Supreme Court Landmark Cases on Employment Contract Arbitration
Despite the presumption in favor of arbitration imposed by the FAA, 9 United States Code section 1 expressly limits the FAA's application by exempting from its coverage certain contracts.
Specifically, section 1 provides (in relevant part) that nothing in the FAA "shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." (9 U.S.C. 1.)
The United States Supreme Court interpreted this language in Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, reversing the lower court's ruling that had held the section 1 exemption from the FAA applicable to all contracts of employment.
The better reading of the law, the Supreme Court held, is that section 1 exempts only "contracts of employment of transportation workers"--meaning "workers 'actually engaged in the movement of goods in interstate commerce.' " (532 U.S. at pp. 106, 119, 112.)
In reaching that conclusion the Supreme Court interpreted the language of the statute without reference to its legislative history, noting however that the legislative record on the section 1 exemption "is quite sparse." (Circuit City Stores, Inc. v. Adams, supra, 532 U.S. at p. 119.)
The court noted the absence of indications of congressional intent apart from testimony given in a Senate committee hearing, adding that "we ought not attribute to Congress an official purpose based on the motives of a particular group that lobbied for or against a certain proposal--even assuming the precise intent of the group can be determined, a point doubtful both as a general rule and in the instant case. It is for the Congress, not the courts, to consult political forces and then decide how best to resolve conflicts in the course of writing the objective embodiments of law we know as statutes." (532 U.S. at p. 120.)
The court in Circuit City Stores, Inc. v. Adams expressly declined to consider what does and does not constitute a " 'contract of employment' " within the meaning of the FAA, under section 1. (Circuit City Stores, Inc. v. Adams, supra, 532 U.S. at p. 113.)