Reference no: EM131656907

Question: Adams, a worker at a Circuit City retail electronics store in California, signed an employment application that included an agreement to resolve all future employment disputes exclusively by binding arbitration. Later, Adams filed a state-law-based employment discrimination suit against Circuit City in a California state court. Circuit City then filed suit in a federal district court, asking the court to enjoin the state court action and compel arbitration under the Federal Arbitration Act (FAA). The coverage provision of the FAA states that "[a] written provision in a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract shall be valid, irrevocable, and enforceable." However, another section of the FAA excludes from the FAA's coverage "contracts of employment of seamen, railroad employees, or any other class or workers engaged in foreign or interstate commerce." Concluding that the FAA applied to the Adams-Circuit City contract, the federal district court issued an order compelling arbitration of the dispute. Adams appealed, and the U.S. Court of Appeals for the Ninth Circuit reversed. The Ninth Circuit reasoned that in view of the above-quoted exclusion, the FAA does not apply to contracts of employment. Circuit City appealed to the U.S. Supreme Court, which agreed to decide the case. Was the Ninth Circuit correct? Are all contracts of employment excluded from the FAA's coverage?