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Arbitration Lesson #8 - What claims are covered?
August 15, 2006 by Ross Runkel at LawMemo

When there is an agreement to arbitrate, one key question is "what claims are covered?"

State law tort? State law contract? State statute? State constitution? Federal statute? Federal constitution?

The usual answer: It depends on what the arbitration agreement says.

The Federal Arbitration Act (FAA) refers to "a controversy ... arising out of such contract or transaction." That's pretty broad.

So read the arbitration agreement. Here are two examples of possible agreements:

1. Any controversy or claim involving the interpretation or enforcement of this contract shall be settled by arbitration administered by the American Arbitration Association under its [______ Rules] and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
2. Any controversy or claim arising out of or relating to this [employment application; ADR program; contract] shall be settled by arbitration administered by the American Arbitration Association under its [______ Rules] and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

In #1 it looks like the parties have agreed to limit the arbitration to a "controversy or claim involving the interpretation or enforcement of this contract." That would empower the arbitrator to hear and decide only those issues that involve the contract that contained the arbitration agreement.

In #2 it looks like the parties have agreed to give the arbitrator the power to hear and decide any claim "arising out of or relating to" the contract or the transaction. In the employment context, that would likely include any contract claim and also any claim involving a federal or state statute.

So #2 should empower the arbitrator to hear and decide Title VII claims, age discrimination claims, disability discrimination claims, whistleblower claims, and so on. It should include any common-law claim, and any statutory claim, so long as it had a relationship to underlying transaction (employment).

Some arbitration agreements spell out a detailed list of statutes that are covered (such as Title VII, the ADEA, etc.), but that is probably not necessary.

The US Supreme Court has made it clear that courts should enforce arbitration agreements that provide for the arbitration of statutory claims.

The Supreme Court decided its first employer-employee FAA case In 1991 - Gilmer v. Interstate/Johnson Lane Corp, 500 U.S. 20 (1991). The Supreme Court held that Gilmer must arbitrate his claim that arose under the federal Age Discrimination in Employment Act (ADEA). After Gilmer, lower courts quickly began enforcing arbitration agreements in a wide variety of employment cases involving federal and state statutory claims and claims under state common law.

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