Imagine a fire service management universe where employee lawsuits over the FLSA, Family Medical Leave Act and other employment-regulation statutes go away, replaced by arbitration.

Well, that alternate universe is here today, and thanks to a recent decision by the Ninth Circuit Court of Appeals, it's accessible across the United States.

It's not a perfect universe. For example, current workers or their collective bargaining agreement agents must agree to waive their right to sue in favor of arbitration, so many employers skip the negotiation battle and limit “pre-employment arbitration agreements” to new hires. But arbitration also has obvious advantages over lawsuits for employers and employees: It takes less time, it's less costly and the rules of engagement are much simpler. Plus, an arbitrator's ruling generally is final; courts tend to steer clear of overturning arbitration decisions, unless there's a compelling reason to do so.

The key fact for fire service managers is that there's no federal-law limitation of such employment-discrimination lawsuit waivers to the private sector. Barring special state- or local-law exceptions (or the provisions of a collective bargaining agreement), employment arbitration agreements can be used in a public-agency workplace.

Arbitration is a familiar concept to many firefighters and officers. Provision for binding arbitration of grievances is a common element in many collective bargaining agreements between firefighter labor organizations and fire department employers. In the private sector, the National Labor Relations Board established the basic principles of arbitration in the workplace in the Spielberg Manufacturing Co. case (112 NLRB 1080) back in 1955. But the employer practice of requiring new employees to waive their right to sue in favor of arbitration of an employment-discrimination dispute is a phenomenon of the late 1990s.

The U.S. Supreme Court first entertained the question of the validity of such pre-employment arbitration agreements in Circuit City Stores Inc. v. Adams (532 U.S. 105, 2001). When Saint Clair Adams applied for work with Circuit City, his employment application included language that required all employment disputes be resolved “in the process of arbitration.” When Adams filed a lawsuit against Circuit City in a California court, charging discrimination under state law, Circuit City sued in federal court, asking the federal judge to block Adam's suit in state court and transfer the case to arbitration, pursuant to provisions of the Federal Arbitration Act.

The District Court ruled in favor of Circuit City, but the Ninth Circuit Court of Appeals overruled the District Court, arguing that Circuit City's arbitration requirement was void because the Federal Arbitration Act's provisions supporting arbitration did not apply to “seamen, railroad employees or any other class of workers engaged in … interstate commerce,” including the employees of a national chain. Circuit City appealed to the U.S. Supreme Court, which held that the Ninth Circuit was wrong. The U.S. Supreme Court said that the “engaged in interstate commerce” language applied only to employees working in the transportation industry, sending the case back to the Ninth Circuit for a rehearing.

Employee organizations on the sidelines of the Circuit City case didn't care much about interstate-commerce issues. They were more concerned about whether the lawsuit waiver was buried in the fine print of Circuit City's application and whether that approach was illegally one-sided under state law.

While the Ninth Circuit pondered what to do with Adams and Circuit City, another lawsuit-waiver clause made its way to the U.S. Supreme Court. In EEOC v. Waffle House (534 U.S. 279, 2002), the issue was whether the federal Equal Employment Opportunity Commission could file its own discrimination suit against Waffle House.

Eric Baker, a Waffle House employee, suffered a seizure while at work and was fired shortly thereafter. The Waffle House application that Baker signed contained a lawsuit waiver clause. Baker didn't sue Waffle House for discrimination, but he did file an EEOC complaint. The EEOC subsequently decided to file its own lawsuit against Waffle House, alleging intentional or reckless engagement in unlawful employment practices. Waffle House asked a U.S. District Court judge to stay EEOC's suit, arguing that its lawsuit waiver clause not only limited Baker to arbitration, but limited what the EEOC could do. Waffle House's request was denied, so Waffle House appealed to the Fourth Circuit Court of Appeals, which, in a fairly technical ruling, overturned the District Court decision in favor of Waffle House. So everyone trooped to the U.S. Supreme Court for the final answer.

The U.S. Supreme Court had a simple answer: First, it was clear that EEOC has federal statutory authority to file its own lawsuits in connection with an employee's discrimination claim. Second — and equally obvious — was that the EEOC was not a party to Baker's employment-application agreement with Waffle House and so was not bound by it.

Meanwhile, the Ninth Circuit reheard Circuit City (279 F3d 889, 2002). On rehearing, the court conceded that Circuit City's employment-application lawsuit waiver did, in fact, have the support of the Federal Arbitration Act, but Circuit City's waiver was unlawfully one-sided under California's laws governing contracts. The Ninth Circuit noted three features of Circuit City's waiver that it found particularly offensive:

• Even though Circuit City employees were limited to arbitration, Circuit City reserved to itself the right to choose between arbitration and a lawsuit.
• Circuit City's waiver also included language that sought to cap the damages that the arbitrator could award an employee.
• The waiver not so subtly imposed many of the arbitration costs on the employee.

At this point, the Ninth Circuit's latest ruling in Circuit City stands; a check of the U.S. Supreme Court's current docket shows no sign of a second review in this term.

In fact, the Ninth Circuit was the last circuit to agree that, if properly and fairly structured, an employment-application waiver of the right to sue in favor of arbitration could be fair. It did so in EEOC v. Luce, Forward (Sept. 30, 2003; Case No. 57222), noting the U.S. Supreme Court's comments in Circuit City suggesting that an arbitration waiver could be valid if all it did was take an employee's complaint out of a courtroom and into an arbitrator's conference room with no effect on an employee's “substantive rights.”

How could a fire department craft an employment-application lawsuit waiver program that would meet this “substantive-rights” standard? Here are some examples.

1. The agreement of a potential employee should be “knowing and voluntary.” In a legal sense, “voluntary” doesn't mean that the applicant can decide whether to accept an employment-application lawsuit waiver; it means that the applicant made an informed decision with a chance to weigh the tradeoffs between signing the application and declining the job. For example:

   • The employer should clearly explain in writing that the applicant would be giving up the right to trial (and trial by jury) for arbitration, and that the employer recognizes that this right has value.
   • The employer should allow the applicant several days (some experts recommend five) before signing the application; and
   • The employer should advise the employee that he or she may want to ask an attorney to review and explain the waiver.

2. The waiver should clearly state that statutory claims are covered by the waiver, and that the arbitration will not interfere with statutorily-authorized remedies, such as the award of attorney's fees.

3. The waiver should provide that the employer and employee agree to mutual selection of the arbitrator. Some waivers go one step further and require qualifications for the arbitrator, such as minimum years of experience or substantial experience in employment discrimination law.

4. The waiver should allow the employee to be represented in arbitration by an attorney.

5. The waiver should authorize limited discovery of documents that directly relate to the dispute, to be managed by the arbitrator. This can be tricky, as one advantage of arbitration over trial is limitation of what seems like an endless discovery process of depositions and requests for records, but an absolute bar to any discovery would probably bring a substantive-rights penalty flag.

6. The waiver should provide for a fair allocation of expenses connected with the arbitration. Some employers bite the bullet and assume those costs, but Circuit City found itself in trouble by attempting to use the waiver to shift most or all of the costs to its employees.

7. The waiver should provide for the arbitration decision to be in writing and to include the finding of fact and conclusions of law that support the decision and award, if any.

8. The waiver should provide that the employer and employee maintain their willingness to arbitrate without delay, and that both agree to waive arguments that arbitration of statutory issues is untimely and that, in the case of EEOC “priority” issues or a history of repeated serious discrimination violations by the employer, there's a presumption that the employee will not defer to arbitration.

Many employers assume that an employment-application lawsuit waiver in favor of arbitration will tilt the discrimination-dispute playing field in their favor. Others assume that arbitration means two hours in a conference room with an informal ruling.

But while remedies like mediation and arbitration are less formal and less “rule-driven” than courtrooms, they aren't intended to deprive any employer or employee of substantive rights. The reality is that, even with substantive-rights safeguards in place, alternative dispute resolution can still be faster and less expensive than going to court with an employment-discrimination claim.

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John Rukavina is director of public safety for Wake County, N.C., and holds a law degree from the University of Minnesota School of Law. He was a 1993 FEMA Fellow at Harvard University's Kennedy School of Government and is a graduate of the National Fire Academy's Executive Fire Officer Program. He has taught for the National Fire Academy, at IAFC conferences and for the Institutes of Government at the universities of North Carolina and Georgia.