U.S. Supreme Court Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S.
20 (1991) Gilmer v. Interstate/Johnson Lane
Corporation No. 90-18 Argued Jan. 14, 1991 Decided May 13, 1991 500 U.S.
20 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE FOURTH
CIRCUIT Syllabus Petitioner Gilmer was required by respondent, his employer, to
register as a securities representative with, among others, the New
York Stock Exchange (NYSE). His registration application contained, inter alia, an agreement to arbitrate when required to by
NYSE rules. NYSE Rule 347 provides for arbitration of any
controversy arising out of a registered representative's employment
or termination of employment. Respondent terminated Gilmer's
employment at age 62. Thereafter, he filed a charge with the Equal
Employment Opportunity Commission (EEOC) and brought suit in the
District Court, alleging that he had been discharged in violation
of the Age Discrimination in Employment Act of 1967 (ADEA).
Respondent moved to compel arbitration, relying on the agreement in
Gilmer's registration application and the Federal Arbitration Act
(FAA). The court denied the motion, based on Alexander v.
Gardner-Denver Co., 415 U. S. 36 --
which held that an employee's suit under Title VII of the Civil
Rights Act of 1964 is not foreclosed by the prior submission of his
claim to arbitration under the terms of a collective bargaining
agreement -- and because it concluded that Congress intended to
protect ADEA claimants from a waiver of the judicial forum. The
Court of Appeals reversed. Held: An ADEA claim can be subjected to compulsory
arbitration. Pp. 500 U. S.
24 -35.

															(a) Statutory claims may be the subject of an arbitration
agreement, enforceable pursuant to the FAA. See, e.g.,
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614 .
Since the FAA manifests a liberal federal policy favoring
arbitration, Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 460 U. S. 1 , 460 U. S. 24 , and
since neither the text nor the legislative history of the ADEA
explicitly precludes arbitration, Gilmer is bound by his agreement
to arbitrate unless he can show an inherent conflict between
arbitration and the ADEA's underlying purposes. Pp. 500 U. S.
24 -26.

															(b) There is no inconsistency between the important social
policies furthered by the ADEA and enforcing agreements to
arbitrate age discrimination claims. While arbitration focuses on
specific disputes between the parties involved, so does judicial
resolution of claims, yet both can further broader social purposes.
Various other laws, Page 500 U. S. 21 including antitrust and securities laws and the civil provisions
of the Racketeer Influenced and Corrupt Organizations Act (RICO),
are designed to advance important public policies, but claims under
them are appropriate for arbitration. Nor will arbitration
undermine the EEOC's role in ADEA enforcement, since an ADEA
claimant is free to file an EEOC charge even if he is precluded
from instituting suit; since the EEOC has independent authority to
investigate age discrimination; since the ADEA does not indicate
that Congress intended that the EEOC be involved in all disputes;
and since an administrative agency's mere involvement in a
statute's enforcement is insufficient to preclude arbitration, see, e.g., Rodriguez de Quijas v. Shearson/American Express,
Inc., 490 U. S. 477 .
Moreover, compulsory arbitration does not improperly deprive
claimants of the judicial forum provided for by the ADEA: Congress
did not explicitly preclude arbitration or other nonjudicial claims
resolutions; the ADEA's flexible approach to claims resolution,
which permits the EEOC to pursue informal resolution methods,
suggests that out-of-court dispute resolution is consistent with
the statutory scheme; and arbitration is consistent with Congress'
grant of concurrent jurisdiction over ADEA claims to state and
federal courts, since arbitration also advances the objective of
allowing claimants a broader right to select the dispute resolution
forum. Pp. 500 U. S.
27 -29.

															(c) Gilmer's challenges to the adequacy of arbitration
procedures are insufficient to preclude arbitration. This Court
declines to indulge his speculation that the parties and the
arbitral body will not retain competent, conscientious, and
impartial arbitrators, especially when both the NYSE rules and the
FAA protect against biased panels. Nor is there merit to his
argument that the limited discovery permitted in arbitration will
make it difficult to prove age discrimination, since it is unlikely
that such claims require more extensive discovery than RICO and
antitrust claims, and since there has been no showing that the NYSE
discovery provisions will prove insufficient to allow him a fair
opportunity to prove his claim. His argument that arbitrators will
not issue written opinions resulting in a lack of public knowledge
of employers' discriminatory policies, an inability to obtain
effective appellate review, and a stifling of the law's
development, is also rejected, since the NYSE rules require that
arbitration awards be in writing and be made available to the
public; since judicial decisions will continue to be issued for
ADEA claimants without arbitration agreements; and since Gilmer's
argument applies equally to settlements of ADEA claims. His
argument that arbitration procedures are inadequate because they do
not provide for broad equitable relief is unpersuasive as well,
since arbitrators have the power to fashion equitable relief; since
the NYSE rules do not restrict the type of relief an arbitrator may
award and provide for collective relief; since the Page 500 U. S. 22 ADEA's provision for the possibility of collective action does
not mean that individual attempts at conciliation are barred; and
since arbitration agreements do not preclude the EEOC itself from
seeking class-wide and equitable relief. Pp. 500 U. S.
30 -32.

															(d) The unequal bargaining power between employers and employees
is not a sufficient reason to hold that arbitration agreements are
never enforceable in the employment context. Cf. e.g.,
Rodriguez de Quijas, supra, at 490 U. S. 484 .
Such a claim is best left for resolution in specific cases. Here,
there is no indication that Gilmer, an experienced businessman, was
coerced or defrauded into agreeing to the arbitration clause. P. 500 U. S.
32 -33.

															(e) Gilmer's reliance on Alexander v. Gardner-Denver
Co., 415 U. S. 36 , and
its progeny, is also misplaced. Those cases involved the issue
whether arbitration of contract-based claims precluded subsequent
judicial resolution of statutory claims, not the enforceability of
an agreement to arbitrate statutory claims. The arbitration in
those cases occurred in the context of a collective bargaining
agreement, and thus there was concern about the tension between
collective representation and individual statutory rights that is
not applicable in this case. And those cases were not decided under
the FAA. Pp. 500 U. S.
33 -35.

															895 F.2d 195, (CA4 1990) affirmed.

															WHITE, J., delivered the opinion of the Court, in which
REHNQUIST, C.J., and BLACKMUN, O'CONNOR, SCALIA, KENNEDY, and
SOUTER, JJ., joined. STEVENS, J., filed a dissenting opinion, in
which MARSHALL, J., joined, post, p. 500 U. S.
36 . Page 500 U. S. 23 JUSTICE WHITE delivered the opinion of the Court.

															The question presented in this case is whether a claim under the
Age Discrimination in Employment Act of 1967 (ADEA), 81 Stat. 602,
as amended, 29 U.S.C. § 621 et seq., can be subjected to
compulsory arbitration pursuant to an arbitration agreement in a
securities registration application. The Court of Appeals held that
it could, 895 F.2d 195 (CA4 1990), and we affirm. I Respondent Interstate/Johnson Lane Corporation (Interstate)
hired petitioner Robert Gilmer as a Manager of Financial Services
in May, 1981. As required by his employment, Gilmer registered as a
securities representative with several stock exchanges, including
the New York Stock Exchange (NYSE). See App. 15-18. His
registration application, entitled "Uniform Application for
Securities Industry Registration or Transfer," provided, among
other things, that Gilmer "agree[d] to arbitrate any dispute, claim
or controversy" arising between him and Interstate "that is
required to be arbitrated under the rules, constitutions or by-laws
of the organizations with which I register." Id. at 18. Of
relevance to this case, NYSE Rule 347 provides for arbitration
of

															"[a]ny controversy between a registered representative and any
member or member organization arising out of the employment or
termination of employment of such registered representative."

															App. to Brief for Respondent 1.

															Interstate terminated Gilmer's employment in 1987, at which time
Gilmer was 62 years of age. After first filing an age
discrimination charge with the Equal Employment Opportunity
Commission (EEOC), Gilmer subsequently brought suit in the United
States District Court for the Western District of North Carolina,
alleging that Interstate had discharged him because of his age, in
violation of the Page 500 U. S. 24 ADEA. In response to Gilmer's complaint, Interstate filed in the
District Court a motion to compel arbitration of the ADEA claim. In
its motion, Interstate relied upon the arbitration agreement in
Gilmer's registration application, as well as the Federal
Arbitration Act (FAA), 9 U.S.C. § 1 et seq. The District
Court denied Interstate's motion, based on this Court's decision in Alexander v. Gardner-Denver Co., 415 U. S.
36 (1974), and because it concluded that "Congress
intended to protect ADEA claimants from the waiver of a judicial
forum." App. 87. The United States Court of Appeals for the Fourth
Circuit reversed, finding

															"nothing in the text, legislative history, or underlying
purposes of the ADEA indicating a congressional intent to preclude
enforcement of arbitration agreements."

															895 F.2d at 197. We granted certiorari, 498 U.S. 809 (1990), to
resolve a conflict among the Courts of Appeals regarding the
arbitrability of ADEA claims. [ Footnote 1 ] II The FAA was originally enacted in 1925, 43 Stat. 883, and then
reenacted and codified in 1947 as Title 9 of the United States
Code. Its purpose was to reverse the longstanding judicial
hostility to arbitration agreements that had existed at English
common law and had been adopted by American courts, and to place
arbitration agreements upon the same footing as other contracts. Dean Witter Reynolds Inc. v. Byrd, 470 U.
S. 213 , 470 U. S.
219 -220, and n. 6 (1985); Scherk v. Alberto-Culver
Co., 417 U. S. 506 , 417 U. S. 610 ,
n. 4 (1974). Its primary substantive provision states that

															"[a] written provision in any maritime transaction or a contract
evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract
or transaction . . . shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of Page 500 U. S. 25 any contract."

															9 U.S.C. § 2. The FAA also provides for stays of proceedings in
federal district courts when an issue in the proceeding is
referable to arbitration, § 3, and for orders compelling
arbitration when one party has failed, neglected, or refused to
comply with an arbitration agreement, § 4. These provisions
manifest a "liberal federal policy favoring arbitration
agreements." Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 460 U. S. 1 , 460 U. S. 24 (1983). [ Footnote 2 ] Page 500 U. S. 26 It is by now clear that statutory claims may be the subject of
an arbitration agreement, enforceable pursuant to the FAA. Indeed,
in recent years, we have held enforceable arbitration agreements
relating to claims arising under the Sherman Act, 15 U.S.C. §§ 1-7;
§ 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b);
the civil provisions of the Racketeer Influenced and Corrupt
Organizations Act (RICO), 18 U.S.C. § 1961 et seq.; and §
12(2) of the Securities Act of 1933, 15 U.S.C. § 771(2). See
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614 (1985); Shearson/American Express Inc. v. McMahon, 482 U. S. 220 (1987); Rodriguez de Quijas v. Shearson/American Express,
Inc., 490 U. S. 477 (1989). In these cases, we recognized that,

															"[b]y agreeing to arbitrate a statutory claim, a party does not
forgo the substantive rights afforded by the statute; it only
submits to their resolution in an arbitral, rather than a judicial,
forum." Mitsubishi, supra, 473 U.S. at 473 U. S.
628 .

															Although all statutory claims may not be appropriate for
arbitration,

															"[h]aving made the bargain to arbitrate, the party should be
held to it unless Congress itself has evinced an intention to
preclude a waiver of judicial remedies for the statutory rights at
issue." Ibid. In this regard, we note that the burden is on
Gilmer to show that Congress intended to preclude a waiver of a
judicial forum for ADEA claims. See McMahon, 482 U.S. at 482 U. S. 227 .
If such an intention exists, it will be discoverable in the text of
the ADEA, its legislative history, or an "inherent conflict"
between arbitration and the ADEA's underlying purposes. See
ibid. Throughout such an inquiry, it should be kept in mind
that "questions of arbitrability must be addressed with a healthy
regard for the federal policy favoring arbitration." Moses H.
Cone, 460 U.S. at 460 U. S. 24 . III Gilmer concedes that nothing in the text of the ADEA or its
legislative history explicitly precludes arbitration. Page 500 U. S. 27 He argues, however, that compulsory arbitration of ADEA claims
pursuant to arbitration agreements would be inconsistent with the
statutory framework and purposes of the ADEA. Like the Court of
Appeals, we disagree. A Congress enacted the ADEA in 1967

															"to promote employment of older persons based on their ability
rather than age; to prohibit arbitrary age discrimination in
employment; [and] to help employers and workers find ways of
meeting problems arising from the impact of age on employment."

															29 U.S.C. § 621(b). To achieve those goals, the ADEA, among
other things, makes it unlawful for an employer

															"to fail or refuse to hire or to discharge any individual or
otherwise discriminate against any individual with respect to his
compensation, terms, conditions, or privileges of employment,
because of such individual's age."

															§ 623(a)(1). This proscription is enforced both by private suits
and by the EEOC. In order for an aggrieved individual to bring suit
under the ADEA, he or she must first file a charge with the EEOC,
and then wait at least 60 days. § 626(d). An individual's right to
sue is extinguished, however, if the EEOC institutes an action
against the employer. § 626(c)(1). Before the EEOC can bring such
an action, though, it must

															"attempt to eliminate the discriminatory practice or practices
alleged, and to effect voluntary compliance with the requirements
of this chapter through informal methods of conciliation,
conference, and persuasion."

															§ 626(b); see also 29 CFR § 1626.15 (1990).

															As Gilmer contends, the ADEA is designed not only to address
individual grievances, but also to further important social
policies. See, e.g., EEOC v. Wyoming, 460 U.
S. 226 , 460 U. S. 231 (1983). We do not perceive any inherent inconsistency between those
policies, however, and enforcing agreements to arbitrate age
discrimination claims. It is true that arbitration focuses on
specific disputes between the parties involved. Page 500 U. S. 28 The same can be said, however, of judicial resolution of claims.
Both of these dispute resolution mechanisms nevertheless also can
further broader social purposes. The Sherman Act, the Securities
Exchange Act of 1934, RICO, and the Securities Act of 1933 all are
designed to advance important public policies, but, as noted above,
claims under those statutes are appropriate for arbitration.

															"[S]o long as the prospective litigant effectively may vindicate
[his or her] statutory cause of action in the arbitral forum, the
statute will continue to serve both its remedial and deterrent
function." Mitsubishi, supra, 473 U.S. at 473 U. S.
637 .

															We also are unpersuaded by the argument that arbitration will
undermine the role of the EEOC in enforcing the ADEA. An individual
ADEA claimant subject to an arbitration agreement will still be
free to file a charge with the EEOC, even though the claimant is
not able to institute a private judicial action. Indeed, Gilmer
filed a charge with the EEOC in this case. In any event, the EEOC's
role in combating age discrimination is not dependent on the filing
of a charge; the agency may receive information concerning alleged
violations of the ADEA "from any source," and it has independent
authority to investigate age discrimination. See 29 CFR §§
1626.4, 1626.13 (1990). Moreover, nothing in the ADEA indicates
that Congress intended that the EEOC be involved in all employment
disputes. Such disputes can be settled, for example, without any
EEOC involvement. See, e.g., Coventry v. United States Steel
Corp., 856 F.2d 514, 522 (CA3 1988); Moore v. McGraw
Edison Co., 804 F.2d 1026, 1033 (CA8 1986); Runyan v.
National Cash Register Corp., 787 F.2d 1039, 1045 (CA6), cert. denied, 479 U.S. 850 (1986). [ Footnote 3 ] Finally, the mere involvement of an
administrative Page 500 U. S. 29 agency in the enforcement of a statute is not sufficient to
preclude arbitration. For example, the Securities Exchange
Commission is heavily involved in the enforcement of the Securities
Exchange Act of 1934 and the Securities Act of 1933, but we have
held that claims under both of those statutes may be subject to
compulsory arbitration. See McMahon; Rodriguez de
Quijas. Gilmer also argues that compulsory arbitration is improper
because it deprives claimants of the judicial forum provided for by
the ADEA. Congress, however, did not explicitly preclude
arbitration or other nonjudicial resolution of claims, even in its
recent amendments to the ADEA.

															"[I]f Congress intended the substantive protection afforded [by
the ADEA] to include protection against waiver of the right to a
judicial forum, that intention will be deducible from text or
legislative history." Mitsubishi, 473 U.S. at 473 U. S. 628 .
Moreover, Gilmer's argument ignores the ADEA's flexible approach to
resolution of claims. The EEOC, for example, is directed to pursue
"informal methods of conciliation, conference, and persuasion," 29
U.S.C. § 626(b), which suggests that out-of-court dispute
resolution, such as arbitration, is consistent with the statutory
scheme established by Congress. In addition, arbitration is
consistent with Congress' grant of concurrent jurisdiction over
ADEA claims to state and federal courts, see 29 U.S.C. §
626(c)(1) (allowing suits to be brought "in any court of competent
jurisdiction"), because arbitration agreements,

															"like the provision for concurrent jurisdiction, serve to
advance the objective of allowing [claimants] a broader right to
select the forum for resolving disputes, whether it be judicial or
otherwise." Rodriguez de Quijas, 490 U.S. at 490 U. S.
483 . Page 500 U. S. 30 B In arguing that arbitration is inconsistent with the ADEA,
Gilmer also raises a host of challenges to the adequacy of
arbitration procedures. Initially, we note that, in our recent
arbitration cases, we have already rejected most of these arguments
as insufficient to preclude arbitration of statutory claims. Such
generalized attacks on arbitration "res[t] on suspicion of
arbitration as a method of weakening the protections afforded in
the substantive law to would-be complainants," and, as such, they
are "far out of step with our current strong endorsement of the
federal statutes favoring this method of resolving disputes." Rodriguez de Quijas, supra, at 490 U.S. 481 . Consequently, we address
these arguments only briefly.

															Gilmer first speculates that arbitration panels will be biased.
However,

															"[w]e decline to indulge the presumption that the parties and
arbitral body conducting a proceeding will be unable or unwilling
to retain competent, conscientious and impartial arbitrators." Mitsubishi, supra, 473 U.S. at 473 U. S. 634 .
In any event, we note that the NYSE arbitration rules, which are
applicable to the dispute in this case, provide protections against
biased panels. The rules require, for example, that the parties be
informed of the employment histories of the arbitrators, and that
they be allowed to make further inquiries into the arbitrators'
backgrounds. See 2 CCH New York Stock Exchange Guide �
2608, p. 4314 (Rule 608) (1991) (hereinafter 2 N.Y.S.E. Guide). In
addition, each party is allowed one peremptory challenge and
unlimited challenges for cause. Id. at � 2609 (Rule 609).
Moreover, the arbitrators are required to disclose "any
circumstances which might preclude [them] from rendering an
objective and impartial determination." Id. at � 2610, p.
4315 (Rule 610). The FAA also protects against bias by providing
that courts may overturn arbitration decisions "[w]here there was
evident partiality or corruption in the arbitrators." 9 U.S.C. Page 500 U. S. 31 § 10(b). There has been no showing in this case that those
provisions are inadequate to guard against potential bias.

															Gilmer also complains that the discovery allowed in arbitration
is more limited than in the federal courts, which he contends will
make it difficult to prove discrimination. It is unlikely, however,
that age discrimination claims require more extensive discovery
than other claims that we have found to be arbitrable, such as RICO
and antitrust claims. Moreover, there has been no showing in this
case that the NYSE discovery provisions, which allow for document
production, information requests, depositions, and subpoenas, see 2 N.Y.S.E. Guide � 2619, pp. 4318-4320 (Rule 619);
Securities and Exchange Commission Order Approving Proposed Rule
Changes By New York Stock Exchange, Inc., Nat. Assn. of Security
Dealers, Inc., and the American Stock Exchange, Inc., Relating to
the Arbitration Process and the Use of Predispute Arbitration
Clauses, 54 Fed.Reg. 21144, 21149-21151 (1989), will prove
insufficient to allow ADEA claimants such as Gilmer a fair
opportunity to present their claims. Although those procedures
might not be as extensive as in the federal courts, by agreeing to
arbitrate, a party "trades the procedures and opportunity for
review of the courtroom for the simplicity, informality, and
expedition of arbitration." Mitsubishi, supra, at 473 U. S. 628 .
Indeed, an important counterweight to the reduced discovery in NYSE
arbitration is that arbitrators are not bound by the rules of
evidence. See 2 N.Y.S.E. Guide � 2620, p. 4320 (Rule
620).

															A further alleged deficiency of arbitration is that arbitrators
often will not issue written opinions, resulting, Gilmer contends,
in a lack of public knowledge of employers' discriminatory
policies, an inability to obtain effective appellate review, and
a Page 500 U. S. 32 stifling of the development of the law. The NYSE rules, however,
do require that all arbitration awards be in writing, and that the
awards contain the names of the parties, a summary of the issues in
controversy, and a description of the award issued. See 2
N.Y.S.E. Guide � 2627(a), (e), p. 4321 (Rule 627(a), (e)). In
addition, the award decisions are made available to the public. See id. at � 2627(f), p. 4322 (Rule 627(f)). Furthermore,
judicial decisions addressing ADEA claims will continue to be
issued, because it is unlikely that all, or even most, ADEA
claimants will be subject to arbitration agreements. Finally,
Gilmer's concerns apply equally to settlements of ADEA claims,
which, as noted above, are clearly allowed. [ Footnote 4 ]

															It is also argued that arbitration procedures cannot adequately
further the purposes of the ADEA, because they do not provide for
broad equitable relief and class actions. As the court below noted,
however, arbitrators do have the power to fashion equitable relief.
895 F.2d at 199-200. Indeed, the NYSE rules applicable here do not
restrict the types of relief an arbitrator may award, but merely
refer to "damages and/or other relief." 2 N.Y.S.E. Guide � 2627(e),
p. 4321 (Rule 627(e)). The NYSE rules also provide for collective
proceedings. Id. at 2612(d) (Rule 612(d)). But

															"even if the arbitration could not go forward as a class action
or class relief could not be granted by the arbitrator, the fact
that the [ADEA] provides for the possibility of bringing a
collective action does not mean that individual attempts at
conciliation were intended to be barred." Nicholson v. CPC Int'l Inc., 877 F.2d 221, 241 (CA3
1989) (Becker, J., dissenting). Finally, it should be remembered
that arbitration agreements will not preclude the EEOC from
bringing actions seeking classwide and equitable relief. C An additional reason advanced by Gilmer for refusing to enforce
arbitration agreements relating to ADEA claims is Page 500 U. S. 33 his contention that there often will be unequal bargaining power
between employers and employees. Mere inequality in bargaining
power, however, is not a sufficient reason to hold that arbitration
agreements are never enforceable in the employment context.
Relationships between securities dealers and investors, for
example, may involve unequal bargaining power, but we nevertheless
held in Rodriguez de Quijas and McMahon that
agreements to arbitrate in that context are enforceable. See 490 U.S. at 490 U. S. 484 ;
482 U.S. at 482 U. S. 230 .
As discussed above, the FAA's purpose was to place arbitration
agreements on the same footing as other contracts. Thus,
arbitration agreements are enforceable "save upon such grounds as
exist at law or in equity for the revocation of any contract." 9
U.S.C. § 2.

															"Of course, courts should remain attuned to well-supported
claims that the agreement to arbitrate resulted from the sort of
fraud or overwhelming economic power that would provide grounds
'for the revocation of any contract.'" Mitsubishi, 473 U.S. at 473 U. S. 627 .
There is no indication in this case, however, that Gilmer, an
experienced businessman, was coerced or defrauded into agreeing to
the arbitration clause in his registration application. As with the
claimed procedural inadequacies discussed above, this claim of
unequal bargaining power is best left for resolution in specific
cases. IV In addition to the arguments discussed above, Gilmer vigorously
asserts that our decision in Alexander v. Gardner-Denver
Co., 415 U. S. 36 (1974), and its progeny -- Barrentine v. Arkansas-Best Freight
System, Inc., 450 U. S. 728 (1981), and McDonald v. City of West Branch, 466 U.
S. 284 (1984) -- preclude arbitration of employment
discrimination claims. Gilmer's reliance on these cases, however,
is misplaced.

															In Gardner-Denver, the issue was whether a discharged
employee whose grievance had been arbitrated pursuant to Page 500 U. S. 34 an arbitration clause in a collective bargaining agreement was
precluded from subsequently bringing a Title VII action based upon
the conduct that was the subject of the grievance. In holding that
the employee was not foreclosed from bringing the Title VII claim,
we stressed that an employee's contractual rights under a
collective bargaining agreement are distinct from the employee's
statutory Title VII rights:

															"In submitting his grievance to arbitration, an employee seeks
to vindicate his contractual right under a collective bargaining
agreement. By contrast, in filing a lawsuit under Title VII, an
employee asserts independent statutory rights accorded by Congress.
The distinctly separate nature of these contractual and statutory
rights is not vitiated merely because both were violated as a
result of the same factual occurrence."

															415 U.S. at 415 U. S.
49 -50.

															We also noted that a labor arbitrator has authority only to
resolve questions of contractual rights. Id. at 415 U. S. 53 -54.
The arbitrator's "task is to effectuate the intent of the parties,"
and he or she does not have the "general authority to invoke public
laws that conflict with the bargain between the parties." Id. at 415 U. S. 53 . By
contrast,

															"in instituting an action under Title VII, the employee is not
seeking review of the arbitrator's decision. Rather, he is
asserting a statutory right independent of the arbitration
process." Id. at 415 U. S. 54 . We
further expressed concern that, in collective bargaining
arbitration, "the interests of the individual employee may be
subordinated to the collective interests of all employees in the
bargaining unit." Id. at 415 U. S. 58 ,
n.19. [ Footnote 5 ] Page 500 U. S. 35 Barrentine and McDonald similarly involved the
issue whether arbitration under a collective bargaining agreement
precluded a subsequent statutory claim. In holding that the
statutory claims there were not precluded, we noted, as in Gardner-Denver, the difference between contractual rights
under a collective bargaining agreement and individual statutory
rights, the potential disparity in interests between a union and an
employee, and the limited authority and power of labor
arbitrators.

															There are several important distinctions between the Gardner-Denver line of cases and the case before us.
First, those cases did not involve the issue of the enforceability
of an agreement to arbitrate statutory claims. Rather, they
involved the quite different issue whether arbitration of
contract-based claims precluded subsequent judicial resolution of
statutory claims. Since the employees there had not agreed to
arbitrate their statutory claims, and the labor arbitrators were
not authorized to resolve such claims, the arbitration in those
cases understandably was held not to preclude subsequent statutory
actions. Second, because the arbitration in those cases occurred in
the context of a collective bargaining agreement, the claimants
there were represented by their unions in the arbitration
proceedings. An important concern therefore was the tension between
collective representation and individual statutory rights, a
concern not applicable to the present case. Finally, those cases
were not decided under the FAA, which, as discussed above, reflects
a "liberal federal policy favoring arbitration agreements." Mitsubishi, 473 U.S. at 473 U. S. 625 .
Therefore, those cases provide no basis for refusing to enforce
Gilmer's agreement to arbitrate his ADEA claim. V We conclude that Gilmer has not met his burden of showing that
Congress, in enacting the ADEA, intended to preclude arbitration of
claims under that Act. Accordingly, the judgment of the Court of
Appeals is Affirmed. Page 500 U. S. 36 [ Footnote 1 ]

															1. Compare the decision below with Nicholson v. CPC
Int'l Inc., 877 F.2d 221 (CA3 1989).

															[ Footnote 2 ]

															Section 1 of the FAA provides that

															"nothing herein contained shall apply to contracts of employment
of seamen, railroad employees, or any other class of workers
engaged in foreign or interstate commerce."

															9 U.S.C. § 1. Several amici curiae in support of Gilmer
argue that that section excludes from the coverage of the FAA all
"contracts of employment." Gilmer, however, did not raise the issue
in the courts below, it was not addressed there, and it was not
among the questions presented in the petition for certiorari. In
any event, it would be inappropriate to address the scope of the §
1 exclusion, because the arbitration clause being enforced here is
not contained in a contract of employment. The FAA requires that
the arbitration clause being enforced be in writing. See 9
U.S.C. §§ 2, 3. The record before us does not show, and the parties
do not contend, that Gilmer's employment agreement with Interstate
contained a written arbitration clause. Rather, the arbitration
clause at issue is in Gilmer's securities registration application,
which is a contract with the securities exchanges, not with
Interstate. The lower courts addressing the issue uniformly have
concluded that the exclusionary clause in § 1 of the FAA is
inapplicable to arbitration clauses contained in such registration
applications. See, e.g., Dickstein v. DuPont, 443 F.2d 783
(CA1 1971); Malison v. Prudential Bache Securities,
Inc., 654 F.
Supp. 101 , 104 (WDNC 1987); Legg, Mason & Co. v.
Mackall & Coe, Inc., 351 F.
Supp. 1367 (DC 1972); Tonetti v.
Shirley, 219 Cal. Rptr.
616 , 618, 173 Cal. App.
3d 1144 (1985); see also Stokes v. Merrill Lynch, Pierce,
Fenner & Smith, 523 F.2d 433, 436 (CA6 1975). We
implicitly assumed as much in Perry v. Thomas, 482 U. S. 483 (1987), where we held that the FAA required a former employee of a
securities firm to arbitrate his statutory wage claim against his
former employer, pursuant to an arbitration clause in his
registration application. Unlike the dissent, see post at 500 U. S. 38 -41,
we choose to follow the plain language of the FAA and the weight of
authority, and we therefore hold that § 1's exclusionary clause
does not apply to Gilmer's arbitration agreement. Consequently, we
leave for another day the issue raised by amici
curiae. [ Footnote 3 ]

															In the recently enacted Older Workers Benefit Protection Act,
Pub.L. 101-433, 104 Stat. 978, Congress amended the ADEA to provide
that "[a]n individual may not waive any right or claim under this
Act unless the waiver is knowing and voluntary." See §
201. Congress also specified certain conditions that must be met in
order for a waiver to be knowing and voluntary. Ibid. [ Footnote 4 ]

															Gilmer also contends that judicial review of arbitration
decisions is too limited. We have stated, however, that,

															"although judicial scrutiny of arbitration awards necessarily is
limited, such review is sufficient to ensure that arbitrators
comply with the requirements of the statute"

															at issue. Shearson/American Express Inc. v. McMahon, 482 U. S. 220 , 482 U. S. 232 (1987).

															[ Footnote 5 ]

															The Court in Alexander v. Gardner-Denver Co., 415 U. S. 36 (1974), also expressed the view that arbitration was inferior to
the judicial process for resolving statutory claims. Id. at 415 U. S. 57 -58.
That "mistrust of the arbitral process," however, has been
undermined by our recent arbitration decisions. McMahon, 482 U.S. at 482 U. S.
231 -232.

															"[W]e are well past the time when judicial suspicion of the
desirability of arbitration and of the competence of arbitral
tribunals inhibited the development of arbitration as an
alternative means of dispute resolution." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U. S. 614 , 473 U. S.
626 -627 (1985).

															JUSTICE STEVENS, with whom JUSTICE MARSHALL joins,
dissenting.

															Section 1 of the Federal Arbitration Act (FAA) states:

															"[N]othing herein contained shall apply to contracts of
employment of seamen, railroad employees, or any other class of
workers engaged in foreign or interstate commerce."

															9 U.S.C. § 1. The Court today, in holding that the FAA compels
enforcement of arbitration clauses even when claims of age
discrimination are at issue, skirts the antecedent question of
whether the coverage of the Act even extends to arbitration clauses
contained in employment contracts, regardless of the subject matter
of the claim at issue. In my opinion, arbitration clauses contained
in employment agreements are specifically exempt from coverage of
the FAA, and, for that reason, respondent Interstate/Johnson Lane
Corporation cannot, pursuant to the FAA, compel petitioner to
submit his claims arising under the Age Discrimination in
Employment Act of 1967 (ADEA), 29 U.S.C. § 621 et seq., to
binding arbitration. I Petitioner did not, as the majority correctly notes, ante at 500 U. S. 25 ,
n. 2, raise the issue of the applicability of the FAA to employment
contracts at any stage of the proceedings below. Nor did petitioner
raise the coverage issue in his petition for writ of certiorari
before this Court. It was amici who first raised the
argument in their briefs in support of petitioner prior to oral
argument of the case. See Brief for American Federation of
Labor and Congress of Industrial Organizations as Amicus
Curiae; Brief for American Association of Retired Persons as Amicus Curiae; Brief for Lawyers' Committee for Civil
Rights Under Law as Amicus Curiae 17-18.

															Notwithstanding the apparent waiver of the issue below, I
believe that the Court should reach the issue of the coverage of
the FAA to employment disputes because resolution of the Page 500 U. S. 37 question is so clearly antecedent to disposition of this case.
On a number of occasions, this Court has considered issues waived
by the parties below and in the petition for certiorari because the
issues were so integral to decision of the case that they could be
considered "fairly subsumed" by the actual questions presented. See, e.g., Teague v. Lane, 489 U.
S. 288 , 489 U. S. 300 (1989) ("The question of retroactivity with regard to petitioner's
fair cross-section claim has been raised only in an amicus brief. Nevertheless, that question is not foreign to the parties,
who have addressed retroactivity with respect to petitioner's Batson claim. Moreover, our sua sponte consideration of retroactivity is far from novel" (citations
omitted)); Batson v. Kentucky, 476 U. S.
79 , 476 U. S. 84 -85,
n. 4 (1986) (notwithstanding petitioner's seemingly deliberate
failure to raise the equal protection issue, "[w]e agree with the
State that resolution of petitioner's claim properly turns on
application of equal protection principles, and express no view on
the merits of any of petitioner's Sixth Amendment arguments"); Mapp v. Ohio, 367 U. S. 643 , 367 U. S. 646 ,
n. 3 (1961) ("Although appellant chose to urge what may have
appeared to be the surer ground for favorable disposition, and did
not insist that Wolf [v. Colorado, 338 U. S.
25 (1949)] be overruled, the amicus curiae, who
was also permitted to participate in the oral argument, did urge
the Court to overrule Wolf. "). See also R. Stern,
E. Gressman, & S. Shapiro, Supreme Court Practice § 6.26 (6th
ed.1986) (describing rule concerning need for presenting questions
below and in petition for certiorari, and deviations from
rule).

															Only this Term, the Court has, on at least two occasions,
decided cases on grounds not argued in any of the courts below or
in the petitions for certiorari. In Arcadia v. Ohio Power
Co., 498 U. S. 73 (1990), we decided the case on an issue that not only was not
raised below or in any of the papers in this Court, but that also
was not raised at any point during oral argument before the Court.
"In our view, however," the decided question was "antecedent to
these [issues presented,] and ultimately dispositive of the present
dispute." Id. at Page 500 U. S. 38 498 U. S. 77 .
Similarly, in McCleskey v. Zant, 499 U.
S. 467 (1991), the Court issued a decision on a question
which the parties had not argued below and evidently had not
anticipated would be at issue in this Court,

															"since respondent did not even mention [ Wainwright v.]
Sykes, [ 433 U.S.
72 ], or cause-and-prejudice in its brief or at oral argument,
much less request the Court to adopt this standard." Id. at 499 U. S.
522 -523 (MARSHALL, J., dissenting).

															In my opinion, the considerations in favor of reaching an issue
not presented below or in the petition for certiorari are more
compelling in this case than in the cited cases. Here the issue of
the applicability of the FAA to employment contracts was adequately
briefed and raised by the amici in support of petitioner.
More important, however, is that respondent and its amici had full opportunity to brief and argue the same issue in
opposition. See Brief for Respondent 42-50; Brief for
Securities Industry Association, Inc. as Amicus Curiae 18-20; Brief for Equal Employment Advisory Council et al. as Amici Curiae 14-16. Moreover, the Court amply raised
the issue with the parties at oral argument, at which both sides
were on notice and fully prepared to argue the merits of the
question. Finally, as in Arcadia, the issue whether the
FAA even covers employment disputes is clearly "antecedent . . .
and ultimately dispositive" of the question whether courts and
respondent may rely on the FAA to compel petitioner to submit his
ADEA claims to arbitration. II The Court, declining to reach the issue for the reason that
petitioner never raised it below, nevertheless concludes that

															"it would be inappropriate to address the scope of the § 1
exclusion, because the arbitration clause being enforced here is
not contained in a contract of employment. . . . Rather, the
arbitration clause at issue is in Gilmer's securities registration
application, which is a contract with the securities exchanges, not
with Interstate." Ante at 500 U. S. 25 , n.
2. In my Page 500 U. S. 39 opinion, the Court too narrowly construes the scope of the
exclusion contained in § 1 of the FAA.

															There is little dispute that the primary concern animating the
FAA was the perceived need by the business community to overturn
the common law rule that denied specific enforcement of agreements
to arbitrate in contracts between business entities. The Act was
drafted by a committee of the American Bar Association (ABA),
acting upon instructions from the ABA to consider and report upon
"the further extension of the principle of commercial arbitration."
Report of the Forty-third Annual Meeting of the ABA, 45 A.B.A.Rep.
75 (1920). At the Senate Judiciary Subcommittee hearings on the
proposed bill, the chairman of the ABA committee responsible for
drafting the bill assured the Senators that the bill

															"is not intended [to] be an act referring to labor disputes, at
all. It is purely an act to give the merchants the right or the
privilege of sitting down and agreeing with each other as to what
their damages are, if they want to do it. Now that is all there is
in this."

															Hearing on S. 4213 and S. 4214 before a Subcommittee of the
Senate Committee on the Judiciary, 67th Cong., 4th Sess., 9 (1923).
At the same hearing, Senator Walsh stated:

															"The trouble about the matter is that a great many of these
contracts that are entered into are really not [voluntary] things
at all. Take an insurance policy; there is a blank in it. You can
take that or you can leave it. The agent has no power at all to
decide it. Either you can make that contract or you can not make
any contract. It is the same with a good many contracts of
employment. A man says, 'These are our terms. All right, take it or
leave it.' Well, there is nothing for the man to do except to sign
it; and then be surrenders his right to have his case tried by the
court, and has to have it tried before a tribunal in which he has
no confidence at all." Ibid. Page 500 U. S. 40 Given that the FAA specifically was intended to exclude
arbitration agreements between employees and employers, I see no
reason to limit this exclusion from coverage to arbitration clauses
contained in agreements entitled "Contract of Employment." In this
case, the parties conceded at oral argument that Gilmer had no
"contract of employment" as such with respondent. Gilmer was,
however, required as a condition of his employment to become a
registered representative of several stock exchanges, including the
New York Stock Exchange (NYSE). Just because his agreement to
arbitrate any "dispute, claim or controversy" with his employer
that arose out of the employment relationship was contained in his
application for registration before the NYSE, rather than in a
specific contract of employment with his employer, I do not think
that Gilmer can be compelled pursuant to the FAA to arbitrate his
employment-related dispute. Rather, in my opinion the exclusion in
§ 1 should be interpreted to cover any agreements by the employee
to arbitrate disputes with the employer arising out of the
employment relationship, particularly where such agreements to
arbitrate are conditions of employment.

															My reading of the scope of the exclusion contained in § 1 is
supported by early judicial interpretations of the FAA. As of 1956,
three Courts of Appeals had held that the FAA's exclusion of
"contracts of employment" referred not only to individual contracts
of employment, but also to collective bargaining agreements. See Lincoln Mills of Ala. v. Textile Workers Union of
America, 230 F.2d 81 (CA5 1956), rev'd, 353 U. S. 353 U.S.
448 (1957); United Electrical, Radio & Machine Workers of
America v. Miller Metal Products, Inc., 215 F.2d 221 (CA4
1954); Amalgamated Assn. of Street, Electric R. and Motor Coach
Employees of America v. Pennsylvania Greyhound Lines, Inc., 192 F.2d 310 (CA3 1951). Indeed, the application of the FAA's
exclusionary clause to arbitration provisions in collective
bargaining agreements was one of the issues raised in the petition
for certiorari and Page 500 U. S. 41 briefed at great length in Lincoln Mills and its
companion cases, Goodall-Sanford, Inc. v. Textile Workers, 353 U. S. 550 (1957), and General Electric Co. v. Electrical Workers, 353 U. S. 547 (1957). Although the Court decided the enforceability of the
arbitration provisions in the collective bargaining agreements by
reference to § 301 of the Labor Management Relations Act, 1947, 29
U.S.C. § 185, it did not reject the Courts of Appeals' holdings
that the arbitration provisions would not otherwise be enforceable
pursuant to the FAA, since they were specifically excluded under §
1. In dissent, Justice Frankfurter perceived a

															"rejection, though not explicit, of the availability of the
Federal Arbitration Act to enforce arbitration clauses in
collective bargaining agreements in the silent treatment given that
Act by the Court's opinion. If an Act that authorizes the federal
courts to enforce arbitration provisions in contracts generally,
but specifically denies authority to decree that remedy for
'contracts of employment,' were available, the Court would hardly
spin such power out of the empty darkness of § 301. I would make
this rejection explicit, recognizing that, when Congress passed
legislation to enable arbitration agreements to be enforced by the
federal courts, it saw fit to exclude this remedy with respect to
labor contracts." Textile Workers v. Lincoln Mills, 353 U.S. at 353 U. S. 466 (Frankfurter, J., dissenting). III Not only would I find that the FAA does not apply to
employment-related disputes between employers and employees in
general, but also I would hold that compulsory arbitration
conflicts with the congressional purpose animating the ADEA, in
particular. As this Court previously has noted, authorizing the
courts to issue broad injunctive relief is the cornerstone to
eliminating discrimination in society. Albemarle Paper Co. v.
Moody, 422 U. S. 405 , 422 U. S. 415 (1975). The ADEA, like Title VII of the Civil Rights Act of 1964,
authorizes Page 500 U. S. 42 courts to award broad, class-based injunctive relief to achieve
the purposes of the Act. 29 U.S.C. § 626(b). Because commercial
arbitration is typically limited to a specific dispute between the
particular parties, and because the available remedies in arbitral
forums generally do not provide for class-wide injunctive relief, see Shell, ERISA and Other Federal Employment Statutes:
When is Commercial Arbitration an "Adequate Substitute" for the
Courts?, 68 Texas L.Rev. 509, 568 (1990), I would conclude that an
essential purpose of the ADEA is frustrated by compulsory
arbitration of employment discrimination claims. Moreover, as Chief
Justice Burger explained:

															"Plainly, it would not comport with the congressional objectives
behind a statute seeking to enforce civil rights protected by Title
VII to allow the very forces that had practiced discrimination to
contract away the right to enforce civil rights in the courts. For
federal courts to defer to arbitral decisions reached by the same
combination of forces that had long perpetuated invidious
discrimination would have made the foxes guardians of the
chickens." Barrentine v. Arkansas-Best Freight System, Inc., 450 U. S. 728 , 450 U. S. 750 (1981) (Burger, C.J., dissenting). In my opinion, the same concerns
expressed by Chief Justice Burger with regard to compulsory
arbitration of Title VII claims may be said of claims arising under
the ADEA. The Court's holding today clearly eviscerates the
important role played by an independent judiciary in eradicating
employment discrimination. IV When the FAA was passed in 1925, I doubt that any legislator who
voted for it expected it to apply to statutory claims, to form
contracts between parties of unequal bargaining power, or to the
arbitration of disputes arising out of the employment relationship.
In recent years, however, the Court Page 500 U. S. 43 "has effectively rewritten the statute", [ Footnote 2/1 ] and abandoned its earlier view that
statutory claims were not appropriate subjects for arbitration. See Mitsubishi Motors v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614 , 473 U. S.
646 -651 (1985) (STEVENS, J., dissenting). Although I
remain persuaded that it erred in doing so, [ Footnote 2/2 ] the Court has also put to one side any
concern about the inequality of bargaining power between an entire
industry, on the one hand, and an individual customer or employee,
on the other. See ante at 500 U. S. 32 -33.
Until today, however, the Court has not read § 2 of the FAA as
broadly encompassing disputes arising out of the employment
relationship. I believe this additional extension of the FAA is
erroneous. Accordingly, I respectfully dissent.

															[ Footnote 2/1 ] See Perry v. Thomas, 482 U. S. 483 , 482 U. S. 493 (1987) (STEVENS, J., dissenting); id. at 482 U. S. 494 (O'CONNOR, J., dissenting); Southland Corp. v. Keating, 465 U. S. 1 , 465 U. S. 36 (1984) (O'CONNOR, J., dissenting) ("[T]oday's exercise in judicial
revisionism goes too far").

															[ Footnote 2/2 ] See Shearson/American Express Inc. v. McMahon, 482 U. S. 220 , 482 U. S.
252 -253 (1987) (BLACKMUN, J., concurring in part and
dissenting in part); id. at 482 U. S. 268 (STEVENS, J., concurring in part and dissenting in part); Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U. S. 477 , 490 U. S. 486 (1989) (STEVENS, J., dissenting).

Summary:
Here is a summary of the Supreme Court case Gilmer v. Interstate/Johnson Lane Corp:

Issue: Whether an Age Discrimination in Employment Act (ADEA) claim can be subjected to compulsory arbitration.

Holding: Yes, an ADEA claim can be subjected to compulsory arbitration.

Reasoning: The Federal Arbitration Act (FAA) allows for statutory claims to be arbitrated as long as there is no inherent conflict between arbitration and the statute's underlying purposes. The Court found no such conflict between arbitration and the ADEA, noting that arbitration can further broader social purposes and is appropriate for claims under other laws designed to advance important public policies. Additionally, arbitration would not undermine the Equal Employment Opportunity Commission's (EEOC) role in ADEA enforcement.

Justice Stevens' dissent emphasizes the inequality of bargaining power between an employer and an employee and expresses concern that compulsory arbitration of employment discrimination claims undermines the role of the judiciary in eradicating discrimination.


OCTOBER TERM, 1996

															Syllabus

															AUER ET AL. v. ROBBINS ET AL.

															CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH
CIRCUIT

															No. 95-897. Argued December 10, 1996-Decided February 19,
1997

															Petitioners, St. Louis police sergeants and a lieutenant, sued
respondent police commissioners for overtime pay under the Fair
Labor Standards Act of 1938 (FLSA). Respondents argued that
petitioners were "bona fide executive, administrative, or
professional" employees exempted from overtime pay requirements by
29 U. S. C. § 213(a)(1). Under the Secretary of Labor's
regulations, that exemption applies to employees paid a specified
minimum amount on a "salary basis," which requires that the
"compensation ... not [be] subject to reduction because of
variations in the quality or quantity of the work performed."
Petitioners claimed that they did not meet this test because, under
the terms of the Police Department Manual, their compensation could
theoretically be reduced (though this was not the department's
general practice) for a variety of disciplinary infractions related
to the "quality or quantity" of their work. Both the District Court
and the Eighth Circuit disagreed with that assertion, holding that
the salary-basis test was satisfied as to all petitioners.

															Held:

															1. The "no disciplinary deductions" element of the salary-basis
test reflects a permissible reading of the FLSA as it applies to
public-sector employees. It is not apparent that the Secretary's
interpretation of § 213(a)(1) is rendered unreasonable, as applied
to public-sector employees, by the absence of other
(non-salary-reduction) means of discipline, or by the peculiar
needs of "quasi military" law enforcement organizations. The
Secretary's approach must therefore be sustained, given §
213(a)(1)'s grant of broad authority to the Secretary to "defin[e]
and delimi[t]" the statutory exemption's scope. See Chevron
U. S. A. Inc. v. Natural Resources Defense Council,
Inc., 467 U. S.
837 , 842-843. Respondents' procedural objection to the
Secretary's failure to amend the disciplinary-deduction rule in the
wake of Garcia v. San Antonio Metropolitan Transit
Authority, 469 U.
S. 528 , cannot be raised in the first instance in this lawsuit,
but must be presented initially in a petition to the Secretary for
amendatory rulemaking under the Administrative Procedure Act, 5 U.
S. C. § 553(e). pp. 456-459.

															2. The Secretary has reasonably interpreted the salary-basis
test to be met when an employee's compensation may not "as a
practical mat- 453 ter" be adjusted in ways inconsistent with the test. The
standard is violated, the Secretary says, if there is either an
actual practice of making deductions or an employment policy that
creates a "significant likelihood" of them. Because the
regulation's critical phrase "subject to" comfortably bears the
meaning the Secretary assigns, his interpretation of his own test
is not "plainly erroneous," and thus is controlling. Robertson v. Methow Valley Citizens Council, 490 U. S. 332 , 359. The
Secretary's interpretation is not rendered unworthy of deference by
the fact that it is set forth in an amicus brief; it is not
a position adopted in response to litigation, and there is no
reason to suspect that it does not reflect the Secretary's fair and
considered judgment. Nor does the rule requiring that FLSA
exemptions be narrowly construed against employers apply here; that
rule governs judicial interpretation of statutes and regulations,
and does not limit the Secretary's power to resolve ambiguities in
his own regulations. Pp. 459-463.

															3. The regulations entitle employers to preserve the exempt
status of employees who have been subjected to pay deductions
inconsistent with the salary-basis test by reimbursing those
employees and promising to comply with the test in the future, so
long as the deductions in question were either inadvertent or made
for reasons other than lack of work. pp. 463-464. 65 F.3d
702 , affirmed.

															SCALIA, J., delivered the opinion for a unanimous Court. Michael T. Leibig argued the cause and filed briefs for
petitioners.

															Irving L. Gornstein argued the cause for the United States as
amicus curiae urging affirmance. With him on the brief were Acting
Solicitor General Dellinger, Deputy Solicitor General Kneedler, J.
Davitt McAteer, Allen H. Feldman, Nathaniel 1. Spiller, and Mark S.
Flynn. John B. Renick argued the cause for respondents. With him
on the brief were James N. Foster, Jr., and Judith
Anne Ronzio.* *Briefs of amici curiae urging reversal were filed for
the American Federation of Labor and Congress of Industrial
Organizations by Jonathan P. Hiatt; for the International
Union of Police Associations AFLcra et al. by Richard Cobb; for the National Association of Police Organizations, Inc., by William J. Johnson; for the National Employment
Law 454 JUSTICE SCALIA delivered the opinion of the Court.

															The Fair Labor Standards Act of 1938 (FLSA), 52 Stat. 1060, as
amended, 29 U. S. C. §§ 201 et seq., exempts "bona fide
executive, administrative, or professional" employees from overtime
pay requirements. This case presents the question whether the
Secretary of Labor's "salary-basis" test for determining an
employee's exempt status reflects a permissible reading of the
statute as it applies to publicsector employees. We also consider
whether the Secretary has reasonably interpreted the salary-basis
test to deny an

															Project, Inc., by Kenneth E. Labowitz; and for Non-Union
Employees in the Private and Public Sectors by Brenda J. Carter. Briefs of amici curiae urging affirmance were filed for
the State of Wisconsin et al. by James E. Doyle, Attorney
General of Wisconsin, Richard Briles Moriarty, Assistant
Attorney General, and by the Attorneys General for their respective
States as follows: Jeff Sessions of Alabama, Grant
Woods of Arizona, Winston Bryant of Arkansas, Daniel
E. Lungren of California, Gale A. Norton of Colorado, Richard Blumenthal of Connecticut, Robert A.
Butterworth of Florida, Michael J. Bowers of
Georgia, Alan G. Lance of Idaho, James E. Ryan of Illinois, Thomas J. Miller of Iowa, Carla J. Stovall of Kansas, J. Joseph Curran, Jr., of
Maryland, Frank J. Kelley of Michigan, Hubert H.
Humphrey III of Minnesota, Mike Moore of Mississippi, Joseph P. Mazurek of Montana, Frankie Sue Del Papa of
Nevada, Dennis C. Vacco of New York, Thomas W
Corbett, Jr., of Pennsylvania, James S. Gilmore
III of Virginia, and Christine Q Gregoire of Washington;
for the Chamber of Commerce of the United States of America et al.
by William J. Kilberg, Mark Snyderman, Stephan A.
Bokat, and Mona C. Zeiberg; for the New York City
Transit Authority by Richard Schoolman; for the Department
of Water and Power of the City of Los Angeles by James K. Hahn,
Thomas C. Hokinson, and Olga Hernandez Garau; for
the Labor Policy Association by Sandra J. Boyd and Daniel V. Yager; and for the National League of Cities et
al. by Richard Ruda, James I. Crowley, and Ronald S. Cooper. Briefs of amici curiae were filed for Broward County, Florida,
by John J. Copelan, Jr., and Anthony C. Musto; for the City of New
York by Paul A. Crotty, Leonard J. Koerner, and Timothy J.
O'Shaughnessy; for the League of California Cities et al. by Arthur
A. Hartinger, Louise H. Renne, and Jonathan V. Holtzman; and for
the International Association of Chiefs of Police, Inc., by Jody M.
Litchford, Wayne W Schmidt, James P. Manak, and Roy Caldwell
Kime. 455 employee salaried status (and thus grant him overtime pay) when
his compensation may "as a practical matter" be adjusted in ways
inconsistent with the test.

															I

															Petitioners are sergeants and a lieutenant employed by the St.
Louis Police Department. They brought suit in 1988 against
respondents, members of the St. Louis Board of Police
Commissioners, seeking payment of overtime pay that they claimed
was owed under § 7(a)(1) of the FLSA, 29 U. S. C. § 207(a)(1).
Respondents argued that petitioners were not entitled to such pay
because they came within the exemption provided by § 213(a)(1) for
"bona fide executive, administrative, or professional"
employees.

															Under regulations promulgated by the Secretary, one requirement
for exempt status under § 213(a)(1) is that the employee earn a
specified minimum amount on a "salary basis." 29 CFR §§ 541.1(f),
541.2(e), 541.3(e) (1996). According to the regulations, "[a]n
employee will be considered to be paid 'on a salary basis' ... if
under his employment agreement he regularly receives each pay
period on a weekly, or less frequent basis, a predetermined amount
constituting all or part of his compensation, which amount is not
subject to reduction because of variations in the quality or
quantity of the work performed." § 541. 118(a). Petitioners
contended that the salary-basis test was not met in their case
because, under the terms of the St. Louis Metropolitan Police
Department Manual, their compensation could be reduced for a
variety of disciplinary infractions related to the "quality or
quantity" of work performed. Petitioners also claimed that they did
not meet the other requirement for exempt status under § 213(a)(1):
that their duties be of an executive, administrative, or
professional nature. See §§ 541.1(a)-(e), 541.2(a)(d),
541.3(a)-(d).

															The District Court found that petitioners were paid on a salary
basis and that most, though not all, also satisfied the 456 duties criterion. The Court of Appeals affirmed in part and
reversed in part, holding that both the salary-basis test and the
duties test were satisfied as to all petitioners. 65 F.3d
702 (CA8 1995). We granted certiorari. 518 U. S. 1016
(1996).1

															II

															The FLSA grants the Secretary broad authority to "defin[e] and
delimi[t]" the scope of the exemption for executive,
administrative, and professional employees. § 213(a)(1). Under the
Secretary's chosen approach, exempt status requires that the
employee be paid on a salary basis, which in turn requires that his
compensation not be subject to reduction because of variations in
the "quality or quantity of the work performed," 29 CFR §
541.118(a) (1996). Because the regulation goes on to carve out an
exception from this rule for "[p]enalties imposed ... for
infractions of safety rules of major significance," §
541.118(a)(5), it is clear that the rule embraces reductions in pay
for disciplinary violations. The Secretary is of the view that
employees whose pay is adjusted for disciplinary reasons do not
deserve exempt status because as a general matter true "executive,
administrative, or professional" employees are not "disciplined" by
piecemeal deductions from their pay, but are terminated, demoted,
or given restricted assignments.

															1 Respondents contend that the District Court lacked
jurisdiction over petitioners' suit by virtue of the Eleventh
Amendment. The Board of Police Commissioners, however, does not
share the immunity of the State of Missouri. While the Governor
appoints four of the board's five members, Mo. Rev. Stat. § 84.030
(1994), the city of St. Louis is responsible for the board's
financial liabilities, § 84.210, and the board is not subject to
the State's direction or control in any other respect. It is
therefore not an "arm of the State" for Eleventh Amendment
purposes. Hess v. Port Authority Trans-Hudson
Corporation, 513
U. S. 30 , 47-51 (1994); Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U. S. 391 , 401402
(1979). 457 A

															The FLSA did not apply to state and local employees when the
salary-basis test was adopted in 1940. See 29 U. S. C. § 203(d)
(1940 ed.); 5 Fed. Reg. 4077 (1940) (salary-basis test). In 1974
Congress extended FLSA coverage to virtually all public-sector
employees, Pub. L. 93-259, § 6, 88 Stat. 58-62, and in 1985 we held
that this exercise of power was consistent with the Tenth
Amendment, Garcia v. San Antonio Metropolitan Transit
Authority, 469 U.
S. 528 (1985) (overruling National League of Cities v. Usery, 426 U.
S. 833 (1976)). The salary-basis test has existed largely in
its present form since 1954, see 19 Fed. Reg. 4405 (1954), and is
expressly applicable to public-sector employees, see 29 CFR §§
553.2(b), 553.32(c) (1996).

															Respondents concede that the FLSA may validly be applied to the
public sector, and they also do not raise any general challenge to
the Secretary's reliance on the salarybasis test. They contend,
however, that the "no disciplinary deductions" element of the
salary-basis test is invalid for public-sector employees because as
applied to them it reflects an unreasonable interpretation of the
statutory exemption. That is so, they say, because the ability to
adjust public-sector employees' pay-even executive, administrative
or professional employees' pay-as a means of enforcing compliance
with work rules is a necessary component of effective government.
In the public-sector context, they contend, fewer disciplinary
alternatives to deductions in pay are available.

															Because Congress has not "directly spoken to the precise
question at issue," we must sustain the Secretary's approach so
long as it is "based on a permissible construction of the statute." Chevron U. S. A. Inc. v. Natural Resources Defense
Council, Inc., 467 U. S. 837 , 842-843
(1984). While respondents' objections would perhaps support a
different application of the salary-basis test for public
employees, we 458 cannot conclude that they compel it. The Secretary's view that
public employers are not so differently situated with regard
to disciplining their employees as to require wholesale revision of
his time-tested rule simply cannot be said to be unreasonable. We
agree with the Seventh Circuit that no "principle of public
administration that has been drawn to our attention ... makes it
imperative" that public-sector employers have the ability to impose
disciplinary pay deductions on individuals employed in genuine
executive, administrative, or professional capacities. Mueller v. Reich, 54

															Respondents appeal to the "quasi military" nature of law
enforcement agencies such as the St. Louis Police Department. The
ability to use the full range of disciplinary tools against even
relatively senior law enforcement personnel is essential, they say,
to maintaining control and discipline in organizations in which
human lives are on the line daily. It is far from clear, however,
that only a pay deduction, and not some other form of
discipline-for example, placing the offending officer on restricted
duties-will have the necessary effect. Because the FLSA entrusts
matters of judgment such as this to the Secretary, not the federal
courts, we cannot say that the disciplinary-deduction rule is
invalid as applied to law enforcement personnel.

															B

															The more fundamental objection respondents have to the
disciplinary-deduction rule is a procedural one: The Secretary has
failed to give adequate consideration to whether it really makes
sense to apply the rule to the public sector. Respondents' amici make the claim more specific: The Secretary's failure
to revisit the rule in the wake of our Garcia decision was
"arbitrary" and "capricious" in violation of the Administrative
Procedure Act (APA), 5 U. S. C. § 706(2)(A).

															It is certainly true that application of the
disciplinarydeduction rule to public-sector employees raises
distinct is- 459 sues that may warrant the Secretary's formal consideration; this
much is suggested by the veritable flood of post-Garcia litigation against public employers in this area, see, e. g., Car penter v. Denver, 82 F.3d
353 (CAlO 1996), cert. pending, No. 95-2088; Bankston v. Illinois, 60 F.3d
1249 (CA7 1995); Shockley v. Newport News, 997 F.2d
18 (CA4 1993); Atlanta Professional Firefighters Union,
Local13J" v. Atlanta, 920 F. 2d 800 (CAll 1991). But
respondents' complaints about the failure to amend the
disciplinary-deduction rule cannot be raised in the first instance
in the present suit. A court may certainly be asked by parties in
respondents' position to disregard an agency regulation that is
contrary to the substantive requirements of the law, or one that
appears on the public record to have been issued in violation of
procedural prerequisites, such as the "notice and comment"
requirements of the AP A, 5 U. S. C. § 553. But where, as here, the
claim is not that the regulation is substantively unlawful, or even
that it violates a clear procedural prerequisite, but rather that
it was "arbitrary" and "capricious" not to conduct amendatory
rulemaking (which might well have resulted in no change), there is
no basis for the court to set aside the agency's action prior to
any application for relief addressed to the agency itself. The
proper procedure for pursuit of respondents' grievance is set forth
explicitly in the AP A: a petition to the agency for rulemaking, §
553(e), denial of which must be justified by a statement of
reasons, § 555(e), and can be appealed to the courts, §§ 702,
706.

															III

															A primary issue in the litigation unleashed by application of
the salary-basis test to public-sector employees has been whether,
under that test, an employee's pay is "subject to" disciplinary or
other deductions whenever there exists a theoretical possibility of
such deductions, or rather only when there is something more to
suggest that the employee is actually vulnerable to having his pay
reduced. Petitioners in 460 effect argue for something close to the former view; they
contend that because the police manual nominally subjects all
department employees to a range of disciplinary sanctions that
includes disciplinary deductions in pay, and because a single
sergeant was actually subjected to a disciplinary deduction, they
are "subject to" such deductions and hence nonexempt under the
FLSA.2

															The Court of Appeals rejected petitioners' approach, saying that
"[t]he mere possibility of an improper deduction in pay does not
defeat an employee's salaried status" if no practice of making
deductions exists. 65 F. 3d, at 710-711. In the Court of Appeals'
view, a "one-time incident" in which a disciplinary deduction is
taken under "unique circumstances" does not defeat the salaried
status of employees. Id., at 711. (In this case the sergeant
in question, who had violated a residency rule, agreed to a
reduction in pay as an alternative to termination of his
employment.) The requirement of actual deductions was also imposed
in an earlier ruling by the Eighth Circuit, McDonnell v. Omaha, 999 F.2d
293 , 296-297 (1993), cert. denied, 510 U. S. 1163 (1994), and
in an Eleventh Circuit case, Atlanta Professional Firefighters
Union, Local 134 v. Atlanta, supra, at 805. Other
Circuits have rejected the requirement, Yourman v. Dinkins, 84 F.3d
655 , 656 (CA2 1996), cert. pending, No. 96-152; Carpenter v. Denver, supra, at 359-360; Bankston v. Illinois, supra, at 1253; Kinney v. District of Columbia, 994 F.2d
6 , 10-11 (CADC 1993); Abshire v. County of Kern, 908 F.2d
483 , 486-488 (CA9 1990), cert. denied, 498 U. S. 1068 (1991);
or else have imposed a requirement of actual deductions only in the
face of vagueness or ambiguity in the governing policy, Michigan
Assn. of Governmental Employees v. Michigan Dept. of
Corrections, 992 F.2d
82 , 86 (CA6 1993).

															2 Petitioners also contend that additional sergeants were
actually subjected to disciplinary deductions, but that fact is not
established by the portions of the record petitioners cite. 461 The Secretary of Labor, in an amicus brief filed at the
request of the Court, interprets the salary-basis test to deny
exempt status when employees are covered by a policy that permits
disciplinary or other deductions in pay "as a practical matter."
That standard is met, the Secretary says, if there is either an
actual practice of making such deductions or an employment policy
that creates a "significant likelihood" of such deductions. The
Secretary's approach rejects a wooden requirement of actual
deductions, but in their absence it requires a clear and
particularized policy-one which "effectively communicates" that
deductions will be made in specified circumstances. This avoids the
imposition of massive and unanticipated overtime liability
(including the possibility of substantial liquidated damages, see, e. g., Kinney v. District of Columbia, supra, at 12)
in situations in which a vague or broadly worded policy is
nominally applicable to a whole range of personnel but is not
"significantly likely" to be invoked against salaried
employees.

															Because the salary-basis test is a creature of the Secretary's
own regulations, his interpretation of it is, under our
jurisprudence, controlling unless "'plainly erroneous or
inconsistent with the regulation.'" Robertson v. Methow
Valley Citizens Council, 490 U. S. 332 , 359 (1989)
(quoting Bowles v. Seminole Rock & Sand
Co., 325 U. S.
410 , 414 (1945)). That deferential standard is easily met here.
The critical phrase "subject to" comfortably bears the meaning the
Secretary assigns. See American Heritage Dictionary 1788 (3d ed.
1992) (def. 2: defining "subject to" to mean "prone; disposed";
giving as an example "a child who is subject to colds"); Webster's
New International Dictionary 2509 (2d ed. 1950) (def. 3: defining
"subject to" to mean "[e]xposed; liable; prone; disposed"; giving
as an example "a country subject to extreme heat").

															The Secretary's approach is usefully illustrated by reference to
this case. The policy on which petitioners rely is contained in a
section of the police manual that lists a total of 462 58 possible rule violations and specifies the range of penalties
associated with each. All department employees are nominally
covered by the manual, and some of the specified penalties involve
disciplinary deductions in pay. Under the Secretary's view, that is
not enough to render petitioners' pay "subject to" disciplinary
deductions within the meaning of the salary-basis test. This is so
because the manual does not "effectively communicate" that pay
deductions are an anticipated form of punishment for employees in petitioners' category, since it is perfectly possible to
give full effect to every aspect of the manual without drawing any
inference of that sort. If the statement of available penalties
applied solely to petitioners, matters would be different; but
since it applies both to petitioners and to employees who are
unquestionably not paid on a salary basis, the expressed
availability of disciplinary deductions may have reference only to
the latter. No clear inference can be drawn as to the likelihood of
a sanction's being applied to employees such as petitioners. Nor,
under the Secretary's approach, is such a likelihood established by
the one-time deduction in a sergeant's pay, under unusual
circumstances.

															Petitioners complain that the Secretary's interpretation comes
to us in the form of a legal brief; but that does not, in the
circumstances of this case, make it unworthy of deference. The
Secretary's position is in no sense a "post hoc rationalizatio[n]" advanced by an agency seeking to defend past
agency action against attack, Bowen v. Georgetown Univ.
Hospital, 488 U.
S. 204 , 212 (1988). There is simply no reason to suspect that
the interpretation does not reflect the agency's fair and
considered judgment on the matter in question. Petitioners also
suggest that the Secretary's approach contravenes the rule that
FLSA exemptions are to be "narrowly construed against ...
employers" and are to be withheld except as to persons "plainly and
unmistakably within their terms and spirit." Arnold v. Ben Kanowsky, Inc., 361 U. S. 388 , 392
(1960). But that is a rule governing 463 judicial interpretation of statutes and regulations, not a
limitation on the Secretary's power to resolve ambiguities in his
own regulations. A rule requiring the Secretary to construe his own
regulations narrowly would make little sense, since he is free to
write the regulations as broadly as he wishes, subject only to the
limits imposed by the statute.

															IV

															One small issue remains unresolved: the effect upon the exempt
status of Sergeant Guzy, the officer who violated the residency
requirement, of the one-time reduction in his pay. The Secretary's
regulations provide that if deductions which are inconsistent with
the salary-basis test-such as the deduction from Guzy's pay-are
made in circumstances indicating that "there was no intention to
pay the employee on a salary basis," the exemption from the FLSA is
"[not] applicable to him during the entire period when such
deductions were being made." 29 CFR § 541. 118(a)(6) (1996).
Conversely, "where a deduction not permitted by [the salarybasis
test] is inadvertent, or is made for reasons other than lack of
work, the exemption will not be considered to have been lost if the
employer reimburses the employee for such deductions and promises
to comply in the future." Ibid. Petitioners contend that the initial condition in the latter
provision (which enables the employer to take corrective action) is
not satisfied here because the deduction from Guzy's pay was not
inadvertent. That it was not inadvertent is true enough, but the
plain language of the regulation sets out "inadverten[ce]" and
"made for reasons other than lack of work" as alternative grounds permitting corrective action. Petitioners also contend that
the corrective provision is unavailable to respondents because Guzy
has yet to be reimbursed for the residency-based deduction; in
petitioners' view, reimbursement must be made immediately upon the
discovery that an improper deduction was made. The language of the
regulation, however, does not address the tim- 464 ing of reimbursement, and the Secretary's amicus brief
informs us that he does not interpret it to require immediate
payment. Respondents are entitled to preserve Guzy's exempt status
by complying with the corrective provision in § 541. 118(a)(6).

															***

															Petitioners have argued, finally, that respondents failed to
carry their affirmative burden of establishing petitioners' exempt
status even under the Secretary's interpretation of the
salary-basis test. Since, however, that argument was inadequately
preserved in the prior proceedings, we will not consider it here.
See Adickes v. S. H. Kress & Co., 398 U. S. 144 , 147, n. 2
(1970). The judgment of the Court of Appeals is affirmed.

															It is so ordered.

Summary: The Supreme Court ruled that police sergeants and a lieutenant were not exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA) due to the "no disciplinary deductions" element of the salary-basis test. The Court held that the Secretary of Labor's interpretation of the FLSA exemption for "bona fide executive, administrative, or professional" employees was reasonable and that the salary-basis test was satisfied when an employee's compensation could not "as a practical matter" be adjusted inconsistently with the test. The Court also clarified that the exemption is lost if deductions are made in circumstances indicating an intention to pay employees on an hourly basis, but can be preserved if the employer reimburses the employee and promises to comply in the future.