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Circuit City Stores, Inc. v. Adams
(U.S. Supreme Court)
Arbitration in employment contracts
In a 5-4 decision, the Supreme Court held that the Section 1 of the Federal Arbitration Act ("FAA") exempts from the Act’s coverage only employees who are engaged in interstate transportation. The FAA compels judicial enforcement of arbitration agreements "in any...contract evidencing a transaction involving commerce," 9 U.S.C. § 2, but excludes from the act’s coverage "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 Court rejected the Ninth Circuit’s broad reading of the exclusion to exempt all contracts of employment and held that the statute confines the exemption to transportation workers, reasoning that the statutory text itself foreclosed any argument that the exemption applied to all employment contracts. Justices Souter, Stevens, Ginsburg, and Breyer dissented, arguing that the broader reading of the statute was supported by the language of the statute itself and its legislative history. This case will have significance for the many employers who utilize employment contracts containing arbitration agreements.
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