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Issue 2, May 2002
More Information about the Labor & Employment Group
Contact
Us:
Daniel Emerson
David Swider
Andrew McNeil
Karen Glasser Sharp
Paul Mannweiler
© 2002
Bose McKinney & Evans LLP
Indianapolis Downtown
2700 First Indiana Plaza
135 North Pennsylvania St.
Indianapolis, IN 46204
(317) 684-5000
Indianapolis North
600 East 96th St., Suite 500
Indianapolis, IN 46240
Washington, D.C.
700 North One Lafayette Centre, Suite N700
1120 20th Street, N.W.
Washington, D.C. 20036
www.boselaw.com
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Welcome to the Bose McKinney & Evans Labor &
Employment Update. This e-mail newsletter will be distributed periodically in an effort to bring our clients
and friends up-to-date on current business topics. If you have any questions or concerns regarding
labor and employment issues, please contact us.
Seventh Circuit Scrutinizes Arbitration
Agreement
An arbitration agreement between an employer and employee with a provision requiring
each party to pay its own attorneys’ fees was deemed unenforceable by the United States Court of Appeals for the
Seventh Circuit. Attorneys’ fees are essential to fulfill the remedial and deterrent functions of Title VII, the
Court noted. However, in this case, the arbitration agreement stated “[e]ach party may retain legal counsel and
shall pay its own costs and attorneys’ fees, regardless of the outcome of the arbitration.” Because the
provision’s plain language preemptively denied the prevailing party its statutory right to collect attorneys’
fees in the arbitral forum, the agreement is unenforceable, said the
Court. See McCaskill v. SCI Management Corp.,
2002 U.S. App. LEXIS 6068, *12 (7th Cir. 2002). The Court left open the issue of whether a second provision in the agreement, which required parties to pay one-half of the costs and fees relating to the arbitration proceeding, also
would be grounds for invalidation under Title VII.
This recent decision suggests that courts in the Seventh Circuit (Indiana, Illinois and Wisconsin) are likely to
impose stricter scrutiny of arbitration agreements than previously believed necessary. Indeed, in 1999, the Seventh
Circuit maintained that such attorneys’ fees and cost-sharing provisions were speculative, and judicial review was
available in the event statutory rights were denied through arbitration. See
Kolveskie v. SBC Capital Markets, Inc. 167 F.3d 361, 362 (7th Cir. 1999); cert. denied, 528 U.S. 811 (1999).
It appears now, however, that any language in an arbitration agreement that deviates from remedies provided under
Title VII to any significant degree may be found unenforceable.
In light of this decision, employers might consider reviewing, or having an attorney review, their arbitration
agreements to ensure full compliance with statutory rights and remedies. The Bose McKinney & Evans Labor
& Employment Group would be pleased to help you with this endeavor.
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