Employers can now be assured that they can require employees to arbitrate any employment dispute under the Federal Arbitration Act.  In Circuit City Stores, Inc. v. Adams, the United States Supreme Court ruled that an employer's requirement that all employment disputes be settled by arbitration was enforceable.

In 1995, Saint Clair Adams applied for employment at Circuit City in Santa Rosa, California.  Adams signed an employment application that included a provision that Adams agree to settle "any and all previously unasserted claims, disputes or controversies arising out of or relating to my application or candidacy for employment, employment and/or cessation of employment with Circuit City, exclusively by final and binding arbitration before a neutral Arbitrator." (emphasis in original).  Adams believed he had been harassed on the job due to his sexual orientation.  Adams filed an employment discrimination claim against Circuit City two years later, alleging violations of California law.  Circuit City sought to enjoin Adams' state action and asked the federal courts to compel arbitration of the claims pursuant to the Federal Arbitration Act ("FAA").
The Supreme Court held in favor of arbitration.  The Court explained that the FAA's inception was a response to American court hostility toward enforcing arbitration agreements.  Thus, the FAA's purpose was to compel arbitration for a "wide range" of written arbitration agreements.  Section 2 of the FAA was enacted under Congress' power to regulate interstate commerce and compels arbitration in any "contract evidencing a transaction involving commerce."  Accordingly, the FAA is applicable in state courts and pre-empts state attempts to prohibit arbitration.

Furthermore, the Court reiterated that it "has been clear in rejecting the supposition that the advantages of the arbitration process somehow disappear when transferred to the employment context."  The Court outlined that arbitration agreements allow parties to avoid costs of litigation, difficult choice of law issues that may be presented in the employment relationship, and the bifurcation of proceedings in cases where state law precludes arbitration of certain employment law claims but not others.

In sum, the Supreme Court, with this recent decision, has reinforced and expanded its line of cases that uphold agreements to arbitrate disputes.  This decision sets forth that agreements between employer and employee to arbitrate federal and/or state law employment disputes, instead of seeking redress in the court system, will be upheld (unless the employee is a transportation worker).  Accordingly, agreements to arbitrate employee disputes pursuant to the FAA are legal and will be enforced.