v. Paine Webber 
32 F.3d 143 (4th Cir. 1994)	19

Rosenberg v. Merrill Lynch 
76 FEP 681 (D.Mass. 1998)	18, 20, 30, 34, 35

Shankle v. B-G Maintenance
163 F.3d 1230 (10th Cir. 1999)	22

Stirlen v. Supercuts 
(1997) 51 Cal.App.4th 1519	34, 35

Thomas v. Union Carbide
473 U.S. 568 (1985)	6

United Steelworkers v. American Mfg. Co. 
363 U.S. 564 (1960)	14

United Steelworkers v. Enterprise Car and Wheel 
363 U.S. 593 (1960)	14

United Steelworkers v. Warrior & Gulf Navigation Co.
363 U.S. 574 (1960)	14

Wright v. Universal Maritime Services
119 S.Ct. 391 (1998)	14, 16


	Statutes


California Constitution, Article 1, §16	7

California Evidence Code §783	26

California Government Code §12920	10

California Government Code §12965	10, 24

California Labor Code §206	15

California Labor Code §216	15


Labor Code §229	14, 15

Labor Code §923	13

U.S. Constitution, Article III	6

U.S. Constitution, Amendment V	7

U.S. Constitution, Amendment VII	7

U.S. Constitution, Amendment XIV	7

9 U.S.C. §1	2

9 U.S.C. §10	19

29 U.S.C. §151	13

29 U.S.C. §201	13

29 U.S.C. §204	32

42 U.S.C. §1981	8

42 U.S.C. §2000	7, 13, 24

Amendments to 42 U.S.C.] Pub.L.No. 102-166; § 102, § 1977A(c), 
105 Stat. 1071, 1073 (1991)	2, 8


	Other Authorities


R. Alleyne, Statutory Discrimination Claims:  Rights “Waived” and Lost
in the Arbitration Forum, 13 Hofstra Labor L.J. 381 (1996)	28, 32

L. Bingham, Employment Arbitration:  The Repeat Player Effect 
(1 Emply.Rts. & Empl.Policy Journal 1 (1997)	27

Bompey & Pappas, Is There A Better Way?  Compulsory Arbitration of Employment
 Discrimination Claims After Gilmer, 19 Emp.Rel.L.J. 197 (1994)	28

Presidential Commission on the Future of Worker-Management Relations (the “Dunlop
Commission”), “Report and Recommendations” (Dec. 1994)	31



P. Carrington & P. Haagen, Contract and Jurisdiction 
1996 Sup.Ct.Rev. 331, 344-45 (1997)	17, 18, 20, 32

137 Cong. Rec. H9526 (daily ed. Nov. 7, 1991)	9

Declaration of Independence (U.S. 1776)	6

Department of Labor, Amicus Curie Brief, Gerke v. Waterhouse Securities, N.D.Cal. Case
No. C-98-4081-CAL	32

Equal Employment Opportunity Commission, Policy Statement on Mandatory Binding 
Arbitration of Employment Discrimination Disputes as a 
Condition of Employment, 133 Daily Lab.Rep (BNA) E-4 (July 11, 1997)	29

R. Fallon, Of Legislative Courts, Administrative Agencies and Article III 
101 Harv.L.Rev. 916, 943 (1988)	6

M. Finkin, Employment Contracts Under the FAA--Reconsidered, 
1997 Lab.L.J. 329 (June 1997)	11

M. Finkin, Workers’ Contracts Under the United States Arbitration Act:
An Essay In Historical Clarification, 
17 Berkeley J.Emp. & Lab.L. 282 (1996)	11, 12

General Accounting Office,  Report HEHS-94-17, Employment Discrimination:  
How Registered Representatives Fare in Discrimination Disputes 
(March 30, 1994)	21

J. Grodin, Arbitration of Employment Discrimination Claims: Doctrine and Policy In
Wake of Gilmer, 14 Hofstra Lab.L.J. 1 (1996)	32

S. Hoffman, Mandatory Arbitration: Alternative Dispute Resolution or Coercive Dispute
Suppression?, 17 Berk.J.Empl.&Lab.L. 131 (1996)	32

H.Rep. No. 102-40(I), 102d Cong., 1st Sess.d (1991), 
reprinted in 1991 U.S.C.C.A.N. 549, 635	9

Model Rules of Professional Conduct, Rule 4.2 (1995)	25, 26

Model Code of Professional Responsibility DR 7-104(A) (1989)	25

National Academy of Arbitrators, Amicus Curiae Brief, Duffield v. Robertson
Stephens, Appeal No. 97-15698 (9th Cir., filed August 6, 1997)	15, 30, 33

National Academy of Arbitrators, Statement and Guidelines (May 21, 1997) 
103 Daily Lab. Rep. (BNA) E-1 (May 29, 1997)	15, 30

National Labor Relations Board, “General Counsel Report,” 1996 Daily Lab.Rep. 
36 E-4, E-6,7 (Feb. 23, 1996)	31


R. Reuben, Public Justice: Toward a State Action Theory of Alternative Dispute Resolution, 
85 Calif.L.Rev. 3 (1997)	32

D. Schwartz, Enforcing Small Print to Protect Big Business: Employee
and Consumer Rights Claims in an Age of Compelled Arbitration, 
1997 Wisc. L.R. 33, 73-81, 122-23 (1997)	passim

Securities Industry Conference on Arbitration, Arbitrator’s Manual	18

Society of Professionals in Dispute Resolution, “Statement on Arbitration of Statutory 
Rights Imposed as a Condition of Employment,” Approved by SPIDR Board 
of Directors January 24, 1998	32

J. Stempel, Reconsidering the Employment Contract Exclusion in Section
1 of the Federal Arbitration Act:  Correcting the Judiciary’s Failure 
of Statutory Vision, 1991 J.Disp.Resol. 259, 265--6 (1991)	12

J. Sternlight, Panacea or Corporate Tool?:  Debunking the Supreme Court’s 
Preference for Binding Arbitration, 
74 Wash. U. L.Q. 637, 647-52 (1996)	12, 14, 27, 32

J. Sternlight, Rethinking the Constitutionality of the Supreme Court’s
Preference for Binding Arbitration:  A Fresh Assessment of Jury Trial,
Separation of Powers and Due Process Concerns, 
72 Tulane L.R. 1, 7 (1977)	14, 20

I.     INTEREST OF AMICUS CURIAE

TO THE HONORABLE CHIEF JUSTICE AND THE ASSOCIATE JUSTICES OF THE 
CALIFORNIA SUPREME COURT:
This Amicus Curiae brief is submitted by the California Employment Lawyers Association 
(“CELA”), a statewide organization of attorneys primarily representing employees in employment 
termination and discrimination cases.
For an employee, compulsory arbitration means forfeiting numerous constitutional and 
statutory rights.  Recently developed empirical and statistical evidence, as well as the experience 
of CELA members over the last eight years, confirms that mandatory arbitration is not “just 
another forum” for the vindication of statutory employment rights.  To the contrary, mandatory 
arbitration puts employees at a severe disadvantage, imposes exorbitant forum costs that deter 
vindication of statutory rights and transforms employees’ statutory entitlements into a matter of 
arbitral discretion. 
CELA fully supports and encourages the use of all voluntary forms of alternative dispute 
resolution (including arbitration), provided the parties to a dispute are permitted to knowingly and 
voluntarily select the most appropriate form of ADR for their particular dispute.
II.     INTRODUCTION & SUMMARY OF ARGUMENT

Over the past 15 years, it has become commonplace for economically powerful parties to 
impose arbitration on those with whom they deal.  Frequently, the motives behind this require-
ment are transparent:  to bypass the constitutional and statutory rights and remedies of the 
economically weaker party and to impose exorbitant costs on employees and consumers in order 
to frustrate their ability to vindicate their rights.   Mandatory arbitration has become a form of “do 
it yourself tort reform” by which parties being regulated by state and federal statutes have 
attempted to unilaterally deprive consumers and employees of the right to have their statutory 
protections properly enforced in a court of law.
Following Gilmer v. Interstate/Lane Johnson Corp., 500 U.S. 20, 111 S.Ct. 1647 (1991), 
employers have made a concerted effort to avoid both the judicial system and the Civil Rights Act 
of 1991,  by requiring employees to submit discrimination claims to arbitration as a condition of 
employment, even though the very purpose of the 1991 amendments was to add a new right to a 
jury trial.  Many lower courts have contributed to this dangerous process by expanding and 
misapplying Gilmer. These courts have mistakenly proclaimed that there is a “public policy” 
favoring arbitration over our constitutional jury trial system.  This position is not only unsupport-
able as a matter of constitutional law, it conflicts with the purposes underlying the civil rights 
laws, and the intent of the Federal Arbitration Act.   In the United States, and particularly in 
California, “public policy” favors the right of access to the courts and to a jury.  And it is the 
constitutional responsibility of the courts to protect these fundamental constitutional rights.  
Unfortunately, many courts have elevated a desire to clear dockets into a judicially-created public 
policy that supercedes these express constitutional guarantees.  Scores of arbitration opinions 
have been written in recent years that fail even to mention the Constitution or the constitutional 
nature of the rights being coercively taken away.

What makes mandatory arbitration particularly insidious in the employment setting is the 
fact that employer-mandated arbitration is not simply “another forum” for the resolution of 
statutory employment claims.  Mandatory arbitration, unilaterally designed and imposed by 
employers, has proven itself to be a grossly inferior, ineffective, exorbitantly expensive and 
inappropriate method for employees to enforce their statutory rights.  	
In the wake of Gilmer, numerous courts made unfounded assumptions about the supposed 
“benefits” of arbitration.  Courts speculated about the “low cost” of arbitration; the benefits of 
“streamlined discovery”; how the elimination of appeals and the absence of judicial review would 
ensure “swiftness” and “finality”; and how both sides would benefit from such a process.  Over 
the past fifteen years, the “reality” of the compulsory arbitration experience has proven these 
assumptions and speculations to be incorrect.  Indeed, a national consensus has developed in 
opposition to the practice among academics, governmental agencies and the arbitrator community 
itself.
First, the cost of arbitration has proven to be exorbitantly expensive.  Whereas employees 
filing a claim in state or federal court pay only an initial filing fee of roughly $150, and thereafter 
have free access to the judicial system (paid for by their tax dollars), parties to arbitration are 
routinely required to pay literally thousands of dollars per day in arbitration “forum fees”.  For 
example, the filing fee alone at the American Arbitration Association is as high as $7,000 in some 
employment cases, and the arbitrator’s fees typically exceed $3,000 per day per arbitrator.  The 
cost for arbitration of a typical employment case can easily exceed $25,000.
Second, the severe limitations on discovery which exist in arbitration have been of 
substantial benefit to one side:  the defendant employer.  The reason is simple:  in most employ-
ment cases, the employer controls virtually all of the witnesses, documents and information 
needed in the case.  Without proper pre-trial discovery, the plaintiff--who has the burden of 
proving his or her claim--is at a severe disadvantage, especially when the primary issue in dispute 
is the “state of mind” of the defendant.

Third, the “finality” of arbitration, i.e., the absence of any meaningful judicial review of 
arbitrators’ rulings, has resulted in arbitrators being free to disregard or completely misapply the 
relevant statutes and laws which have been passed to protect employees.  When arbitrators--who 
are often unfamiliar with employment law--misapply or ignore relevant laws, employees are left 
with no recourse.   
Fourth, employers are the parties who draft and impose compulsory arbitration agree-
ments.  When employers are permitted to unilaterally design and impose a system upon 
employees, they frequently insert limitations and restrictions on employees’ rights and remedies, 
such that employees are left with far fewer rights than they would have in a court of law.  For 
example, employers routinely attempt to limit or eliminate statutory remedies (attorneys fees, 
punitive damages, non-contract damages), as occurred in this case, shorten applicable statute of 
limitations periods, or even require the use of arbitration panels which are inherently biased in 
favor of the employer. 
In this case, this Court has the opportunity to correct many of the problems which now 
exist in this area, by carefully distinguishing between voluntary and mandatory arbitration and by 
acknowledging the “reality” of compulsory arbitration, as it has been practiced in the employment 
area.  

There are several subjects which need clarification from this Court.  
First, with respect to statutory employment rights, there is no “public policy” favoring 
employer-mandated arbitration imposed as a condition of employment.  Rather, public policy 
favors the right of employees to have access to state and federal courts, as well as to low-cost 
administrative agencies such as the Department of Fair Employment and Housing and the 
California Labor Commission, in order to vindicate their statutory entitlements in the manner 
expressly provided for by the Constitution and various statutes.  
Second, arbitration agreements are only enforceable if they are both knowing and truly 
voluntary.  This is consistent with the Federal Arbitration Act, the California Arbitration Act and 
the traditional judicial standard applied to a waiver of constitutional and statutory rights. 
 	Third, the parties being regulated by a statute cannot unilaterally “opt-out” of the strict 
enforcement of that statute.  Although both parties may elect to settle their dispute by the use of a 
non-judicial procedure, that decision cannot be made unilaterally by the party being regulated by 
the statute.
  	III.  LEGAL ARGUMENT

A.  Public Policy Does Not “Favor” Mandatory Arbitration of Statutory Claims	
Parties and courts seeking to enforce arbitration clauses routinely state that, “public policy 
favors arbitration.”  In fact, this assertion is completely unsupportable in the context of 
unilaterally imposed arbitration of statutory employment rights.  Public policy does not “favor” 
arbitration.  To the contrary, public policy mandates preserving the right to a jury trial, to due 
process, and to a citizen’s being able to enforce his or her legal rights in a public court before 
neutral judges who are required to follow the law.

This Court has repeatedly stated that “public policy” should not be created by the courts; 
it must emanate from the Constitution or statutory provisions.  See, e.g., Gantt v. Sentry (1992) 1 
C.4th 1083, 1095, 4 C.R.2d 874.  This country’s “public policy” concerning its citizens’ right of 
access to the courts and a jury is easily discerned and indisputable. 	
1.  The Historic and Constitutional Roots of Public Policy
a.  The Declaration of Independence
The Declaration of Independence is an appropriate place to start an examination of 
“public policy” in this context.  It lists the grievances against the King that justified the creation of 
this country.  Among the specific reasons stated was, “for depriving us, in many cases, of the 
benefit of Trial by Jury.”  The Declaration of Independence (U.S. 1776). 
b.  Article III of the Constitution
Article III of the United States Constitution created a public civil justice system 
administered by impartial judges, appointed for life and bound to follow the law of the land.   By 
this scheme, Article III “protect[s] the role of the independent judiciary within the constitutional 
scheme of tripartite government and assure[s] the impartial adjudication in federal courts.” 
c.  The Bill of Rights

The importance attached to the jury trial was next reflected in the United States 
Constitution’s Bill of Rights--perhaps the most compelling statement of “public policy.”  The 
Seventh Amendment provides that, “the right of trial by jury shall be preserved.”  U.S. CONST. 
amend. VII (emphasis added).  It is thus the express duty of the courts to protect and preserve 
this right, and not to condone its being coercively taken away by employers.
The Fifth Amendment to the Constitution further guarantees to citizens the right to “due 
process of law.”  U.S. CONST. amend. V.  The Fourteenth Amendment to the Constitution 
guarantees the right to “equal protection of the laws.”  U.S. CONST. amend. XIV.  At a 
minimum, “due process” and “equal protection” mean the right to have the laws passed for one’s 
protection enforced correctly.
d.  The California Constitution
Article 1, Section 16 of the California Constitution provides that, “Trial by jury is 
an inviolate right and shall be secured to all...” (emphasis added).
In addition to stressing the critical importance of the right to a jury trial, this Court has 
also emphasized the importance of a citizen’s right of access to the courts.  “Few liberties in 
America have been more zealously guarded than the right to protect one’s property in a court of 
law...In a variety of contexts, the right of access to the courts has been reaffirmed and strength-
ened throughout our 200 year history.”  Payne v. Superior Court (1976) 17 C.3d 908, 911, 132 
C.R. 405.
2.  The Public Policy Underlying the Civil Rights Laws
a.  Title VII

Congress considered the federal anti-discrimination laws  to be statements of 
critical public policy.  They were deemed laws of the “highest priority” and of “paramount impor-
tance.”  Newman v. Piggie Park Enterprises, 390 U.S. 400, 402 (1968).
Title VII of the Civil Rights Act of 1964 was landmark legislation in large part because it 
intended that employees would have access to the federal courts when bringing discrimination 
claims.    Prior to Gilmer, the courts consistently construed the language and legislative history of 
Title VII as precluding any binding arbitration of statutory employment claims, even where the 
arbitration agreement was both voluntary and knowing.   Alexander v. Gardner-Denver, 415 U.S. 
36, 47-51, 94 S.Ct. 1011 (1974); Prudential v. Lai, 42 F.3d 1299, 1303-04 (9th Cir. 1994); EEOC 
v. Children’s Hospital, 719 F.2d 1426, 1431 (9th Cir. 1983).

In 1991, after the Gilmer decision, Congress passed the Civil Rights Act of 1991 
(“C.R.A.”),  expressly giving employees the right to a jury trial when bringing federal discrimi-
nation claims.   The jury right was given to employees in exchange for a cap on damages.    In 
the C.R.A., Congress encouraged the use of all forms of alternative dispute resolution mecha-
nisms, but only where both parties knowingly and voluntarily agreed to submit their dispute to the 
non-judicial forum that the parties deemed “most appropriate” for their particular case.   As 
Representative Edwards explained, “The section contemplates the use of voluntary arbitration to 
resolve specific disputes after they have arisen, not coercive attempts to force employees in 
advance to forego statutory rights.”   
Thus, Congress has made it clear that the federal civil rights laws:  a) represent a public 
policy of the highest national priority; b) assure employees of the right of access to the federal 
courts and a jury trial; and c) mandate that employers cannot compel employees to forfeit these 
rights prospectively as a condition of employment.  Duffield v. Robertson Stephens, 144 F.3d 
1182 (9th Cir. 1998).
In Duffield, supra, the Ninth Circuit Court of Appeals  held that employers may not 
condition employment upon signing an arbitration agreement covering Title VII claims.  The 
Court further held that the same result applies to civil rights claims brought under the California  
anti-discrimination statutes, because those statutes are expressly incorporated into Title VII’s 
enforcement mechanism. See, Duffield, supra, fn. 3.  Contracts in violation of public policy should 
not be enforced regardless of whether the public policy in question is of federal or state origin.	
b.  The California Fair Employment and Housing Act

California’s employment discrimination laws are also statements of fundamental 
public policy.  Government Code § 12920.   In enacting the comprehensive scheme underlying 
the Fair Employment and Housing Act, the Legislature was seeking to ensure a full range of 
remedies for victims of discrimination.   Thus, employees who bring claims for discrimination are 
not only entitled to the full range of tort remedies,  but are also entitled to an award of attorneys 
fees.   And, even though an administrative scheme exists for resolution of such claims 
(Government Code § 12960 et seq.), victims of employment discrimination are always entitled to 
bring their statutory claims in a civil court action (Government Code § 12965) and are entitled to 
a jury trial on such claims.  Asare v. Hartford (1991) 1 C.A.4th 856, 869, 2 C.R.2d 452.
It is apparent from the above constitutional and statutory provisions that there is no public 
policy which “favors” mandatory arbitration over the right to a jury trial of statutory civil rights 
claims.  Indeed, allowing the party who is regulated by these laws--the employer--to unilaterally 
“opt out” of these provisions is completely inconsistent with the purpose of either Congress or the 
California Legislature in passing these statutes.   

An accurate statement of public policy would be that public policy under the civil rights 
laws encourages and permits parties to voluntarily select an appropriate alternative dispute resolu-
tion mechanism to meet the needs of a particular case, after a dispute has arisen.  But it is clearly 
against the policy behind the civil rights laws for employers to coerce employees into forfeiting 
their constitutional and statutory rights to judges, juries, the Department of Fair Employment & 
Housing and the California Labor Commission by requiring employees to arbitrate any future 
disputes as a condition of obtaining employment.
3.  The Federal Arbitration Act Did Not--And Could Not--Create A Public Policy
“Preferring” Arbitration Over Litigation
Some courts (including the lower court in this case) have sought to justify a policy 
“favoring” arbitration in the context of statutory employment laws by mistakenly pointing to the 
Federal Arbitration Act, claiming that its passage was meant to indicate a new “preference” for 
arbitration of employment disputes.  Once again, this is completely unsupportable.  
First, a legislative statute such as the FAA cannot create a “public policy” which 
contradicts the express public policy set forth in the United States Constitution, i.e., a policy 
guaranteeing the right to a jury trial and access to an Article III court.  

Second, the FAA was passed 40 years before the first federal employment discrimination 
laws were enacted, and 65 years before the 1991 amendments to those laws.  Thus, it can hardly 
be argued that the FAA was ever intended to create a “policy” superseding the provisions of the 
civil rights laws which ensured victims of discrimination access to federal courts and the right to a 
jury trial.  In fact, as the Ninth Circuit Court of Appeals recently held following an exhaustive 
examination of the language and legislative history of the FAA, Congress never intended for the 
FAA to apply to employment contracts at all.  See, Craft v. Campbell Soup, 161 F.3d 1199 (9th 
Cir. 1998), rehearing denied en banc177 F.3d 1083 (9th Cir. 1999).  The court below did not have 
the benefit of the Craft decision when it wrote its opinion.   The significance of the Craft decision 
is enormous because it renders much of the public policy language relied on by the court below, 
and the preemptive effect of that policy, inapplicable to arbitration clauses contained in 
employment contracts, as is the case here.
Third, the FAA was never intended to create a “preference” for arbitration, much less a 
“public policy” favoring arbitration.  The original intent of the FAA was simply to allow commer-
cial entities of equal bargaining power the right to use arbitration as a dispute mechanism, at a 
time when arbitration was held in such low regard that many courts flatly refused to enforce pre-
dispute arbitration agreements, even if they were voluntary.    
In sum, Congress passed the FAA not to give a “preference” to arbitration, but simply to 
allow courts to permit arbitration of contractual matters arising out of a “transaction” between 
commercial entities when such agreements were wholly voluntary.  There is a vast difference 
between removing a “prohibition” on arbitration and creating a “preference” for it.  
4.  Especially Where The Employment Relationship Is One of Unequal Bargaining
Power, Public Policy Does Not Favor Permitting Coercive Arbitration Agreements
Which Threaten Statutory Protections


Employers who seek to enforce mandatory arbitration agreements claim that they are 
merely seeking to uphold “freedom of contract.”  Congress and the California Legislature long 
ago determined that an unregulated free market is not appropriate in the employment relation-
ship.   That the FAA would exclude employment contracts from its intended coverage makes 
perfect sense, since Congress has always recognized that the employment relationship is one of 
inherently unequal bargaining power.
This country’s entire body of labor law was created in response to this inequality in 
bargaining power between employers and individual employees.   The California Legislature has 
similarly recognized the inability of individual employees to bargain fairly with employers, and, in 
Labor Code § 923, has stated unequivocally that, 
“the public policy of this State is declared as follows:  Negotiation of terms and 
conditions of labor should result from voluntary agreement between employer and 
employees.  Governmental authority has permitted and encouraged employers to 
organize in the corporate and other forms of capital control.  In dealing with such 
employers, the individual unorganized worker is helpless to exercise actual liberty 
of contract and to protect his freedom of labor, and thereby obtain acceptable 
terms and conditions of employment...” (emphasis added).   
During this century, Congress and the state legislatures have created an extensive scheme 
of statutory protections for workers. 

  	Whenever Congress has imposed some restraint on the way an employer can treat its 
employees, it has enunciated a public policy reflecting values it considered important.  These 
statutes reflect a strong public policy of protecting employees where they cannot protect them-
selves, due to the vastly superior bargaining power of employers.  In the context of mandatory 
arbitration agreements, imposed by employers as a condition of employment, this disparity in 
“bargaining” power is obvious.  There is rarely any “bargaining” available to a prospective 
employee presented with an arbitration agreement;  his or her “alternative” is often to go without 
work.  

The insidious nature of compulsory employment arbitration in the face of such unequal 
bargaining power was also recognized by the Legislature in Labor Code § 229, another unequivo-
cal statement of California public policy.  That section prohibits the enforcement of an arbitration 
agreement between an employer and an employee whenever an employee brings an action to 
collect unpaid wages.      
The employment relationship is perhaps the most regulated relationship in this nation.  The 
reliance by many courts upon a “free market analysis” in the employment relationship is simply 
inappropriate.  That is why the National Academy of Arbitrators, the nation’s leading professional 
organization of labor-management arbitrators, while strongly supporting arbitration in the 
collective bargaining context, has condemned the concept of mandatory pre-dispute arbitration 
agreements in the individual worker context. 
5.         The United States Supreme Court Has Recognized That Any “Policy” In Favor of
Arbitration Only Exists With Respect to the Scope of Arbitration Agreements
Which Have Been Entered Into “Voluntarily”


The United States Supreme Court has recognized that, despite much of the rhetoric 
concerning a “liberal” federal policy favoring arbitration, this simply means that if two parties 
have entered into a valid, consensual agreement to arbitrate, the courts will thereafter liberally 
construe the scope of that agreement.  Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 
614, 625--27, 105 S.Ct. 3346 (1985).   And in First Options v. Kaplan, 514 U.S. 938, 115 S.Ct.  
1920, 1925 (1995), the Court made clear that:
...the basic objective in this area is not to resolve disputes in the quickest manner 
possible, no matter what the parties’ wishes, but to ensure that commercial 
arbitration agreements, like other contracts, are enforced according to their terms, 
and according to the intentions of the parties.  

First Options, supra, 115 S.Ct. at 1925 (emphasis added).	

The Court of Appeals in this case completely misinterpreted and misapplied public policy 
in order to uphold an illegal and unconscionable arbitration agreement.
B.  Mandatory Arbitration Is Not “Just Another Forum” For Resolution of Statutory Claims

In Gilmer, the Court upheld an arbitration agreement which required arbitration of a 
statutory age discrimination claim .  The Court’s ruling was based on several critical assump-
tions.  First, the Court assumed that, “by agreeing to arbitrate a statutory claim, a party does not 
forego the substantive rights afforded by the statute;  it only submits to their resolution in an 
arbitral, rather than a judicial, forum.”  500 U.S. at 26.  In other words, the Court assumed--in the 
absence of proof to the contrary--that arbitration of statutory employment disputes would be “just 
another forum,” essentially equivalent to federal court for purposes of vindicating statutory rights.


The Court’s second critical assumption in Gilmer was that, “the prospective litigant 
effectively may vindicate [his or her] statutory cause of action in the arbitral forum,” such that the 
specific statute at issue would “continue to serve both its remedial and deterrent function.”  
Gilmer, 500 U.S. at 28 (emphasis added).
  	In the context of employer-mandated arbitration, both of these assumptions have proven 
simply incorrect.  Arbitration is not “just another forum,” and employees are often not able to 
effectively vindicate their statutory rights.  Employees do lose substantive rights, including the 
right to have the civil rights laws applied and enforced as written.  The result is that the remedial 
and deterrent functions of the nation’s employment laws are being undermined. 
1.  Employees Lose The Substantive Right to Have the Statutory Employment
Laws Enforced Correctly, Since Arbitrators Are Not Obligated To Follow Or
Apply The Law, And Arbitrators’ Decisions Are Virtually Unreviewable

One of the most important substantive rights an employee has is the right to have the civil 
rights laws applied and enforced as written.  It would do little good for employees to have 
numerous protective statutes enacted by Congress and the state legislatures if the courts were 
then permitted to ignore or misapply those laws. 

Yet, employees face precisely this situation in the arbitration context.  Since courts are 
essentially powerless to review or correct arbitrators’ decisions, arbitrators are empowered to 
ignore or misapply statutory law, including the civil rights laws.   Moncharsh v. Heily & Blase, 3 
Cal.4th 1, 27-28, 832 P.2d 899 (1992) (courts are powerless to correct plain errors of law, even 
where substantial injustice results).     Arbitration, in the end,  is merely a dispute resolution 
mechanism, it is not a justice system.
a.  Arbitrators Are Sometimes Expressly Instructed That They Are Not
Obligated To Follow Statutory Law

Arbitrators are sometimes told that they have no obligation to follow statutory law 
in the first place.  For example, in some arbitration settings, arbitrators are specifically instructed 
that they “are not strictly bound by case precedent or statutory law.”   Even if an arbitrator feels 
obligated to follow the law, he or she may make an error of law.  But it is virtually impossible to 
overturn even the most egregious errors of law, for two reasons.  First, the standard of review is 
exceedingly narrow.  Second, arbitrators are not required to set forth any written explanation of 
their decision, so there is rarely a record or written opinion  to review anyway. 


b.  The Applicable Standard of Review Makes It Virtually Impossible to
Overturn Arbitrators’ Errors of Law

With respect to arbitration awards under the FAA and the California Arbitration 
Act, the decision may not be overturned unless the arbitrator “manifestly disregards the law.”  
But this standard is virtually impossible to meet.  First, vacating the award cannot be justified 
merely because an arbitrator made a clear error in interpretation or application of the law.  9 
U.S.C. § 10; Moncharsh v. Heily & Blase, 3 Cal.4th 1, 832 P.2d 899 (1992); Anaconda v. District 
Lodge, 693 F.2d 35, 37-38 (6th Cir. 1982).  Instead, the party must prove that the arbitrator 
knew the law, understood it, found it applicable, and specifically chose to ignore it.  See, Health 
Services Management v. Hughes, 975 F.2d 1253, 1267 (7th Cir. 1992); Remmey v. Paine 
Webber, 32 F.3d 143, 149 (4th Cir. 1994).  	
This leads to outlandish results such as DiRussa v. Dean Witter, 121 F.3d 818 (2d Cir. 
1997), in which the arbitrator failed to award attorneys’ fees to a prevailing plaintiff in a 
discrimination case, in plain violation of the statutory requirements.  The arbitrator’s plainly 
erroneous decision was affirmed by the courts, which stated that even though the arbitrator was 
clearly wrong under the law, his decision would not be modified or reversed, since there was no 
clear proof that the arbitrator had “known” the correct law and had then intentionally “disre-
garded” it.  As long as the arbitrator was simply “ignorant” of the correct law, the arbitration 
decision would be affirmed. 
c.  Since Arbitrators Often Give No Written Explanation or Opinion For
Their Award, Overturning The Award Is Virtually Impossible

For a party wishing to challenge an arbitration award, proving that an arbitrator 
“knew” the law but then “purposely disregarded” it is a practical impossibility, since arbitrators

are rarely required to set forth any explanation for their decision.   As one court noted, “When 
arbitrators do not give their reasons, it is nearly impossible for the court to determine whether 
they acted in disregard of the law.”  O.R. Securities v. Prof. Planning Assoc., 857 F.2d 742, 747 
(11th Cir. 1988); Carrington, Contract, pp. 397-98. 	
In sum, an arbitrator does not need to follow statutory law, and does not need to issue any 
written explanation or rationale for his or her award.  Thus, it is usually impossible for a party to 
establish that an arbitrator has ever engaged in “manifest disregard.”  This lack of effective judicial 
review raises serious due process issues where arbitration has been unilaterally imposed on one 
party. 

The problems of limited judicial review become even more acute when arbitrators are not 
only allowed to ignore statutory law, but when the arbitrators have no expertise in employment or 
civil rights law.  As pointed out in Alexander v. Gardner-Denver 415 U.S. 36, 57 (1974), arbitra-
tors typically know the “law of the shop,” not the civil rights laws. 
In Gilmer, the Court “assumed” that there would be “sufficient” judicial review of the 
arbitration decision “to ensure that arbitrators complied with the requirements of the statute.”  
See, Gilmer, 500 U.S. at 32, n. 4.  In the real world, this assumption has proven to be groundless, 
as few arbitration decisions provide enough information to make such a review possible.  This is 
yet another reason why mandatory arbitration of statutory employment claims cannot be justified.
2.  The Costs To An Employee To Vindicate His or Her Rights Are Exorbitant
An employee does not have to pay a federal or state court judge to hear his or her 
discrimination claim; access to the public courts is free, once the initial nominal filing fee is paid.  
By contrast, employees who are required to submit to arbitration face exorbitant “forum” costs 
which act as significant deterrents to an employee’s ability to vindicate his or her legal rights.  

Parties to arbitration are routinely charged an initial filing fee of several thousand dollars.  
Schwartz, Enforcing, p. 44, n. 30.   They are then often charged in excess of three thousand 
dollars per day in arbitration “forum fees,” since arbitrators typically charge $300-400 per hour 
for their services.   Schwartz, Enforcing, p. 44, n. 30.  Over the course of an arbitration, a plain-
tiff may ultimately be required to pay tens of thousands of dollars in arbitration “forum fees”--
even when he or she has prevailed.  
  	A mandatory arbitration agreement which prohibits an employee from using a free judicial 
forum, while forcing an employee to pay exorbitant arbitration fees, effectively prevents many 
employees from vindicating their rights, and so undermines the remedial and deterrent function of 
the employment laws.  The California legislature, attempting to reduce the costs of litigation for 
employees, has created several low cost administrative fora such as the California Labor 
Commission and the Department of Fair Employment & Housing to assist employees in 
vindicating their rights.  Employers have effectively negated these legislative acts and policies by 
compelling arbitration as a condition of employment.  Thus, an employee making approximately 
$40,000 a year who seeks to bring an overtime or discrimination claim must be prepared to pay 
the equivalent of a full year’s salary, after taxes, to obtain the protection of statutes passed for his 
or her protection.

Many courts have therefore found that the imposition of such costs on plaintiffs renders 
such arbitration agreements unenforceable.  See, Shankle v. B-G Maintenance, 163 F.3d 1230 
(10th Cir. 1999) (mandatory arbitration agreement which required employee to pay for AAA 
arbitration costs is unenforceable); Cole v. Burns, 105 F.3d 1465, 1483-85 (D.C.Cir. 1997) 
(interpreting mandatory arbitration agreement as requiring employer to pay all costs of arbitration; 
agreement would be unenforceable if employee were forced to pay AAA arbitration costs to 
vindicate statutory rights); Paladino v. Avnet Computer, 134 F.3d 1054, 1062 (11th Cir. 1998) 
(arbitration agreement did not require the employer to pay the arbitration costs; large forum fees 
involved in AAA arbitration were thus another factor in finding the arbitration agreement unen-
forceable). 
The Court in Cole v. Burns, 105 F.3d 1465, 1468 (D.C.Cir. 1997), stated that, “In our 
view, an employee can never be required, as a condition of employment, to pay an arbitrator’s 
compensation in order to secure resolution of statutory claims...(any more than an employee can 
be made to pay a judge’s salary).  If there is any risk that an arbitration agreement can be 
construed to require this result, this would surely deter the brining of arbitration and constitute a 
de facto forfeiture of the employee’s statutory rights.”   

More significantly, this Court recently expressed its strong approval of Cole and raised 
serious doubts about the enforceability of agreements which deprive a party of access to the 
courts while simultaneously requiring that party to pay thousands of dollars in “forum fees.”  In 
California Teachers Association v. State of California, 99 C.D.O.S. 3376 (filed May 10, 1999), 
this Court struck down as unconstitutional a provision which required teachers to pay for the cost 
of an administrative law judge if they were not successful in their hearings.  The Court quoted at 
length from Cole, strongly endorsing that portion of the opinion which stated that courts should 
not enforce private arbitration agreements if the employees would be required to pay excessive 
costs in order to vindicate their rights.  
In California State Teachers, this Court stated that, 
“The invalidity of a provision requiring dismissed public teachers to pay for the 
public cost of an administrative law judge is apparent when we consider decisions 
holding that even private employees who have agreed to private arbitration of 
statutory wrongful termination claims cannot be compelled to pay half the cost of 
the arbitrator.  The United States Supreme Court has upheld agreements requiring 
employees to arbitrate federal statutory claims, as long as the employee may 
effectively vindicate the statutory cause of action in the arbitral forum....in Cole, 
the Court considered an issue not raised in Gilmer: whether an employer could 
condition employment upon acceptance of an arbitration agreement requiring the 
employee to submit statutory claims to arbitration and requiring the employee to 
pay all or part of the arbitrator’s fees...If employees in the private sector cannot be 
compelled to pay the costs of private arbitrators when seeking to vindicate 
statutory rights in the arbitral forum, then certainly public employees seeking to 
vindicate constitutionally based interests in an official quasi-judicial forum cannot 
be required to compensate the state for the cost of the administrative law judge.” 
99 C.D.O.S. at 3383.      
This Court’s holding in the California State Teachers case and the Cole line of decisions 
was recently relied upon by the Fourth Appellate District when it refused to compel arbitration of 
an employment claim because of the excessive costs involved.  Maciejewski v.  Alpha Systems 
Lab, 1999 Daily Journal D.A.R. 8045 (Aug. 5, 1999).

Prevailing plaintiffs who are required to pay these exorbitant “forum fees” frequently 
suffer the additional economic burden that arbitrators may misapply or ignore statutory law, and 
may fail to award prevailing plaintiffs their costs or attorneys fees.   See, DiRussa v. Dean 
Witter, supra (arbitrator failed to award prevailing plaintiff in discrimination case costs and 
attorneys fees, even though such an award was required under the civil rights laws; court 
powerless to correct this error).  
3.  In Arbitration, Significantly Limited Discovery Unfairly Burdens Employees
Attempting to Vindicate Statutory Rights

Arbitration works best when it involves parties of equal bargaining power who have equal 
access to the evidence.  However, a plaintiff in a discrimination case is at a severe disadvantage in 
an arbitration setting.  An employee generally needs extensive discovery if she is going to establish 
her claims.  The plaintiff not only has the burden of proof, but the plaintiff in many employment 
cases (including discrimination cases) must prove “state of mind,” show “pretext” by the 
employer, or show a “pattern” of discrimination.  Without full and complete discovery, an 
employee/plaintiff is greatly handicapped in attempting to prove her claims.  
In litigation, such discovery is easily obtainable.  Arbitration, however, permits very little, 
if any, discovery.  Whatever limited discovery may be allowed is left to the discretion of the 
arbitrator.   Schwartz, Enforcing, pp. 46-47.   Significantly, the severe limitations on discovery in 
arbitration heavily favor the employer in most employee/employer disputes, since the employer 
usually controls almost all of the critical evidence in a case.  

An employee typically needs to obtain documents from the employer, gather statistical 
evidence from the employer and, perhaps most importantly, take depositions of the employer’s 
employees.   The employer not only possesses most of the written evidence relevant to the case, 
but the employer has full access to the various employees and managers who may be witnesses.  
This poses a major problem for employee/plaintiffs, because the plaintiff’s attorney is ethically 
precluded from even contacting these employees.  See, Schwartz, Enforcing, pp. 46-47, 61; 
Model Code of Professional Responsibility DR 7-104(A) (1989); Model Rules of Professional 
Conduct Rule 4.2 (1995).  Thus, the only method of obtaining information from these employee 
witnesses is by taking depositions.  Yet depositions are often either prohibited or extremely 
limited in arbitration. 
4.  Employees Lose the Benefit of Evidentiary Protections
 A further obstacle to employees in arbitration is the fact that arbitrators are not required 
to follow the rules of evidence.  This means that employees may lose the benefit of significant 
evidentiary protections.  Schwartz, Enforcing, pp. 49-50.  For example, in sexual harassment 
cases, consensual sexual activity of the plaintiff with persons other than the harasser are generally 
deemed irrelevant and invade the plaintiff’s right to privacy.  Such evidence is thus specifically 
excluded in many jurisdictions, including California.  See, Schwartz, Enforcing, p. 49, n. 44; 
California Evidence Code §783.  Yet arbitrators are not obligated to comply with such evidentiary 
restrictions, and so procedural protections may be lost.   
C.  Developments Since Gilmer Have Demonstrated That Mandatory Arbitration of
Statutory Employment Claims Is Inappropriate


In Gilmer, the Court stated that it would not accept “generalized attacks” and “specu-
lat[ion]” about the suspected shortcomings of arbitration, especially since the plaintiff in Gilmer 
had made no specific showing of actual problems with the process.  500 U.S. at 30.  However, 
since Gilmer was decided, there have been numerous studies, surveys, and articles dealing with 
how mandatory arbitration of statutory employment claims has worked in the “real world.”  In 
sum, it has now been empirically demonstrated that mandatory arbitration places the employee at 
a severe disadvantage, and that outcomes in arbitration are far more favorable to employers than 
employees when compared to similar cases brought in a public court. 	
1.  Repeat User Bias
The Supreme Court has repeatedly held that constitutional due process entitles parties to 
unbiased decision-makers.   Since arbitrators rely on repeat business for income, many 
commentators have expressed a serious concern about the potential for an arbitrator’s bias in 
favor of “repeat users,” i.e., a natural tendency to favor the party which has the potential of using 
the arbitrator’s services again.    
In the employment setting, the “repeat users” are the employers.  Thus, there was always 
the perception that arbitrators might favor the employer’s side.  Significantly, there are now 
empirical studies showing that this “repeat user” bias exists in fact in employment arbitration.  
Lisa Bingham, Employment Arbitration:  The Repeat Player Effect, 1 Emply.Rts.& Empl.Policy 
Journal 1 (1997) (employees recover a lower proportion of their claims in repeat player cases than 
in non-repeat player cases).  The significance of this survey is enormous, since it confirms the 
reality of the “repeat user” bias in employment arbitration. 
2.  Surveys Show That Employers Are Far More Successful In Arbitration 

Several studies and surveys since Gilmer have shown that employers fare much better 
under mandatory arbitration programs than they do in court before a jury.  Employers not only 
win more often in arbitration, but employees who do prevail are awarded far less in damages. 
This is consistent with studies indicating that, when a petition to compel arbitration is 
filed, it is always the employer which is seeking to compel arbitration, while the employee is 
inevitably attempting to bring his or her claims in federal or state court.  Schwartz, Enforcing, p. 
62, n. 88.  As an intuitive matter, employers would not be uniformly seeking an arbitration forum 
unless they felt it gave them an advantage over  employees.
3.  Counsel For Employers Repeatedly Recommend That Employers Use
 Mandatory Arbitration Because They Will Win More and Pay Less 
Attorneys who counsel employers repeatedly and publicly urge employers to impose 
mandatory arbitration.  These attorneys boldly and correctly proclaim that employers who require 
arbitration are more likely to prevail; are likely to pay less in damage awards; are far more likely 
to avoid an assessment of punitive damages; and may succeed in discouraging the employee from 
instituting or pursuing his or her claims, due to the costs and other obstacles imposed by 
arbitration. 
///

///


4.  Government Agencies, Professional Organizations and Legal Scholars Have
Strongly Opposed and Condemned Mandatory Arbitration of Statutory Employment
Claims
In recent years, virtually every government agency charged with enforcing labor law, 
neutral commissions, commentators and professional organizations of arbitrators have strongly 
opposed mandatory arbitration of statutory employment claims.  The pleas of these organizations, 
especially of the arbitrators themselves, cannot be ignored.
a.  The Equal Employment Opportunity Commission
The Equal Employment Opportunity Commission, the federal agency charged with 
enforcing the civil rights laws, has issued an extensive policy statement dealing with mandatory 
arbitration.  The EEOC stated that, “agreements that mandate binding arbitration of 
discrimination claims as a condition of employment are contrary to the fundamental principles 
evinced in the federal anti-discrimination statutes,” and are thus illegal and unenforceable.   
EEOC, Policy Statement on Mandatory Binding Arbitration of Employment Discrimination 
Disputes as a Condition of Employment, 133 Daily Lab.Rep (BNA) E-4 (July 11, 1997) (hereaf-
ter, “EEOC, Policy Statement”).  The courts traditionally give “great deference” to the EEOC’s 
views of the proper procedure for vindicating Title VII rights.  EEOC v. Commercial Office 
Products Co., 486 U.S. 107, 115 (1988); Albermarle Paper v. Moody, 422 U.S. 405, 431 (1975).

Among the EEOC’s objections are that arbitration is not governed by the statutory 
requirements and standards of Title VII; it is conducted by arbitrators given no training and pos-
sessing no expertise in employment law; it routinely does not permit plaintiffs to receive punitive 
damages and attorneys fees to which they would otherwise be entitled under the statute; and it 
forces employees to pay exorbitant “forum fees” in the tens of thousands of dollars, greatly 
discouraging aggrieved employees from seeking relief. 
b.  The National Academy of Arbitrators
The National Academy of Arbitrators, the nation’s leading organization of 
professional labor-management arbitrators and the body which gave labor arbitration its 
credibility, has also condemned mandatory arbitration of employment disputes.  In 1997, the 
Academy stated that it, “opposes mandatory employment arbitration as a condition of employ-
ment when it requires waiver of direct access to either a judicial or administrative forum for the 
pursuit of statutory rights.”  National Academy of Arbitrators Statement and Guidelines, 103 
Daily Lab.Rep. (BNA) E-1 (May 29, 1997).  
	The Academy has expressed strong concern that mandatory arbitration often results in 
arbitral forums which do not provide elements of fundamental fairness to employees, and in which 
arbitrators are often not able or willing to enforce the claimed statutory rights.  See, Amicus 
Curiae Brief of the National Academy of Arbitrators, filed in Duffield v. Robertson Stephens, 
Appeal No. 97-15698 (9th Cir., filed August 6, 1997) (hereafter “Academy Amicus Brief in 
Duffield”).
The Academy was particularly disturbed by the fact that mandatory arbitration, imposed 
by employers as a condition of employment, was simply not “voluntary.” 

c.  The Dunlop Commission
The requirement of voluntariness is also supported by the recommendations of the 
“Commission on the Future of Worker-Management Relations” (the “Dunlop Commission”), a 
blue ribbon Presidential commission.  In its December 1994 “Report and Recommendations,” the 
Dunlop Commission stated that, “binding arbitration agreements should not be enforceable as a 
condition of employment.”  Commission on the Future of Worker-Management Relations: Report 
and Recommendations (December 1994), pp. 34--35. 
The Dunlop Commission expressed a concern about, 
the potential for abuse of ADR created by the imbalance of power between 
employer and employee, and the resulting unfairness to employees who, voluntarily 
or otherwise, submit their disputes to ADR.  These concerns are obvious if the 
process is controlled unilaterally by employers, such as when employees are re-
quired to sign mandatory arbitration clauses as a condition of employment.

 Commission on the Future of Worker-Management Relations: Report and Recommenda-
tions (December 1994), pp. 28-29.   Given this concern, the Commission formally recommended 
that arbitration agreements not be required as a condition of employment.
d.  The National Labor Relations Board
The National Labor Relations Board has also challenged mandatory employment 
arbitration agreements as being illegal.  In a 1996 report, the General Counsel of the NLRB 
concluded that mandatory binding arbitration clauses, imposed as a condition of employment, 
violated the National Labor Relations Act.  NLRB General Counsel Report, 1996 Daily Lab.Rep. 
36 E-4, E-6-7 (Feb. 23, 1996). 
e.  The Department of Labor

The United States Department of Labor has taken the position that employees 
cannot be required, as a condition of employment, to arbitrate claims arising under the Fair Labor 
Standards Act (29 U.S.C. § 204 et seq.).  The Department of Labor has stated that requiring 
employees to waive their statutory right to pursue such claims in court, as a condition of 
employment, is contrary to Congressional intent and seriously affects the ability of employees to 
vindicate their statutory wage and hour rights.  Therefore, such arbitration agreements are invalid 
and unenforceable with respect to FSLA claims.  See, Amicus Curiae Brief of Department of 
Labor, filed in Gerke v. Waterhouse Securities, N.D. Cal. Case No. C-98-4081-CAL. 
f.  The Society of Professionals in Dispute Resolution
The Society of Professionals in Dispute Resolution (“SPIDR”), the country’s 
largest organization of neutrals, has announced that it, too, opposes mandatory employment arbi-
tration.  In a January 1998 policy statement issued by the SPIDR Board of Directors, the 
organization stated that it “is in substantial agreement with the position taken by the National 
Academy of Arbitrators in opposition to agreements imposing arbitration of statutory rights as a 
condition of employment.”  Statement on Arbitration of Statutory Rights Imposed as a Condition 
of Employment, Approved by SPIDR Board of Directors, January 24, 1998.
g.  Academics and Legal Scholars

Since Gilmer, some of the country’s most prominent employment law professors 
and legal scholars have written law review articles in which they conclude that mandatory 
arbitration of statutory employment claims--imposed by employers as a condition of employment-
-is unlawful.   The reasons include the absence of a “voluntary” waiver of rights, a lack of 
constitutional due process in the arbitration system, the basic conflict with the purposes and 
language of the civil rights laws, and the fact that the FAA simply does not apply to employment 
contracts.
D.  Unilaterally Imposed Arbitration is Inconsistent with the Consensual Underpinnings of 
Arbitration, and Forces the Courts to Constantly Review the Validity and Fairness of Agreements

1.  From Both a Legal And a Policy Perspective, “Voluntariness” Is the Key to The
Enforceability of Arbitration Agreements
Arbitration is only viable, from either a legal or policy perspective, if it is the result of a 
truly voluntary agreement by the parties, who are aware of arbitration’s strengths and limitations, 
and who have freely decided to use that process to settle a particular dispute.  Without this 
element of a knowing, voluntary agreement, there is no legal or moral justification for enforcing 
an arbitration agreement. 
The National Academy of Arbitrators has stressed that, 
...the strength and justification for the enforcement of agreements to arbitrate, and 
for the limited judicial review of arbitration awards, rests on the foundation that 
agreements to arbitrate be voluntary...unless a party has agreed to arbitrate, it will 
not be compelled to do so.  Likewise, the immunity from judicial review of an 
arbitrator’s alleged error of law or fact is premised on the voluntary choice of the 
parties to submit to an arbitrator’s judgment.  Without the voluntariness of the 
arbitration agreement, the public policy favorable to arbitration lacks a foundation. 
 

Academy Amicus Brief in Duffield, p. 16.


 	This emphasis on “voluntariness” is consistent with the Supreme Court’s own pronounce-
ment that arbitration under the FAA is, “a matter of consent, not coercion.”  Mastrobuono v. 
Shearson-Lehman, supra, 115 S.Ct. at 1216.  And, it is consistent with the strict standard 
traditionally required by the courts before finding a valid waiver of constitutional and statutory 
rights, i.e., a knowing and voluntary waiver.   An agreement to arbitrate in the employment 
setting is a waiver of both constitutional rights (jury trial, Article III court, due process) and 
statutory rights under the civil rights laws.  
2.  Arbitration Agreements Drafted and Imposed by Employers Are Subject to Abuse

Our system of justice is an adversarial one.  The ability of employers to draft arbitration 
agreements and then impose them on prospective (or existing) employees as a non-negotiable 
condition of employment invites abuses by those who control the process.  Inevitably, employers 
have taken advantage of this power, by drafting arbitration agreements which slant the process 
distinctly in their favor.   This overreaching will only continue until the courts deal with the 
underlying problem and prevent employers from unilaterally designing and imposing arbitration 
agreements upon their employees as a condition of employment.
3.  Courts Are Constantly Being Required to Determine The Validity of Involuntary
Employment Arbitration Agreements
In the wake of Gilmer, employers have been quick to impose adhesion arbitration clauses 
on prospective (and existing) employees.  As discussed above, the legality and enforceability of 
such agreements is highly questionable, both from a legal and a policy standpoint.  
The courts’ dockets are now filled with cases in which employees challenge these coercive 
arbitration agreements as invalid and unenforceable.  The courts are then forced to evaluate both 
the substance of an arbitration agreement (fundamental fairness of the procedures, due process, 
unconscionability, etc.), and the circumstances surrounding the creation of the agreement (to 
determine whether the agreement was “knowing,” “voluntary,” the product of undue duress or 
coercion, etc.).  Unfortunately, as long as employers continue to require arbitration as a pre-
dispute condition of employment, these challenges will continue, and the courts will remain busy 
evaluating the validity of every such agreement.  	

The solution to this problem is simple, and follows logically from the concept of 
“voluntariness.”  If an arbitration agreement has been required by an employer as a condition of 
employment, then it is not “voluntary,” and any such agreement should be unenforceable.  The 
parties are always free, after a dispute has arisen, to voluntarily decide that arbitration is the best 
method of resolving their particular dispute.  The parties themselves will then be empowered to 
ensure fairness, by identifying neutral arbitrators and selecting fair and affordable procedures.  If 
they have knowingly and voluntarily agreed to use arbitration under these circumstances, then 
neither party will be going to court to “challenge” the agreement and the courts will be relieved of 
a substantial burden.  
	IV.    CONCLUSION
Parties certainly have the right to waive constitutional rights.  But those rights cannot be 
taken away by corporations with excessive market leverage.  The courts need to respect their very 
reason for being:  to protect the constitutional rights of the citizenry and to properly interpret and 
enforce the laws. If the courts ensure that fundamental rights may only be waived knowingly and 
voluntarily, and if they place responsibility for ensuring fairness on the parties, then–and only 
then–will alternative dispute resolution fulfill its promise.
As the Court of Appeal properly concluded in Maciejewski v. Alpha Systems Lab, supra:  
“[i]n the final analysis, no dispute resolution method, whether in court or out, will be accepted by 
litigants unless it is (and is perceived to be) fair, prompt and economical.”  1999 Daily Journal 
D.A.R. at 8047.  Mandatory arbitration simply does not and will not ever enjoy that essential 
perception of fairness.
Amicus asks the Court to reverse the decision of the Court of Appeal, and so uphold the 
right of an employee to have access to a judge and jury in order to vindicate his or her statutory 
employment rights.
Respectfully submitted, 
CLIFF PALEFSKY      
KEITH EHRMAN
McGUINN, HILLSMAN & PALEFSKY
535 Pacific Avenue
San Francisco, CA 94133
(415) 421-9292
Attorneys for Amicus Curiae
   	CALIFORNIA EMPLOYMENT 
LAWYERS ASSOCIATION

	PROOF OF SERVICE

CASE NAME:	Armendariz & Olague-Rodgers v. Foundation Health Psychcare Services, Inc.
CASE NO.: 		S075942
COURT: 		Supreme Court of the State of California
  
I am employed in the City and County of San Francisco, California; I am over the age of eighteen years and 
not a party to the within action; my business address is 535 Pacific Avenue, San Francisco, California 
94133.  On the date last written below, I served the following documents: 

	BRIEF AMICUS CURIAE OF THE
	CALIFORNIA EMPLOYMENT LAWYERS ASSOCIATION
	IN SUPPORT OF PLAINTIFF/RESPONDENT

on the parties, through their attorneys of record, by placing true copies thereof in sealed envelopes 
addressed as shown below for service as designated below: 

(A)	By First Class Mail - I caused each such envelope, with first-class postage thereon fully prepaid, 
to be deposited in a recognized place of deposit of the U. S. mail in San Francisco, California, for collection 
and mailing to the office of the addressee on the date shown herein following ordinary business practices.

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addressee by a member of the staff of this law firm on the date last written below.

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T Delivery, with whom we have a direct billing account, who personally delivered each such envelope to 
the office of the addressee.

(D)	By Federal Express - I caused each such envelope to be delivered to the Federal Express 
Corporation at San Francisco, California, with whom we have a direct billing account, to be delivered to 
the office of the addressee on the next business day.

(E)	By Facsimile - I caused a copy of this document to be faxed to the parties noted at the fax numbers 
stated below.  Attached hereto is a verification of reception.

Type of
Service   	Addressee						

C		Clerk						(Original & 14 Copies)
Supreme Court of the State of California
350 McAllister Street
San Francisco, CA 94102





A		Glenn M. Clark, Esq.				(1 copy)
Allan C. Miller, Esq.
Miller, Clark, Calvert & Raimondi
2222 Martin Luther King Jr. Way
Berkeley, CA 94704

A		William Gaus, Esq.				(1 copy)
Pillsbury, Madison & Sutro
235 Montgomery Street
P.O. Box 7880
San Francisco, CA

A		Clerk 						(5 copies)
California Court of Appeal	
303 Second Street, South Tower
San Francisco, CA 94107

A		The Hon. Lynn Duryee			(1 copy)
Marin County Superior Court
Department 7L
3501 Civic Center Drive
P.O. Box 4988
San Rafael, CA 94913-4988

I declare under penalty of perjury that the foregoing is true and correct.  Executed this 17th day of 
August, 1999, at San Francisco, California.

_____________________
      L. Holben

 	See, Graham Oil v. ARCO, 43 F.3d 1244, 1247-48 (9th Cir. 1995).
 	Pub.L.No.102-166.
 	9 U.S.C. § 1 et seq.
 	Members of this Court have previously recognized that the “assumption” that contractual 
arbitration proceedings are “efficient” and “low cost” and benefit employees is largely a myth.  In 
Moore v. Conliffe (1994) 7 C.4th 634, 659-60, 29 C.R.2d 152, Justice Baxter’s dissent noted this 
problem: “In their eagerness to shift dispute resolution from the courts to arbitration, the majority 
ignore the differences between contractual arbitration and judicial proceedings, and engage in 
assumptions unsupported by the record or by fact as to the practical impact of contractual arbitration 
on participants.  Among those unsupported and insupportable assumptions is the assumption that 
contractual arbitration is relatively low cost and efficient when compared to a judicial proceeding. 
 That assumption overlooks the thousands of individuals who, but for arbitration provisions inserted 
into employment agreements, consumer contracts, bank customer agreements...and other contracts 
would resolve their disputes at much less cost in small claims court, and, in many cases in municipal 
and superior court.  For this and other well-founded reasons, the paternalistic assumption of the 
majority that arbitration is a preferable means of dispute resolution is not universally shared. [Cites 
omitted].”  Id., J. Baxter (dissenting).    
 	U.S. CONST. art. III.  That section vests the “judicial power of the United States,” which 
extends “to all Cases, in Law and Equity, arising under this Constitution,” in the “supreme Court, and 
in such inferior Courts as the Congress may from time to time ordain and establish,” whose
judges hold lifetime appointments and whose compensation cannot be diminished during their terms 
of office.  Id., §§ 1-2.
 	Thomas v. Union Carbide, 473 U.S. 568, 582-83, 105 S.Ct. 3325 (1985); see also, R. Fallon, 
Of Legislative Courts, Administrative Agencies and Article III, 101 Harv.L.Rev. 916, 943 (1988) 
(Article III promotes the “constitutional interest in maintaining a judicial check against arbitrariness 
[or] infidelity to the requirements of law”).

 	42 U.S.C. § 2000e et seq.
 	42 U.S.C. 2000e-5(f)(3).  As this Court said in Alexander v. Gardner-Denver, 415 U.S. 36 
(1974), “The purposes and procedures of Title VII indicate that Congress intended federal courts to 
exercise final responsibility for enforcement of Title VII; deferral to arbitral decisions would be 
inconsistent with that goal.”  415 U.S. at 56. 
 	In Gilmer, the Court merely held that under some circumstances, an employee could be bound 
to arbitrate his or her statutory claims.  The Court did not delineate what those circumstances were. 
 	10  Pub.L.No. 102-166; § 102, § 1977A(c), 105 Stat. 1071, 1073 (1991); 42 U.S.C. § 
1981a(c).
 	 42 U.S.C. § 1981a(b).
 	Congress encouraged the use, “where appropriate and to the extent authorized by law...of 
alternative means of dispute resolution, including settlement negotiations, conciliation, facilitation, 
mediation, fact-finding, mini-trials, and arbitration.”  42 U.S.C. § 1981 notes (West 1994).  See, 
Prudential v. Lai, supra, 42 F.3d at 1304-05 (in light of legislative history of Title VII and the strong 
public policy of protecting victims of discrimination, court will only permit arbitration of Title VII 
disputes where it is established that there was a knowing agreement to submit such disputes to 
arbitration). 
 	137 Cong. Rec. H9526 (daily ed. Nov. 7, 1991) (statement of Rep. Edwards) (emphasis 
added).  No one in Congress advanced the contrary view, i.e., that the 1991 Act would allow 
prospective waivers obtained as a condition of employment.  In fact, Congress rejected a provision 
that would have allowed the use of mandatory agreements to arbitrate.  See, H.Rep. No. 102-40(I), 
102d Cong., 1st Sess.d (1991), reprinted in 1991 U.S.C.C.A.N. 549, 635. 
 	§ 12920 provides, in part, “It is hereby declared as the public policy of this state that it is 
necessary to protect and safeguard the right and opportunity of all persons to seek, obtain and hold 
employment without discrimination...”.  
  	“It is the purpose of this part to provide effective remedies which will eliminate such 
discriminatory practices.”  Government Code § 12920.
 	Commodore Home Systems v. Superior Court (1982) 32 C.3d 211, 185 C.R. 270. 
   	Government Code § 12965(b).
 	The Supreme Court did not decide the scope of the F.A.A.’s employment contract exclusion 
in Gilmer, supra, although the only two justices to address the subject agreed with the Ninth Circuit’s 
analysis in Craft.  In addition to the Craft decision, numerous law review articles have detailed the 
significant legislative history supporting Justice Steven’s interpretation of the exclusion as set forth 
in his dissent in Gilmer, and adopted in Craft.  See, Matthew Finkin, Employment Contracts Under 
the FAA--Reconsidered, 1997 Lab.L.J. 329 (June 1997) (hereafter “Finkin, Employment Contracts”); 
Matthew Finkin, Workers’ Contracts Under the United States Arbitration Act:  An Essay In 
Historical Clarification, 17 Berkeley J.Emp. & Lab.L. 282 (1996) (hereafter “Finkin, Workers’ 
Contracts”); Jeffrey Stempel, Reconsidering the Employment Contract Exclusion in Section 1 of the 
Federal Arbitration Act:  Correcting the Judiciary’s Failure of Statutory Vision, 1991 J.Disp.Resol. 
259, 265--6 (1991) (hereafter “Stempel, Reconsidering”);  J. Sternlight, Panacea or Corporate Tool?: 
 Debunking the Supreme Court’s Preference for Binding Arbitration, 74 Wash. U. L.Q. 647-52 
(1996) (hereafter, “Sternlight, Panacea”);  D. Schwartz, Enforcing Small Print to Protect Big 
Business:  Employee and Consumer Rights Claims in an Age of Compelled Arbitration, 1997 Wisc. 
L.R. 33, 73-81, 73-81, 122-23 (1997) (hereafter, “Schwartz, Enforcing”).  As indicated in Craft, 
other Circuits lacking the benefit of the legislative history relied upon by the 9th Circuit which 
identified  the exact source of the language used in the “employment contract” exception to the FAA, 
reached a contrary conclusion.
 	Sternlight, Panacea, pp. 637, 647-52; Schwartz, Enforcing, pp. 122-23.
 	See, e.g. Title VII, 42 U.S.C. § 2000 et seq., which limits employers’ freedom to make 
employment decisions for discriminatory reasons, and the Fair Labor Standards Act, 29 U.S.C. § 201 
et seq, enacted in 1938, which limits employers’ ability to pay substandard wages or require excessive 
hours.
 	In setting forth the policy reasons underlying the National Labor Relations Act, which gave 
employees the right to organize and bargain collectively, Congress noted that its passage was 
necessary because of, “The inequality of bargaining power between employees...and employers....” 
29 U.S.C. § 151.  The NLRA was designed to “restor[e] equality of bargaining power between 
employers and employees.”  Id.
 	Congress alone has enacted statutes in the following areas:  preventing the abuse of child 
labor; regulating minimum wages and maximum work hours; conferring on employees the right to 
organize, and to form and join unions; and prohibiting discrimination of all kinds, whether based on 
race, gender, age, religion or disability.
 	 The United States Supreme Court has approved of arbitration of contract claims in the 
organized labor (union-management) context for several key reasons.  First, and most importantly, 
labor arbitration was agreed to by parties of roughly equal bargaining power.  Second, the Court 
recognized the unique trade-off inherent in collective bargaining, the finality of arbitration in exchange 
for labor peace (no strikes).  Third, the labor arbitrator is expected to simply interpret and decide 
contract issues, arising out of the collective bargaining agreement itself.  United Steelworkers v. 
Enterprise Car and Wheel, 363 U.S. 593 (1960); United Steelworkers v. Warrior & Gulf Navigation 
Co., 363 U.S. 574 (1960); United Steelworkers v. American Mfg. Co., 363 U.S. 564 (1960); 
Sternlight, Panacea, pp. 642--43, 653--54; Schwartz, Enforcing, pp. 72--73, n. 130. 
But even in the organized labor context, the courts have recognized that limitations must be 
placed on arbitration agreements, to the extent they implicate statutory claims. Alexander v. Gardner-
Denver, supra.  The Supreme Court has repeatedly held that unionized employees are not required 
to arbitrate statutory and other public policy claims that do not involve the collective bargaining 
agreement.  Lingle v. Norse, 486 U.S. 399, 108 S.Ct. 1877 (1988), Wright v. Universal Maritime 
Services, 119 S.Ct. 391 (1998).
Furthermore, courts and commentators alike have recognized the vast difference between 
arbitration in the organized labor context and in the individual employee context.  Cole v. Burns 
Intern’l Security, 105 F.3d 1465, 1476-1477 (D.C. Cir. 1997) (questioning validity of imposing the 
model of collective bargaining agreement arbitration onto individual employment situations where 
employees are attempting to enforce public statutory rights, and noting the structural protections for 
employees inherent in the union/collective bargaining arena); Sternlight, Panacea, pp. 642-43 (using 
labor arbitration in lieu of a union labor strike is entirely different from using individual arbitration 
in lieu of a public court proceeding); J. Sternlight, Rethinking the Constitutionality of the Supreme 
Court’s Preference for Binding Arbitration:  A Fresh Assessment of Jury Trial, Separation of Powers 
and Due Process Concerns, 72 Tulane L.R. 1, 7 (1977) (hereafter “Sternlight, Rethinking”). 
 	California public policy protects the rights of wage earners to be promptly paid all wages due. 
 Gould v. Maryland (1995) 31 C.A.4th 1137, 1147, 37 C.R.2d 718; Labor Code §§ 206, 216.  The 
Legislature therefore adopted Labor Code §229, which provides, “Actions to enforce the provisions 
of this article for the collection of due and unpaid wages...may be maintained without regard to the 
existence of any private agreement to arbitrate....” In Perry v. Thomas, 482 U.S. 483, 107 S.Ct. 2520 
(1987), the Supreme Court found that the FAA pre-empted §229.  The Perry case, like Gilmer,  
involved a U-4 registration statement and not an employment contract. In light of the Craft decision, 
preemption would not be an issue in the context of an arbitration clause contained in an employment 
contract.
 	In 1997, the Academy passed a resolution stating, “The National Academy of Arbitrators 
opposes mandatory employment arbitration as a condition of employment when it requires waiver of 
direct access to either a judicial or administrative forum for pursuit of statutory rights.”  National 
Academy of Arbitrators Statement and Guidelines (May 21, 1997) 103 Daily Lab. Rep. (BNA) E-1 
(May 29, 1997).  The Academy position is based largely on the notion that the justification for the 
enforcement of agreements to arbitrate rests on the premise that such agreements are completely 
voluntary, and that voluntariness is obviously lacking when employers condition employment on 
submission to arbitration.  See, Amicus Curiae Brief of the National Academy of Arbitrators, p. 16, 
filed in Duffield v. Robertson Stephens, Appeal No. 97-15698 (9th Cir., filed August 6, 1997) 
(hereafter “Academy Amicus Brief in Duffield”).
 	The court in Gilmer merely held that parties could arbitrate an ADEA case.  It made it clear 
that Mr. Gilmer was not contending that he was “coerced” into signing the arbitration clause 
contained in his U-4 registration document.  Thus, the Gilmer decision does not support the concept 
that  employers may condition employment upon an arbitration agreement for statutory claims.  In 
fact, the Gilmer court made it clear that the clause in question in that case was not contained in an 
employment contract.  And, in its recent decision in Wright v. Universal Maritime Services, 119 S.Ct. 
391 (1998),  the Supreme Court made it clear that Gilmer does not resolve the question of the validity 
of a mandatory arbitration agreement of civil rights claims in light of the subsequent passage of the 
1991 amendments. 119 S.Ct. at 397 fn. 2.
 	The Supreme Court has long recognized that the choice of forum may materially affect the 
substantive rights to be vindicated in Title VII cases.  Alexander v. Gardner-Denver, supra, 415 U.S. 
at 56.  As the Court explained in Alexander, “arbitral procedures, while well suited to the resolution 
of contractual disputes, make arbitration a comparatively inappropriate forum for the final resolution 
of rights created by Title VII.”  Id. at 57.  	
 	This is hardly surprising.  The main goal of arbitration is finality.  The goal of arbitration is 
not, and never has been, to reach the “legally correct result.”  See, Moncharsh v. Heily & Blase, 3 
Cal.4th 1, 8-12, 832 P.2d 899 (1992) (“by voluntarily submitting to arbitration, the parties have 
agreed to bear the risk [that the arbitrator will make a mistake] in return for a quick...and
conclusive resolution to their dispute”); P. Carrington & P. Haagen, Contract and Jurisdiction, 1996 
Sup.Ct.Rev. 331, 344-45 (1997) (hereafter, “Carrington, Contract”).
   	A related problem of arbitration proceedings is that they are a “closed,” non-public forum. 
 When employers engage in discriminatory conduct which violates the public policy of this state, it 
does not serve the public interest to have such conduct shielded from view.  The courts have 
repeatedly stressed the importance of “open trials” which allow public access to the administration 
of justice.  Most recently, in NBC Subsidiary v. Superior Court, 1999 D.A.R. 7575 (July 28, 1999), 
this Court stated that, “open trials serve to demonstrate that justice is meted out fairly, thereby 
promoting public confidence in such governmental proceedings; ‘more importantly,’ open trials 
provide a means, ‘akin in purpose to the other checks and balances that infuse our system of 
government’, by which citizens scrutinize and ‘check’ the use and possible abuse of judicial power; 
and finally, ‘with some limitations’, open trials serve to enhance the truth-finding function of the 
proceeding...In that sense, public access is an indispensable element of the trial process itself.  Trial 
access, therefore, assumes structural importance in our ‘government of laws’.”  Id. at 7583.
 	Rosenberg v. Merrill, Lynch, Pierce, Fenner & Smith, 76 FEP 681 (D.Mass. 1998) (quoting 
the Securities Industry Conference on Arbitration Arbitrator’s Manual [hereinafter “SICA 
Arbitrator’s Manual], p. 19).  Thus, in a discrimination case, NASD arbitrators are essentially being 
told that they need not follow the civil rights laws as written.  See also, Carrington, Contract, pp. 
344-45.
 	First Options v. Kaplan, supra, 115 S.Ct. at 1923.
 	For example, the FAA does not require arbitrators to explain their decisions or even to record 
the evidence on which they are based, so it is impossible to detect whether a particular award is or 
is not a faithful application of the controlling law.  Carrington, Contract, p. 347.  Indeed, in the 
securities industry, arbitrator training manuals discourage arbitrators from giving any written analysis, 
in order to avoid judicial review.  Rosenberg v. Merrill, Lynch, Pierce, Fenner & Smith, 76 FEP 681 
(D.Mass. 1998) (citing materials used in National Association of Securities Dealers arbitrator training 
sessions). 
 	This concern was addressed by the New Mexico Supreme Court in a slightly different 
arbitration context.  In Carlsbad Municipal Schools v. Harrell, 118 N.M. 470, 882 P.2d 511 (1994), 
the court held that when a party is forced into compulsory arbitration, the scope of judicial review 
may not be narrowly limited.  To compel a party to arbitrate, but then to deny effective judicial 
oversight would be a violation of due process.  At a minimum, if a party is forced into arbitration, the 
law requires that the courts have the opportunity to see whether the law was correctly applied.
Other commentators have suggested that where employees have been compelled to submit 
to arbitration, and have not “voluntarily” waived the right to adequate judicial review of the 
arbitration decision, the employee’s due process rights may have been violated.  Sternlight, 
Rethinking, pp. 95-97.
 	Following a lengthy survey, the federal government’s General Accounting Office expressed 
serious reservations about the competence of securities industry arbitrators to hear employment cases. 
 See, GAO Report HEHS-94-17, Employment Discrimination:  How Registered Representatives Fare 
in Discrimination Disputes (March 30, 1994) (finding that securities industry arbitrators are 
inadequately trained to handle discrimination cases); see also, Cole v. Burns, supra, 105 F.3d at 1477 
(questioning competence of arbitrators to analyze and decide purely legal issues in connection with 
statutory claims).
 	The American Arbitration Association charges an initial filing fee of between $500 and 
$7,000, depending on the size of the employee’s claim.
 	This assumes that there is only one arbitrator.  Often, there is a panel of arbitrators, and the 
forum fees will naturally rise.  In Cole v. Burns, supra, the Court noted that JAMS/Endispute 
arbitrators charge an average of $400 per hour, although fees of $500 or $600 per hour are not 
uncommon.  105 F.3d at 1480, n. 8.  Furthermore, when calculating the arbitrator fees, AAA now 
assesses the parties a 50% “supplemental” charge on top of the arbitrator’s actual hearing time, to 
account for the arbitrator’s “study time”, i.e., reviewing briefs, reviewing evidence, legal research, 
etc.  Thus, even if the parties only had six hours of “hearing time” in a day, they would be charged 
in advance for nine hours of arbitrator time!  And, AAA charges an “administrative fee” to each party 
of $150 per day for each day of hearing, on top of the arbitrator’s fees.
 	For example, in a ten day arbitration before the American Arbitration Association with just 
one arbitrator who charges $350 per hour, the cost to the parties (based on an eight hour day, plus 
“study time”) would be a minimum of $42,000 in arbitration fees, plus the initial filing fee of up to 
$7,000, plus daily AAA “administrative fees.”  This means that a plaintiff employee would initially 
have to pay approximately $25,000 in “forum fees” just to vindicate his or her statutory rights!  And, 
if there is a panel of three arbitrators, or there are discovery disputes, the costs would rise 
dramatically higher.
 	The California courts had previously noted the serious problem caused when plaintiffs are 
required to pay large arbitration forum fees in order to vindicate their rights.  See, Patterson v. ITT 
(1993) 14 C.A.4th 1659, 1665, (arbitration agreement unconscionable and unenforceable on several 
grounds, one of which was the requirement of a $250 per hour arbitration forum fee (plus a $100 
filing fee), when most disputes would involve relatively small consumer claims; clear effect of these 
procedures was to discourage consumers from bringing claims). 
 	Congress and the California Legislature encouraged victims of discrimination to vindicate their 
statutory rights under Title VII and the California Fair Employment and Housing Act by shifting a 
prevailing plaintiff’s reasonable attorneys fees and costs to the losing party.  42 U.S.C. § 2000e-5(k); 
California Government Code § 12965(b).  The failure of arbitrators to award fees and costs to a 
prevailing plaintiff undermines one of the critical features of the civil rights laws.  
 	Other employees are usually the most critical witnesses in an employment case.
 	 In arbitration, there is a presumption against taking depositions, and permission to take 
depositions is usually only granted in order to preserve testimony of key witnesses who will be unable 
to testify in person at the arbitration hearing.  Schwartz, Enforcing, p. 46, n. 34.  In addition, 
employers who draft a mandatory arbitration agreement will sometimes place specific, severe 
restrictions on the amount of discovery permitted in any arbitration proceeding, by barring 
depositions altogether or by severely limiting their number.  See, e.g., Hooters of America v. Phillips, 
Case No. 4:96-3360-22 (D.S.C., March 12, 1998). 
 	See, Prudential v. Lai, 42 F.3d 1299, 1305 (9th Cir. 1994) (in a sex harassment case, the 
remedies and procedural protections available in arbitral forum may differ significantly from those 
contemplated by the legislature, to the detriment of the employee).
 	Aetna Life Ins. v. Lavoie, 475 U.S. 813, 824 (1986); Morrissey v. Brewer, 408 U.S. 471, 
485-86 (1972); Gibson v. Berryhill, 411 U.S. 564, 579 (1973).
 	See, e.g., Sternlight, Panacea, pp. 684-85; Schwartz, Enforcing, pp. 60-61 (individual 
arbitrators have an economic stake in being selected again, and their judgment may well be shaded 
by a desire to build a “track record” of decisions that corporate repeat users will view approvingly).
 	See, Bompey & Pappas, Is There A Better Way?  Compulsory Arbitration of Employment 
Discrimination Claims After Gilmer, 19 Emp.Rel.L.J. 197 (1994); R. Alleyne, Statutory 
Discrimination Claims:  Rights “Waived” and Lost in the Arbitration Forum, 13 Hofstra Labor L.J. 
381 (1996); Schwartz, Enforcing, pp. 64-66.
 	See, Schwartz, Enforcing, p. 63; Bompey & Pappas, Is There A Better Way?  Compulsory 
Arbitration of Employment Discrimination Claims After Gilmer, 19 Emp.Rel.L.J. 197 (1994); see 
also, BNA Employment Discrimination Report, 1996, Vol. 6, p. 875 (summarizing comments of Paul 
Cane, a management employment law attorney, made at a conference sponsored by the Labor and 
Employment Law Section of the State Bar of California, recommending that employers use 
arbitration agreements because the employer has a better chance of winning in arbitration, damage 
awards tend to be lower, an arbitrator is less likely to award punitive damages or significant emotional 
distress damages, the employer can avoid discovery and depositions, and employees may be 
discouraged from bringing cases forward in the first place if they are faced with arbitration.)
 	Recognizing the questionable nature of its compulsory arbitration process, the National 
Association of Securities Dealers voted in August 1997 to abolish mandatory arbitration of statutory 
employment discrimination claims.  And, effective January 1, 1999, the New York Stock Exchange 
announced that it would not even allow its forum to be used in discrimination cases involving pre-
dispute arbitration agreements.
 	See, EEOC, Policy Statement (Appendix hereto); Amicus Curiae Brief filed by EEOC in 
Duffield v. Robertson Stephens, No. C-95-0109-EFL (N.D.Cal. filed August 4, 1995); Cole v. Burns, 
supra, 105 F.3d at 1479 (discussing EEOC’s position in numerous amicus curiae briefs filed around 
the country); Rosenberg v. Merrill Lynch, 76 FEP 681 (D.Mass. 1998) (noting EEOC’s position as 
stated in the EEOC’s own official policy statements and in brief submitted to the court).
 	See, discussion in Section III.D.1, infra. 
 	See, e.g., J. Grodin, Arbitration of Employment Discrimination Claims: Doctrine and Policy 
In Wake of Gilmer, 14 Hofstra Lab.L.J. 1 (1996); P. Carrington & P. Haagen, Contract and 
Jurisdiction, 1996 Sup.Cit.Rev. 331(1997); R. Reuben, Public Justice: Toward a State Action Theory 
of Alternative Dispute Resolution, 85 Calif.L.Rev. 3 (1997)(“Public Justice”); R. Alleyne, Statutory 
Discrimination Claims: Rights “Waived” and Lost in the Arbitration Forum, 13 Hofstra.Lab.L.J. 381 
(1996); J. Sternlight, Panacea or Corporate Tool?: Debunking the Supreme Court’s Preference for 
Binding Arbitration, 74 Wash.U.L.Q. 637 (1996); S. Hoffman, Mandatory Arbitration: Alternative 
Dispute Resolution or Coercive Dispute Suppression?, 17 Berk.J.Empl.&Lab.L. 131 (1996); D. 
Schwartz, Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in 
an Age of Compelled Arbitration, 1997 Wisconsin L.R. 33 (1997).
 	Leasing Service v. Crane, 804 F.2d 828, 832--33 (4th Cir. 1986) (constitutional right to jury 
trial is fundamental; any purported waiver of that right must be both knowing and voluntary; party 
claiming waiver has burden of showing that consent to the waiver was voluntary and knowing); KMC 
v. Irving Trust, 757 F.2d 752, 756 (6th Cir. 1985) (constitutional right to jury trial may be 
contractually waived only if done knowingly, intentionally and voluntarily); Prudential v. Lai, supra 
(requiring knowing waiver of statutory rights, remedies and procedural protections under Title VII); 
Nelson v. Cyprus Bagdad Copper Corp., 119 F.3d 756 (9th Cir. 1997) (requiring “knowing and 
voluntary” waiver of statutory rights under the civil rights laws); cf. Fuentes v. Shevin, 407 U.S. 67, 
92 S.Ct. 1983 (1972) (consumer did not waive constitutional due process rights to notice and a 
hearing when she signed an adhesion contract permitting seller to seize property she had purchased 
upon non-payment of monthly installment obligations; court noted absence of true “voluntariness” 
and lack of economic power of consumer).
 	Thus, mandatory arbitration agreements in recent years have contained the following elements 
which put the weaker party at a severe disadvantage: (1)  a limitation on the remedies an employee 
may recover, i.e., no tort damages, or no punitive damages (Paladino v. Avnet Computer, supra; 
Stirlen v. Supercuts (1997) 51 Cal.App.4th 1519; Great Western Mortgage Co. v. Peacock, 110 F.3d 
222 (3rd Cir. 1997); Hooters of America v. Phillips, Case No. 4:96-3360-22 (D.S.C., March 12, 
1998)); (2) limitations on the discovery available prior to the arbitration, which inevitably works to 
the disadvantage of the plaintiff (Hooters of America v. Phillips, supra); (3)  controlling the panel of 
arbitrators (Rosenberg v. Merrill Lynch, supra; Cheng-Canindin v. Renaissance Hotel (1996) 50 
Cal.App.4th 676; Hooters of America v. Phillips, supra; Graham v. Scissor-Tail (1981) 28 Cal.3d 
807, 623 P.2d 165); (4)  requiring arbitration in some distant location (Patterson v. ITT Consumer 
Financial (1993) 14 Cal.App.4th 1659, 18 C.R.2d 563); (5)  unilateral agreements, which require the 
employee to arbitrate, but which permit the employer to go to court (Stirlen v. Supercuts, supra); 
 (6)  shortening the statute of limitations (Graham Oil v. ARCO, supra; Stirlen v. Supercuts, supra); 
 (7)  ensuring that the employer dominates and controls the arbitration process, such as having the 
power to control what discovery is permitted or who can testify (Cheng-Canindin v. Renaissance 
Hotel, supra; Rosenberg v. Merrill Lynch, supra); and (8)  forbidding the arbitrator from awarding 
attorneys fees or costs, regardless of whether statutes provide such remedies to prevailing plaintiffs 
(Stirlen v. Supercuts, supra; Paladino v. Avnet Computer, supra; Hooters of America v. Phillips, 
supra; Graham Oil v. ARCO, supra).

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