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Montana Judge Dismisses Employer's Suit

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HELENA, Mont. ? A federal judge has dismissed a lawsuit Town Pump Inc. filed against an American Indian woman who lodged a racial discrimination and retaliation complaint against the company.

The case is part of an ongoing national debate over whether employers can prevent workers from suing their firms over job-related discrimination, wrongful discharges and other claims by requiring them to submit grievances to an arbitrator. A similar case, Equal Employment Opportunity Commission (EEOC) vs. Waffle House Inc., is about to be decided by the U.S. Supreme Court.

Records show Rhonda Phipps, a member of the Chippewa-Cree Tribe, started work as a cashier and deli attendant at a Town Pump outlet in White Sulphur Springs last January. A month later, she says, she was standing next to her supervisor, Debbie Sanford, when Sanford allegedly used the word "squaw" while talking with a customer.

Phipps, 42, says she later reported the incident to a manager, who agreed that it was inappropriate because the word is offensive to many Indians. Phipps then asked the manager to talk to Sanford and ask her to apologize. But what allegedly happened next brought the matter to the Montana Human Rights Bureau and U.S. District Judge Sam Haddon of Great Falls, who says he doesn't believe the state's anti-discrimination laws

are preempted by the Federal Arbitration Act.

According to Phipps, Sanford responded to her with anger after the manager broached the "squaw" issue, and Sanford accused Phipps of trying to get her fired. Sanford also denied making the derogatory remark. She said she told a friend in the store "to quit squawking" about not stocking a type of doughnuts he liked. She also refused to adequately apologize, Phipps contends.

Following the confrontation, Phipps says Sanford and other Town Pump employees improperly reprimanded her over work duties for which she hadn't been trained, tried to sabotage her work and cut her hours. Moreover, other company employees also reported that Sanford and other supervisors repeatedly discussed how to get rid of Phipps after the incident.

Phipps quit her job a few months later and filed a complaint with the Human Rights Bureau. Following an investigation, the bureau ruled that her supervisors retaliated against Phipps, but that no racial discrimination took place.

"The term 'squaw' is extremely derisive to a Native American female, but one incident does not rise to the level of creating a hostile work environment," investigator D.R. "Sunni" Phillips concluded.

Nonetheless, the bureau's report on the matter states that another supervisor at the White Sulphur Springs store, Amanda Tyler, testified that Sanford and others "talked bad" about Phipps after she complained to the store's manager. Tyler said that another Native American woman who applied for work at the outlet was turned down because supervisors didn't want another "squaw" working at the business.

According to the report, Tyler said Sanford also commonly made derogatory remarks about customers who "were of other national origins or who were religious," and that Sanford was particularly disdainful of African Americans. Sanford denies the allegations and contends she apologized to Phipps for the "misunderstanding" about the "squaw"

remark. A contested-case hearing is set for Jan. 28 in Helena.

"The administrative hearing looks at everything new with fresh eyes, so the discrimination will be on the table again," says Andy Huff, one of Phipps' attorneys.

Meanwhile, Town Pump contract attorney Jim Goetz of Bozeman last June filed the federal lawsuit against Phipps, Human Rights Bureau director Kathleen Helland, and Francisco Flores, Denver regional director of the EEOC, where another claim was filed.

The suit alleges that the state and federal governments can't consider Phipps' complaints because she signed an employment agreement that mandates binding arbitration for resolving disputes she may have with the company.

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Eula Compton, a Town Pump staff attorney, says the arbitration policy was adopted in October 2000. All people seeking work with Town Pump since that time have been required to sign the agreement, which is included in the company's job application. Employees already working for the firm when the policy went into effect were given the option of signing, she says. The Butte-based company, owned by the Thomas Kenneally family, has more than 1,500 full-time employees at dozens of gas stations, convenience stores, casinos and motels across Montana.

"The Kenneallys are frugal," Compton says. "It's well-known. The arbitration policy is just a cost issue. Discrimination and wrongful discharge suits are costly. With arbitration, you can just get it done quickly and it's less costly."

But detractors contend many arbitration mandates unfairly limit workers' rights and prevent them from pursuing legitimate claims against unsavory employment practices. The policies, they say, are also often aimed at minorities and other low-income workers who can't afford to take on powerful corporations. In addition, they contend, many workers don't fully understand the consequences of waiving legal rights. Some credit

card companies are also instituting the policies to stem a tide of consumer-related court battles.

"Nationally, it's becoming a disgrace of our country," says Gene Fenderson, executive secretary of the Montana Progressive Labor Caucus. "They end up costing (workers) thousands and thousands of dollars to go through the process."

Fenderson says he equates the new wave of arbitration mandates to the old "yellow dog" contracts of the early 1900s, where companies forced citizens to sign anti-union agreements before they were hired.

"Now we're kind of going through the same thing with these binding arbitration agreements," he says. "They're just a disgrace."

"It's a very big problem for workers," adds Mike Quirk, an attorney with the Trial Lawyers for Public Justice in Washington, D.C. "We're seeing it in way too many cases."

But Compton says she believes workers still have adequate protections, and they are cautioned in the company's application about what is at stake.

"The rights to an administrative remedy, to a judicial forum and to a trial by jury are important rights, and you may wish to consult an attorney before submitting this application for employment," the company's document reads.

"Our arbitration process covers all the remedies available in state and federal court," Compton adds, neglecting to mention that binding arbitration decisions typically cannot be appealed.

While dismissing the company's case for procedural reasons on Dec. 6, Haddon added that he believes Town Pump's employment agreements are contracts of "adhesion," meaning they are potentially improper because the company is exerting undue power over its employees. Compton, however, disagrees that the contracts are unfair.

"Any employment contract is a contract of adhesion," she says. "Employees don't get to set their hours or their pay."

Compton says a decision has not yet been made whether to challenge Haddon's decision in the 9th U.S. Circuit Court of Appeals. It is unknown at this point what effect, if any, the ruling will have on other Montana companies that require employees to waive their rights to litigate.

"We're not against all arbitration," says Huff, who represents Phipps with Emigrant attorney Tim Kelly. "But arbitration always has to be fair. I think that's what is at the heart of this case."