When Federal Law Controls, Arbitration Prevails: ELCRA, Title VII, and the FAA
Employment litigators are increasingly encountering the tension between state-level civil-rights statutes and broad arbitration agreements that require employees to resolve disputes outside the courtroom. Nowhere is that tension more visible than in Michigan, where courts and commentators continue to debate whether claims brought under the Elliott-Larsen Civil Rights Act (ELCRA) or the Persons with Disabilities Civil Rights Act (PWDCRA) may be subjected to mandatory arbitration as a condition of employment. That debate, however, changes dramatically once the Federal Arbitration Act (FAA) enters the picture.
A new federal decision from the U.S. District Court for the Eastern District of Michigan, Johnson v. Kelly Services, Inc., drives that point home with unmistakable clarity. The ruling is significant not only because it enforces arbitration agreements against two plaintiffs asserting serious allegations of race discrimination and retaliation, but because it explains—forcefully—why ELCRA claims must be arbitrated when the FAA governs, regardless of how Michigan’s state courts might view the issue.
For Michigan employment litigators, this is a case worth understanding in depth. While state law may still be developing, federal law is not. When the FAA applies, it preempts any state rule—statutory or judicial—that seeks to bar arbitration of a particular category of claims. That includes civil-rights claims under ELCRA. The outcome is predictable, enforceable, and ultimately not subject to Michigan’s unsettled posture on mandatory arbitration of discrimination claims.
The Facts Behind the Dispute
The plaintiffs, long-serving employees at Kelly Services, alleged discrimination and retaliation relating to their handling of a tuberculosis-related information request from a public health department. After reporting what they believed to be a racially offensive remark by a supervisor, both employees were terminated. They filed suit asserting multiple statutory claims: § 1981, Title VII, and ELCRA.
Kelly Services moved to compel arbitration, pointing to two arbitration agreements. One was signed by a newer employee as part of his onboarding process; the other was electronically acknowledged by a long-term employee through a required training module. Both agreements broadly required arbitration of all employment-related statutory claims, including discrimination and retaliation.
The plaintiffs challenged the agreements, arguing lack of assent, lack of notice, insufficient consideration, and procedural unfairness. These arguments were carefully analyzed and rejected by the court, which applied long-established Sixth Circuit principles. But the dispute that matters for purposes of this discussion came later—when the plaintiffs argued that ELCRA claims should be treated differently because of Michigan’s evolving state-law landscape.
The Central Question: Are ELCRA Claims Arbitrable Under the FAA?
The plaintiffs asked the federal court to wait. Specifically, they urged the court to delay ruling on whether their ELCRA claims were arbitrable until the Michigan Supreme Court resolved two pending appeals addressing whether ELCRA claims may be subjected to mandatory arbitration under Michigan law. The plaintiffs argued that Michigan’s public policy is moving toward restricting mandatory arbitration of civil-rights claims and that their ELCRA allegations should therefore remain in court.
The federal court rejected that argument outright—and the reasoning is essential for employment litigators to understand.
Why the FAA Determines the Outcome
The FAA requires courts to enforce arbitration agreements according to their terms, except where a generally applicable contract defense applies. The statute treats arbitration agreements as “valid, irrevocable, and enforceable” and broadly preempts any state rule that singles out arbitration for disfavored treatment. This includes state rules that attempt to prohibit arbitration of certain types of claims.
The U.S. Supreme Court has repeatedly reaffirmed this principle, including in AT&T Mobility LLC v. Concepcion, where it held that the FAA displaces any state law that “prohibits outright the arbitration of a particular type of claim.” The district court in Johnson applied that rule decisively.
Even if Michigan were to declare—through statute or judicial decision—that ELCRA claims cannot be subjected to mandatory arbitration as a matter of state public policy, that rule could not survive in a case governed by the FAA. The federal statute would override any such state-law limitation.
As the court explained, federal preemption has a direct, practical consequence: ELCRA claims, when brought in federal court and when an employment relationship involves interstate commerce, must be arbitrated if the parties signed a valid arbitration agreement. The FAA leaves no room for a state-specific exception.
The Court’s Analysis and Holding
In rejecting the plaintiffs’ request to postpone its decision, the court held that the Michigan Supreme Court’s pending consideration of the ELCRA arbitration question was “inconsequential” for purposes of the FAA.
The court reaffirmed several key principles:
1. The FAA preempts any state-law rule that singles out arbitration for disfavored treatment.
If Michigan attempted to prohibit arbitration of ELCRA claims, such a prohibition would not apply in federal court.
2. ELCRA claims are treated the same as Title VII claims under the FAA.
Federal anti-discrimination statutes have long been arbitrable. The FAA requires ELCRA claims to be treated no differently.
3. Federal courts must enforce broad arbitration provisions as written.
If the agreement covers statutory employment discrimination claims—and the agreement is valid—then the claims must be arbitrated.
4. State-level uncertainty does not affect FAA governance.
Even if Michigan’s high court were to issue a decision limiting arbitration of ELCRA claims, that outcome would apply only in cases governed solely by state law.
The federal court compelled arbitration of all claims, including ELCRA claims, and stayed the federal case pending completion of arbitration.
What the Decision Does Not Decide
The court was careful not to extend its ruling beyond the FAA’s reach. It expressly declined to comment on what a Michigan state court might do when considering only Michigan-law claims outside the FAA’s preemptive scope. While many employment relationships involve interstate commerce, not all do. A dispute arising solely under Michigan law, in a setting not implicating the FAA, could produce a different result.
That remains an open and important question for Michigan practitioners.
Implications for Employment Litigators
The Johnson decision reinforces several practical takeaways for attorneys representing employers and employees:
1. The FAA provides certainty—even when state law is unsettled.
Regardless of Michigan’s evolving stance on ELCRA arbitration, federal courts must enforce arbitration agreements covering employment discrimination claims.
2. Forum strategy matters.
Removal to federal court can dramatically affect the enforceability of arbitration agreements in mixed federal/state discrimination cases.
3. Drafting and rollout of arbitration agreements remain essential.
Courts continue to enforce clearly written, well-implemented arbitration agreements, even when employees dispute assent or notice.
4. Employers should expect continued challenges in Michigan state courts.
Until Michigan’s Supreme Court provides definitive guidance on ELCRA arbitration under state law, arguments rooted in state public policy will continue in non-FAA cases.
5. Plaintiffs and defendants alike should evaluate whether an arbitration agreement implicates the FAA.
If it does, outcome predictability increases significantly.
A Broader Perspective
From a policy standpoint, Johnson reflects a broader national reality: Congress and the U.S. Supreme Court have made arbitration the default path for resolving most employment disputes involving interstate commerce. States may articulate their own public-policy views, but those views yield to federal law when the FAA applies.
For litigators, the lesson is straightforward. When drafting, enforcing, or challenging arbitration agreements in employment discrimination cases, consider the FAA first. It controls the outcome more often than not.
And for parties navigating these complex questions, working with an experienced neutral who understands the competing layers of federal and state arbitration doctrine can make a meaningful difference. Nationwide ADR brings a resolution-driven, balanced approach to these disputes, with deep experience handling employment matters involving both state and federal civil-rights statutes.