Defending servicemembers from forced arbitration | The American Association For Justice

Defending servicemembers from forced arbitration

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June 2018 - R. Joseph Barton

 

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Federal law protects the employment rights of servicemembers who leave their jobs for active duty—but their ability to assert those rights in court is being compromised.
 

People are often surprised to find that employers sometimes fire or refuse to rehire servicemembers­ returning from active duty even though the Uniformed Services Employment and ­Reemployment Rights Act of 1994 (USERRA) protects against this discrimination.1 The statute guarantees them prompt reemployment to their civilian jobs and provides federal courts with broad powers to enforce those rights.

But with forced arbitration agreements becoming more common—and with five federal appellate courts having addressed their validity in the context of USERRA—it is crucial to understand the current legal landscape.

USERRA is the latest in a series of laws since at least 1940 that protect veterans’ employment and reemployment rights. USERRA’s immediate statutory predecessor was the Veterans’ Reemployment Rights Act—in amending and codifying that law as USERRA, Congress clarified and strengthened servicemembers’ established employment rights.2 Prior case law interpreting USERRA predecessor statutes remained in full force and effect to the extent it was consistent with USERRA.3

Before USERRA, a handful of cases addressed the validity of forced arbitration clauses involving veterans’ employment rights, and arbitration provisions in employment agreements were not often used outside of collective bargaining agreements. Two U.S. Supreme Court decisions also ensured veterans could enforce their employment and ­reemployment rights in court under USERRA’s statutory predecessors.

First, in Fishgold v. Sullivan Drydock & Repair Corp., the Court held that laws protecting veterans were to be “liberally construed” in favor of veterans and that “no practice of employers or agreements between employers and unions can cut down the service adjustment benefits which Congress has secured the veteran under the [Selective Training and Service Act of 1940].”4 Second, in McKinney v. Missouri-Kansas-Texas Railroad Co., the Court held that an employee was “not obliged” to pursue remedies possibly available under a grievance procedure before he could bring an action in district court on his reemployment rights.5

Following these principles, district courts generally concluded that employers could not impose other requirements to “thwart the clear purpose”6 of statutes guaranteeing ­servicemembers’ reemployment­ rights. Even if the plaintiff had proceeded to arbitration and received an ­unfavorable ruling, the ruling would not prevent the plaintiff from pursuing his or her right in court since the federal courts are the exclusive forum for the vindication of these “distinctively federal rights.”7 While several district courts followed this rationale in the USERRA context as recently as 12 years ago, today’s judiciary has rejected these principles.

Courts of Appeals Weigh In

The Fifth Circuit was the first federal appellate court to address whether an employer could use an arbitration provision in an individual employment contract to force an employee to arbitrate a USERRA claim.8 In Garrett v. Circuit City Stores, Inc., Circuit City fired a long-time manager, a reserve officer in the U.S. Marines Corps, when he returned to duty as the United States invaded Iraq. Although a district court found that USERRA §4302(b) expressed a “clear intent” that the right to a jury trial was “not subject to waiver in arbitration,” the Fifth Circuit disagreed, holding that it was “not evident from the statutory language that Congress intended to preclude arbitration by simply granting the possibility of a federal judicial forum.”9

The Fifth Circuit insisted that the statutory language had to specifically mention “mandatory arbitration” or the Federal Arbitration Act to preclude arbitration—even though the Supreme Court did not require that level of specificity.10 In Gilmer v. Interstate/Johnson Lane Corp., the Supreme Court recognized that “all statutory claims may not be appropriate for arbitration” and that courts must look to the text of the statute, its legislative history, or an inherent conflict between the statute and the underlying purposes of arbitration to determine whether Congress intended to “preclude a waiver of judicial remedies” for that statute.11

The Fifth Circuit relied heavily on Gilmer, but there was no provision in the statute at issue in that case similar to §4302(b)—which provides that USERRA supersedes any contract or agreement that “reduces, limits, or eliminates in any manner any right or benefit provided”12 by USERRA and for which the legislative history expressed that any arbitration decision of USERRA claims “shall not be binding as a matter of law.”13

The Fifth Circuit also limited ­USERRA’s “any right or benefit” language to mean only substantive rights, even though USERRA broadly defines “benefits” and includes various protections to sue in federal court.14 The court also ignored ­USERRA’s grant to an employee of the unilateral right to proceed in court, as well as the broad prescription against arbitration in USERRA’s legislative history.15

The Fifth Circuit construed this broad prohibition against enforcing forced arbitration for USERRA claims to include only collective bargaining ­agreements rather than those between an employer and an individual employee.16 Finally, the Fifth Circuit found that allowing arbitration would not conflict with the purposes of USERRA.17 In doing so, it ignored that the U.S. Secretary of Labor must represent the employee, effectively requiring the U.S. government to proceed in arbitration if it wants to enforce a USERRA claim subject to an arbitration provision.18

Unfortunately, the majority of the circuits have followed the Fifth Circuit. In addressing this issue, the Sixth Circuit largely parroted the Fifth Circuit’s rationale with little independent analysis.19

The Sixth Circuit’s concurring opinion, however, acknowledged that its decision precludes an employer from requiring an employee to submit to arbitration as a prerequisite to filing suit in federal court but requires an employee to substitute federal court with arbitration if the contract requires him or her to do so.20 This strange result contradicts the plain language of §4302(b) and is not likely what Congress intended.

The Federal Circuit addressed mandatory arbitration for USERRA claims in an unpublished ­decision. In Russell v. Merit Systems Protection Board, the collective bargaining agreement required that the employee submit her USERRA claim to arbitration.21 Without citing the Fifth or Sixth Circuit decisions, the Federal Circuit concluded that the plain language of §4302(b) prohibited such a provision because it “amounts to an impermissible attempt to subordinate individual rights under USERRA to majoritarian collective bargaining processes” and that ­USERRA’s legislative history confirmed the result.22 As there should be no difference between an arbitration clause in collective bargaining and an arbitration clause in an individual agreement, the Federal Circuit reached a different conclusion than the Fifth and Sixth Circuits.

In Ziober v. BLB Resources, Inc., the Ninth Circuit became the most recent court of appeals to address this issue. It concluded that the Supreme Court’s 2012 decision in CompuCredit v. ­Greenwood, which upheld an arbitration agreement, “foreclose[d any] argument that USERRA includes a non-waivable procedural right to a judicial forum.”23

Beyond relying on CompuCredit, the Ninth Circuit followed the rationale of the Fifth and Sixth Circuits with little additional analysis, asserting that §4302(b) was limited to union contracts and collective bargaining agreements and claiming that the liberal construction of the statute applied only to ­undefined “substantive rights.”24

The Eleventh Circuit addressed a related issue: The plaintiff did not argue that USERRA prohibited arbitration, but rather that an arbitration provision containing numerous “­USERRA-offending terms” was superseded by §4302(b), therefore invalidating the arbitration provision.25 The court affirmed arbitration but held that the arbitrator will decide whether the terms at issue applied. As a result, servicemembers can be forced into arbitration via contracts with illegal terms, and they have no recourse to challenge an arbitrator who subjects them to terms that are invalid under USERRA.26

Going Forward

In the Fifth, Sixth, Ninth, and Eleventh Circuits, challenging arbitration provisions involving USERRA claims will be limited to the same grounds on which any other arbitration provisions can be challenged. In other circuits, however, you can argue that §4302(b) precludes arbitration—and that any decisions to the contrary suffer from flawed reasoning.

First, §4302(b) is a broad prohibition that states USERRA expressly supersedes any contract, agreement, or other matter that “reduces, limits, or eliminates in any manner any right or benefit provided under USERRA.”27 The “including” language can only broaden, not limit, its scope, and some district court decisions reach that same conclusion.28

Second, the Fishgold principle that USERRA must be construed liberally in favor of veterans applies to both their procedural and substantive rights based on the statute’s “any rights and benefits” language, as well as Supreme Court and circuit court precedent.29 The ­Fishgold principle is not merely a tiebreaker between two equally credible arguments. According to Supreme Court precedent, “interpretative doubt [must] be resolved in the veteran’s favor”30 and the veteran’s view can be rejected only if the statutory language is “unambiguous.”31

Third, CompuCredit and other employment-rights statutes are distinguishable, as explained by the concurring opinion in Ziober.32 The concurring opinion recognized the argument that USERRA contains a “contrary congressional command” that overrides the FAA’s pro-arbitration mandate.

For example, USERRA confers on servicemembers the right to litigate in court, unlike the statute at issue in ­CompuCredit, which did not confer that right. Other statutes discussed in ­CompuCredit did confer the right to bring an action in court but lacked a nonwaiver provision. Further, a U.S. Department of Labor regulation interpreted §4302(b) as prohibiting waiver in an arbitration clause of an employee’s USERRA right to sue in federal court.33 And this agency interpretation is entitled to deference.34

Fourth, USERRA’s legislative history expresses the intent that for any USERRA claim, “any arbitration decision shall not be binding as a matter of law.”35 When Congress enacted USERRA, the ­Fishgold principle was expressly included in §4302(b). The House Committee Report explained that §4302(b) codified the principles from Fishgold and McKinney and adopted the view of the courts that expressly interpreted that guidance to forbid binding arbitration.36

Fifth, any distinction between arbitration clauses in contracts between employers and individual employees and arbitration clauses in collective bargaining agreements contradicts the statute’s text as well as Supreme Court precedent.37

Finally, particularly with respect to arbitration agreements with provisions that violate other sections of USERRA—such as requiring payment of costs, allowing cost-shifting, or limiting venue options—you can argue that there is a conflict with USERRA’s purpose. The point of the statute is to ensure that servicemembers are promptly ­reemployed and can enforce those employment rights through specific provisions.

Two judges from different appellate courts have suggested that Congress should pass legislation to address this issue.38 Although legislation has been proposed multiple times in the past several years, it has not advanced. (For more legislative updates, see p. 38.)

Hopefully, members of Congress who publicly praise our veterans and ­servicemembers will back up those words with action—and pass legislation ensuring their ability to enforce their USERRA rights in court.


R. Joseph Barton is a partner at Block & Leviton in Washington, D.C. He can be reached at joe@blockesq.com.


Notes

  1. 38 U.S.C. §§4301 et seq. (2012). 
  2. See Rivera-Melendez v. Pfizer Pharm., LLC, 730 F.3d 49, 54 (1st Cir. 2013) (citing 20 C.F.R. §1002.2 (2017)).
  3. Id. 
  4. 328 U.S. 275, 285 (1946).
  5. 357 U.S. 265, 268 (1958).
  6. Taylor v. S. Pac. Co., 308 F. Supp. 606, 609 (N.D. Cal. 1969).
  7. Kidder v. E. Air Lines, Inc., 469 F. Supp. 1060, 1065 (S.D. Fla. 1978) (quoting McKinney v. Missouri-Kansas-Texas Railroad Co., 357 U.S. at 269); see also Brown v. Consol. Rail Corp., 605 F. Supp. 629, 633 (N.D. Ohio 1985). 
  8. Garrett v. Cir. City Stores, Inc., 449 F.3d 672, 673 (5th Cir. 2006).
  9. Garrett v. Cir. City Stores, Inc., 338 F. Supp. 2d 717, 722 (N.D. Tex. 2004), rev’d, 449 F.3d 672 (5th Cir. 2006). 
  10. Garrett, 449 F.3d at 677. 
  11. 500 U.S. 20, 26 (1991). 
  12. 38 U.S.C. §4302 (2012) (emphasis added).
  13. H.R. Rep. No. 103-65 (1994). 
  14. Garrett, 449 F.3d at 677.
  15. Id. at 679.
  16. Id. at 680. 
  17. Id. at 681. 
  18. Id.
  19. Landis v. Pinnacle Eye Care, LLC, 537 F.3d 559, 562–64 (6th Cir. 2008).
  20. Id. at 564 (Cole, J. concurring).
  21. Russell v. Merit Sys. Protec. Bd., 324 Fed. App’x 872 (Fed. Cir. 2008) (unpublished).
  22. Id. at 875 (quoting Russell v. Equal Emp. Opportunity Comm’n, 104 M.S.P.R. 14, 19 (2006)). 
  23. Ziober v. BLB Resources, Inc., 839 F.3d 814, 818 (9th Cir. 2016) (citing CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98 (2012)). 
  24. Id. at 820–21.
  25. Bodine v. Cook’s Pest Control, Inc., 830 F.3d 1320, 1325–26 (11th Cir. 2016).
  26. Id. at 1332–33 (Martin, J. dissenting).
  27. 38 U.S.C. §4302.
  28. Lopez v. Dillard’s Inc., 382 F. Supp. 2d 1245, 1248 (D. Kan. 2005).
  29. Henderson v. Shinseki, 562 U.S. 428 (2011); Kirkendall v. Dep’t of Army, 479 F.3d 830, 843–44 (Fed. Cir. 2007) (en banc); Feore v. North Shore Bus Co., 161 F.2d 552, 553–54 (2d Cir. 1947).
  30. Brown v. Gardner, 513 U.S. 115, 118 (1994). 
  31. See King v. St. Vincent’s Hosp., 502 U.S. 215, 220 n.9 (1991). 
  32. Ziober, 839 F.3d at 822 (Watford, J. concurring).
  33. Id
  34. Milhauser v. Minco Prods., Inc., 701 F.3d 268, 273 (8th Cir. 2012) (according “considerable deference to the Secretary’s interpretation, since [the DOL] is tasked with ‘implementing the provisions’ of USERRA”).
  35. “It is the Committee’s intent that, even if a person protected under the Act resorts to arbitration, any arbitration decision shall not be binding as a matter of law.” H.R. Rep. 103-65, supra note 13, at 20. 
  36. “Section 4302(b) would reaffirm a general preemption as to state and local laws and ordinances as well as to employer practices and agreements, which provide fewer rights or otherwise limit rights provided under amended chapter 43 or put additional conditions on those rights . . . Moreover, this section would reaffirm that additional resort to mechanisms such as grievance procedures or arbitration or similar administrative appeals is not required.” H.R. Rep. 103-65, supra note 13, at 20. 
  37. 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 258 (2009).
  38. Ziober, 839 F.3d at 822 (Watford, J. concurring); Landis, 537 F.3d at 565 (Cole, J. concurring).