Ninth Circuit Joins Other Circuits Holding that USERRA Does Not Prohibit Mandatory Arbitration of Claims

Practical Law Legal Update w-003-9842 (Approx. 6 pages)

Ninth Circuit Joins Other Circuits Holding that USERRA Does Not Prohibit Mandatory Arbitration of Claims

by Practical Law Labor & Employment

Background

Kevin Ziober, who served in the US Navy Reserve, signed an arbitration agreement with his civilian employer, BLB Resources, Inc., providing that:

Any claims arising under Ziober's employment with BLB would be subject to arbitration "as the exclusive remedy."
BLB would pay all arbitration-related costs.
Discovery and available remedies would be the same in arbitration as they would in a court.

When Ziober informed BLB that the Navy was recalling him to serve in Afghanistan, BLB indicated to Ziober that he would not have a job with BLB when he returned. After returning from Afghanistan in 2014, Ziober sued BLB for violating USERRA's provisions protecting servicemembers from discrimination and providing returning servicemembers with reemployment rights. BLB moved to compel arbitration of Ziober's claims based on the arbitration agreement.

The district court granted BLB's motion, holding that USERRA did not invalidate or supersede Ziober's arbitration agreement. Ziober appealed.

Outcome

The Ninth Circuit:

Affirmed the district court's grant of BLB's motion to compel arbitration.
Held that USERRA does not prohibit the compelled arbitration of USERRA claims because:
- neither USERRA's text nor its legislative history reflect that Congress intended to preclude waiver of a judicial forum; and
- USERRA does not create a procedural right to access a judicial forum for resolving USERRA claims.

The Ninth Circuit noted that:

The FAA requires courts to "rigorously enforce" arbitration agreements, including agreements to arbitrate claims brought under federal statutes (Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309 (2013)).
The US Supreme Court recognizes and approves of the FAA's policy favoring arbitration agreements, including arbitration agreements between employers and employees (see Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 109 (2001)).
An exception to the FAA's mandate that courts enforce arbitration agreements covering federal statutory claims occurs when a party challenging arbitration can show that Congress intended to prohibit waiver of a judicial remedy for that type of claim, as reflected by:
- the statute's text and legislative history; and
- an inherent conflict between arbitration and the statute's underlying purpose.
(Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991).)
In general, USERRA:
- prohibits employment discrimination against individuals who serve in the military and then seek to reenter civilian life following their military service; and
- establishes reemployment rights for those individuals.
(See 38 U.S.C. § 4301 to 38 U.S.C. § 4334.)
Individuals seeking to enforce their USERRA rights against a private employer may either:
- file a complaint with the Secretary of Labor and request that the Secretary refer the matter to the Attorney General for further prosecution (38 U.S.C. §§ 4322 and 4323(a)(1)); or
- directly pursue a civil action in federal court (38 U.S.C. § 4323(a)(3)).
Both the Fifth and Sixth Circuits have held that nothing in USERRA's text or legislative history shows that Congress intended to preclude arbitration of USERRA claims (Landis v. Pinnacle Eye Care, LLC, 537 F.3d 559 (6th Cir. 2008); Garrett v. Circuit City Stores, Inc., 449 F.3d 672 (5th Cir. 2006)).
In CompuCredit Corp. v. Greenwood, the US Supreme Court held that claims under the Credit Repair Organizations Act (CROA) could be subject to arbitration, even though CROA expressly provided that consumers had a right to sue under the statute. The Court determined that:
- CROA did not create a procedural right to bring a lawsuit in court; and
- the fact that a statute expressly provides a standard way for bringing a lawsuit to enforce its rights is not sufficient by itself to establish that Congress intended the statute to supersede the FAA.
(132 S.Ct. 665, 669 (2012).)
Like CROA, USERRA:
- does not contain anything in its plain text mentioning mandatory arbitration or the FAA;
- does not contain any "unmistakable" language precluding arbitration; and
- describes civil remedies and liability only in a standard way.
A provision in USERRA prohibiting "the establishment of additional prerequisites" to vindicating USERRA's substantive rights directly relates to union contracts and collective bargaining agreements that require employees to take additional steps before filing suit, and does not relate to arbitration agreements (see Garrett, 449 F.3d at 680; Landis, 537 F.3d at 564).

A concurring opinion joined the decision, noting that:

A provision in USERRA providing that a contract or agreement that "reduces, limits, or eliminates" USERRA rights is unenforceable could be viewed as a "contrary Congressional command" sufficient to supersede the FAA (see 38 U.S.C. § 4302(b)).
Although Section 4302(b) is subject to debate, it is not worthwhile to create a circuit split on this issue when Congress could easily address and resolve it.

Practical Implications

The Ninth Circuit's decision in Ziober joins other circuits in holding that USERRA does not preclude employers from compelling employees to arbitrate USERRA claims. Therefore, absent a contrary circuit court or Supreme Court ruling, employers are not prohibited from including USERRA claims in mandatory arbitration agreements and are likely to be successful in compelling arbitration of USERRA claims brought by employees who have signed an arbitration agreement.

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