Healthcare Law, Litigation & Public Policy   Medical Licensure & Discipline ♦ Employment Board of Registration

On May 13, 1991, the United States Supreme Court handed down an important decision that is likely to revive discussion amongst health care providers of the possibility of having patients sign agreements to arbitrate disputes regarding treatment prior to the provision of any such treatment.

In Gilmore v. Interstate/Johnson Lane Corporation, the U.S. Supreme Court, by a 7-2 vote, affirmed a federal district court's ruling that a claim brought by a plaintiff pursuant to the federal age discrimination statute can be subject to an arbitration agreement..


Robert Gilmer was terminated by his employer, Interstate/Johnson Lane, in 1987, at the age of 62.  Gilmer was replaced with a 28 year old woman whom he had helped train.  When Gilmer was hired by the company in 1981, he was required by his employer to register as a securities representative with the New York Stock Exchange.  The Exchange's registration application, a standard, uniform document, contained an agreement to arbitrate certain issues, including any controversies arising out of employment or termination.


The Supreme Court upheld the validity of this arbitration provision, effectively stating that a worker may be prevented from suing his or her employer for alleged age bias-- or, presumably, other, similar wrongdoing-- if the worker had previously agreed to submit such a claim to arbitration.  Justice Byron White, who wrote the majority decision, stated that the federal age discrimination act at issue in this case does not foreclose such arbitration agreements.  Arbitration, wrote White, is not inconsistent with the broad social purpose of the statute in question, but is in fact consistent in that arbitration, like the age discrimination law, furthers an important social purpose.  In rejecting Mr. Gilmer's arguments that arbitration does not afford the complaining party the same discovery opportunities and due process rights as traditional litigation, White identified a strong federal policy favoring arbitration and other methods of alternative dispute resolution.  White stated that as a general rule, the Court actually favors arbitration.  This statement implies that the Court will again uphold arbitration agreements in other contexts.


Justices Stevens and Marshall dissented from the majority opinion.  They noted that arbitration clauses contained in employment agreements are specifically exempted from coverage of the Federal Arbitration Act.  Thus, an employer cannot, pursuant to that act, compel an employee to arbitrate his or her claims under another federal law.  Here, Justices Stevens and Marshall believe that the arbitration clause signed by Mr. Gilmer, though technically not part of an employment contract, was so integral to Mr. Gilmer's employment that it must fall within the scope of the FAA, which is the statute under which Interstate/Johnson Lane compelled arbitration.  Thus, Mr. Gilmer should not have had to arbitrate his age discrimination claim.  The majority did not consider this particular issue, stating that because Mr. Gilmer did not raise it in the court below, he had waived his right to argue it to the Supreme Court.


For years, health care providers have considered the possibility of requiring patients to agree to arbitrate future disputes concerning treatment controversies as a prerequisite to admission to the health care institution.  Such arrangements would likely face strong challenges as being against public policy on the grounds that the health care provider and the potential admittee stood in greatly unequal bargaining positions.  However, this recent Supreme Court decision lends some support for favoring such agreements in the health care context.  Indeed, the Gilmer court addressed the issue of equality of bargaining power, and declared that such arguments are best left for resolution on an individual, case-by-case basis.


As legislators and the public continue to focus more on the continuing rise in the costs of health care, and as courts become more receptive to alternative dispute resolution programs, the potential for legislation authorizing or requiring arbitration arrangements in the health care setting grows.  Though empirical studies have yet to be done, it seems likely that the long-held perception that such programs would be an effective way to decrease insurance and related costs of health care is correct.  Consequently, it is likely that the debate of the propriety of arbitration agreements between patients and their hospitals and doctors will be renewed. 


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Agreement to Arbitrate

by Attorney Frank E. Reardon

May 1991