In three recently decided cases, United States courts continue to scrutinize the use of pre-dispute arbitration agreements. These agreements, which are referred to in the securities industry as the "Form U-4," generally require employees to pursue any employment-related claims they may have in the future, such as discrimination claims, through the more informal procedure of arbitration, rather than filing a lawsuit in a state or federal court. The U.S. Court of Appeals for the District of Columbia Circuit recently found that a securities saleswoman who registered with the National Association of Securities Dealers ("NASD") did not have to arbitrate her sex discrimination and retaliation claims against her employer. In Gardner v. Benefits Communications Corp., No. 98-7054, 1999 WL 83942 (D.C. Cir. Feb. 23, 1999), the Court of Appeals held that the NASD arbitration rules did not cover Sandra Gardner's dispute with her employer because her employer was not an NASD member and was not a person associated with a member. The NASD Code covers only disputes between members and/or persons associated with members. Although an arbitration panel had ruled in Gardner's favor on her discrimination claims and awarded her $15,000, the Court of Appeals ruled that she was entitled to have her claims adjudicated by a federal court.
In Olde Discount Corp. v. Hubbard, No. 98-3179, 1999 WL 79389 (10th Cir. Feb. 19, 1999), the U.S. Court of Appeals for the Tenth Circuit found that a stockbroker, Julian Hubbard, did not have to arbitrate his race discrimination claims against his former employer because those claims were encompassed by a pending class action suit. The Court of Appeals upheld a district court finding that rejected the employer's attempts to compel arbitration of Hubbard's individual claims under the terms of the Form U-4 that Hubbard had signed. The district court found that the Form U-4 incorporated the arbitration rules of the NASD and the New York Stock Exchange, and that the plaintiff's individual claims fit within those rules' express exclusion for class action suits.
In a decision enforcing a pre-dispute arbitration agreement, the U.S. Supreme Court let stand a Court of Appeals decision that a securities employee must arbitrate her sex and age discrimination claims. In Seus v. John Nuveen & Co., Inc., No. 98-719, 1999 WL 80340 (U.S. Feb. 22, 1999), Ms. Seus, the plaintiff, alleged that her supervisor had told her when she was hired as a sales assistant in 1982 that the arbitration clause of the Form U-4 applied only to disputes over brokers' commissions. However, the Form U-4, which she had signed as a condition of employment, in fact required arbitration of "any dispute, claim, or controversy" that would be required to be arbitrated under the rules of the securities organizations with which Ms. Seus registered, including the NASD. Therefore, the court required Ms. Seus to arbitrate her claims against her former employer, rather than pursue them in court. In light of the continued scrutiny by courts of pre-dispute arbitration agreements, employers seeking to use such agreements should take care to ensure that such agreements are enforceable. If we may be of assistance in answering questions about these cases, pre-dispute arbitration agreements, or alternative dispute resolution, please feel free to contact us by telephone or e-mail as set forth below.
The information provided herein is for general guidance on matters of interest only. While every effort has been made to ensure the information provided herein is accurate and timely, no decision should be made or action taken on the basis of this information without first consulting an Epstein Becker & Green, P.C. professional.
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