Section 1981 Claims Can Be Arbitrated

 

By Mitchell J. Cogen August 14, 2019
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​Employment-related claims alleging race discrimination in violation Section 1981 of the Civil Rights Act of 1866, which prohibits race discrimination in contractual relationships, are subject to arbitration when an employment contract includes an agreement to arbitrate employment disputes, according to the 9th U.S. Circuit Court of Appeals.

The plaintiff began working as a production associate in Tesla's Fremont, Calif., factory in June 2015. Upon hire, he entered an employment agreement that included an arbitration provision requiring Tesla and him to arbitrate any disputes that might arise between them concerning his employment, rather than bring claims in court.

According to the plaintiff, his co-workers began to harass him almost immediately because of his race. The plaintiff claimed that his co-workers regularly made inappropriate racial, sexual and other disparaging comments to him; he was disciplined differently from other employees; the co-workers who harassed him were promoted while he was not; and the company retaliated against him by failing to properly rotate him between positions, causing him injury.

On Sept. 15, 2017, the plaintiff sued Tesla in federal district court, alleging race discrimination in violation of Section 1981, which guarantees all persons, regardless of race, the same rights to enter into and enjoy all benefits, privileges and terms and conditions of any contract, including employment agreements. The plaintiff also sought a declaration by the district court that claims brought under Section 1981 are not subject to arbitration.

[SHRM members-only toolkit: Managing Equal Employment Opportunity]

Tesla argued that the case should be dismissed and referred to arbitration in accordance with the terms of the employment agreement. The district court agreed with Tesla, dismissed the court case and denied the declaratory relief requested by the plaintiff.

On appeal, the 9th Circuit affirmed the decision of the district court. The 9th Circuit found that both U.S. Supreme Court precedent in Gilmer v. Interstate/Johnson Lane Corp. and 9th Circuit precedent in EEOC v. Luce, Forward, Hamilton & Scripps supported the assertion that Section 1981 claims are subject to arbitration.

The 9th Circuit held that since Title VII claims are arbitrable pursuant to the Civil Rights Act of 1991 and applicable case law, the Civil Rights Act and relevant case law similarly applied to Section 1981, and the plaintiff's Section 1981 claims are subject to arbitration. The 9th Circuit reiterated the Supreme Court's position that arbitration affects only the choice of forum, not substantive rights, and noted that "[w]e have become an arbitration nation."

Lambert v. Tesla Inc., 9th Cir., No. 18-15203 (May 17, 2019).

Professional Pointer: This case highlights the growing prevalence and potential usefulness of arbitration agreements in the employment relationship. As courts increasingly find statutory claims affecting the workplace subject to mandatory arbitration, employers are further empowered with a dispute-resolution alternative that can help reduce the cost of litigation, as well as mitigate the unpredictable risk of jury verdicts. Nonetheless, the rules regarding enforceability of mandatory employment arbitration agreements under state and certain federal laws may differ. Mandatory employment arbitration agreements can be a powerful tool for employers, but forethought and planning are needed prior to implementation.

Mitchell J. Cogen is a shareholder with Bullard Law PC, the Worklaw® Network member firm in Portland, Ore.

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