« June 2006 | Main | August 2006 »
Mandatory arbitration "most equitable way"
July 20, 2006 by Ross Runkel at LawMemo
"Mandatory Arbitration: Why Alternative Dispute Resolution May Be the Most Equitable Way to Resolve Discrimination Claims" is the hefty title.
This is an article which, among other things, concludes that "arbitration seems to work better than litigation for both employees and employers."
By David Sherwyn, J.D., published by The Center For Hospitality Research at Cornell University School of Hotel Administration.
Download the article (free registration required): Mandatory Arbitration: Why Alternative Dispute Resolution May Be the Most Equitable Way to Resolve Discrimination Claims.
Brought to my attention by National Arbitration Forum Blog: New Cornell Study: Employment Disputes Resolved Better Through Arbitration.
|
|
RLA excludes "public policy" as ground for vacating arbitration award
July 17, 2006 by Ross Runkel at LawMemo
Arbitration awards can be vacated on the ground that they "violate public policy." But not awards issued under the Railway Labor Act.
That's the holding in Netjets Aviation v. Teamsters (SD Ohio 06/02/2006).
Netjets, a company covered by the federal Railway Labor Act, fired an employee for posting a nasty video on the union web site. The union grieved the discharge, and an arbitrator ordered the company to reinstate the employee.
The company sued to set aside the arbitrator's award, arguing that reinstating the employee would violate the public policy favoring safety in air travel and workplace safety.
I thought the company's argument was weak, and that reinstatement would not violate public policy.
The court, however, did not even look at the merits, saying:
The Court holds that public policy does not constitute a basis for reviewing the [award] under the RLA.
The court's theory was simple. The Railway Labor Act states three grounds for overturning an award: (1) failure to comply with the RLA, (2) exceeding jurisdiction, (3) fraud or corruption. Public policy is not on the list.
Interesting because courts typically say that public policy is a ground for vacating an award under the Federal Arbitration Act, even though the FAA has a specific list of grounds that does not include public policy.
|
|
Arbitration penny wise and pound foolish?
July 13, 2006 by Ross Runkel at LawMemo
Interesting article in Law.com's In-House Counsel: Arbitration's Fall From Grace (07/13/2006).
It's full of quotes from in-house lawyers, giving their views on arbitration - the good, the bad, the ugly.
Some choice quotes:
- After a customer sued a company, "Our company ended up investing more than a year's worth of time and substantial legal fees simply to enforce in court our right not to have to go to court."
- "All too often you end up with a mini-trial which is as expensive as litigation but without any appeal rights."
- Arbitrators tend to split their decisions.
- "In a place like California that is very litigious, it is better to go to arbitration rather than spend half your life in court."
- "Over the last 10 years, we have built up considerable experience in arbitration disputes, and there is no question in my mind that it is preferable to litigation."
- "The truth is that arbitration is not a panacea, and it is not for every company." But I do think that the factors that made arbitration favorable to certain companies do remain, and companies should continue to take a look at whether it works for them."
So how about mediation instead?
- "Most lawyers will tell you today that mediation is one of the most fantastic things to come along."
|
|
Arbitration Lesson #6 - History part 4
July 13, 2006 by Ross Runkel at LawMemo
What has the US Supreme Court said about applying the Federal Arbitration Act (FAA) to individual arbitration agreements between employers and employees?
The Supreme Court decided its first employer-employee FAA case In 1991 - Gilmer v. Interstate/Johnson Lane Corp, 500 U.S. 20 (1991). Robert Gilmer was employed in the securities industry, and his registration with the New York Stock Exchange provided that he would arbitrate any claim between himself and his employer. When Gilmer sued his former employer claiming a violation of the Age Discrimination in Employment Act (ADEA), the employer responded by asking the court to compel arbitration of the ADEA claim.
The Supreme Court held that Gilmer must arbitrate his ADEA claim.
After Gilmer, lower courts quickly began enforcing arbitration agreements in a wide variety of employment cases involving federal and state statutory claims and claims under state common law.
Gilmer did not decide one big question: Whether the FAA applies when the agreement to arbitrate is contained in a contract between an employer and employee. The Gilmer Court didn't need to decide that issue because Gilmer's arbitration agreement was contained in his NYSE registration rather than in an employment contract.
The FAA has a clause that excludes from its coverage "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 legal issue was whether the FAA's exclusion clause excluded all employment contracts, or only those involving transportation workers.
In 2001 the Supreme Court decided Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), holding that the FAA applies to contracts signed by most employees, and excludes from its coverage only the employment contracts of seamen, railroad employees, and other transportation workers. The Court split 5 to 4, interpreting this exclusion narrowly.
As a legal matter, the Gilmer and Circuit City decisions simply take a long-standing federal statute and apply it in the employment context. Although opponents of arbitration have a number of good arguments, the policy judgment was made by Congress in 1925: written agreements to arbitrate must be enforced by the courts. The practical results of the Supreme Court's decisions are more profound. Arbitration opponents have lost the major legal battles. The remaining legal issues are matters of detail, albeit important detail. The publicity given to the Supreme Court's decisions, together with the prestige that goes with that Court's imprimatur, have created a higher level of interest in arbitration as an alternative to litigation.
|
|
Arbitration Lesson #5 - History part 3
July 12, 2006 by Ross Runkel at LawMemo
The Federal Arbitration Act (FAA) is the main legal engine behind enforcement of individual agreements to arbitrate.
Passed by Congress in 1925, the FAA was intended to put arbitration agreements on the same footing as other contracts. The translation: Agreements to arbitrate must be enforced by the courts on the same basis that courts enforce any other contract. Likewise, any normal reason for not enforcing a contract (unconsionability, for example) applies equally to arbitration agreements.
The most significant FAA section is Section 2:
Section 2. Validity, Irrevocability, And Enforcement Of Agreements To Arbitrate.
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, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. § 2.
The US Supreme Court has ordered enforcement of agreements to arbitrate claims arising under a variety of federal statutes, including anti-trust statutes, RICO, and the Equal Credit Opportunity Act.
The Supreme Court also decided that the FAA preempts any state law that is hostile to arbitration. Southland Corporation v. Keating, 465 U.S. 1 (1984).
What has the Supreme Court said about arbitrating employment law claims that normally would go to court? For example, the Age Discrimination in Employment Act (ADEA), Title VII, and others. That's the topic for the next lesson.
|
|
Arbitration Lesson #4 - History part 2
July 11, 2006 by Ross Runkel at LawMemo
In the unionized sector, it's the unions that really love arbitration. In the non-union sector, it is the employers who seek individual arbitration agreements.
Employees, organized labor, and pro-employee groups typically oppose pre-dispute agreements to arbitrate, especially when they are required by an employer as a condition of employment.
Employment litigation has changed a lot in 40 years.
Congress enacted a series of employment discrimination statutes (Equal Pay Act, Title VII, ADEA, ADA) and other employment statutes such as the Family and Medical Leave Act. In 1991 Congress allowed for jury trials in Title VII cases, and expanded available remedies to include compensatory damages and punitive damages.
State courts have become more hospitable to employee claims such as wrongful discharge, and many courts have turned the legal notion of "at-will employment" into little more than a slogan.
Employers worried about the increase in employment litigation, the risk of large jury verdicts, and the related unfavorable publicity. One response was requiring non-union employees to sign agreements that all future employment disputes would be resolved through arbitration.
A lot of the history had little or nothing to do with employees and employers. States began to adopt pro-arbitration statutes in the 1920s. In 1955 the National Conference of Commissioners on Uniform State Laws promulgated the Uniform Arbitration Act. Thirty-five jurisdictions have adopted the Uniform Act, and 14 have adopted substantially similar legislation. In 2000 the Commissioners put forth a Revised Uniform Arbitration Act that addresses a number of issues that arise in modern arbitrations.
In 1925 Congress enacted the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et. seq., in response to the needs of commercial interests that were frustrated by the unwillingness of American courts to enforce their arbitration agreements. The basic purpose of the FAA was to put arbitration agreements on the same footing as other contracts. The application of the FAA to the employment arena will be covered in a later lesson.
|
|
Arbitration Lesson #3 - History part 1
July 10, 2006 by Ross Runkel at LawMemo
Today: The history of collective bargaining arbitration, or traditional labor arbitration. Next: The history of individual agreements to arbitrate.
Organized labor has long demanded that collective bargaining agreements contain arbitration clauses. One hundred years ago labor unions distrusted judges and the court system. Judges has issued injunctions against peaceful strikes and picketing, blocked their efforts to organize employees, and jailed their leaders. They did not want judges interpreting their hard-won labor contracts.
Many employers resisted arbitration, mostly because they didn't want outsiders second-guessing their decisions. Litigation was a better forum for them because the cost of litigation would keep down the number of claims and because many judges had pro-management leanings.
Today almost every collective bargaining agreement has an arbitration clause. The main reasons are that agreeing to arbitration is necessary in order to settle contract negotiations, the employer gains a trade-off when the union agrees not to go on strike during the term of the agreement, and the employer gains advantages from arbitration.
In the unionized portion of the private sector the alternative to arbitration is not litigation, it is the strike. Unions see the strike, not litigation, as the alternative method of enforcing their labor agreements. Therefore, the costs and benefits of labor arbitration must be weighed against the costs and benefits of strikes.
During the 20th century the law changed dramatically. Prior to the Taft-Hartley Act of 1947, the enforcement of collective bargaining agreements was a matter for state courts, and they applied state law. In many states pre-dispute agreements to arbitrate could not be enforced at all. In some states an employer's refusal to honor an arbitration agreement resulted in an award of money damages, but the union still could not force the employer to actually engage in arbitration.
In 1947, the Taft-Hartley Act gave unions the right to sue in federal court to enforce their collective agreements. Labor Management Relations Act of 1947 § 301; 29 U.S.C. § 185. That meant unions could get a court to force an employer to arbitrate.
|
|
Arbitration Lesson #2 - Contract
July 09, 2006 by Ross Runkel at LawMemo
Without a contract agreeing to arbitrate, there is no legal duty to arbitrate. That's the main rule.
If there is an agreement to arbitrate, then courts will enforce that agreement and make the parties arbitrate rather than litigate a dispute.
Because arbitration is controlled by the law of contracts, it is important to know (1) whether there is an agreement to arbitrate and (2) what the arbitration agreement provides.
Is there an agreement to arbitrate?
In a unionized workplace, with a collective bargaining agreement (CBA), there is almost always an agreement to arbitrate disputes that arise out of the CBA. Disputes about wages, demotions, suspensions, and discharge get resolved in arbitration rather than in the court system.
In a non-unionized workplace, some employers (certainly not all) require that employees agree to arbitrate disputes. The arbitration agreement might be found in an employment application form, in a hiring letter, in an employee handbook, in a separate employment agreement, or in a separate agreement dealing only with arbitration. The agreement typically says that all disputes that arise in the future have to be resolved through arbitration.
Both federal and state statutes say that courts must enforce written agreements to arbitrate. The statutes say "written." They don't say "signed." Although most arbitration agreements are in fact signed, there is no requirement that they be signed so long as there has been an agreement.
Even though an employer requires an employee to agree to arbitration in order to get hired, that is still an agreement.
Some agreements are so unfair that a court will not enforce them, and we'll cover that in a later lesson. But courts do not consider the agreement to arbitrate, all by itself, to be unfair.
Sometimes employees try to avoid arbitration by saying that they did not get a copy of the arbitration agreement, or did not read the agreement, or did not understand the agreement. Most courts say a person is bound by a contract if they signed it, even though they didn't read it or understand it. On the other hand, courts often overturn arbitration agreements that are obtained though trickery, or when an employee didn't get a chance to read it.
What does the arbitration agreement provide?
Arbitration agreements are not all the same. They often spell out in detail what disputes are covered, who the arbitrator will be or how the arbitrator will be selected, and some of the procedures to be followed. More on this in later lessons.
|
|
Arbitration Lesson #1 - What is it?
July 08, 2006 by Ross Runkel at LawMemo
This is the first in a series of lessons on the law of arbitration.
Arbitration is not mediation. Don't mix them up.
- An arbitrator is like a private judge who listens to both sides and then makes a decision that is final and binding.
- A mediator is a person who helps disputing parties work out their own solution to a dispute, and has no power to compel them to agree to anything.
When two parties have a dispute, they can get that dispute resolved by an arbitrator rather than going to court. There are many ways to conduct an arbitration. The following example is fairly typical.
- Contract. The parties sign a contract to arbitrate. The arbitration agreement can be entered into either before or after a dispute arises. Almost all collective bargaining agreements have arbitration clauses. Many non-union employers require their employees to arbitrate disputes, by entering into an arbitration agreement before any disagreement or dispute exists.
- Selecting an arbitrator. Usually the parties agree to have some outside agency help them select an arbitrator. Often the agency will send a list of available arbitrators, the parties take turns crossing off names, and the person remaining on the list becomes the arbitrator.
- Setting a hearing. The arbitrator works with the parties to find a good time and place to hold the arbitration.
- The hearing. An arbitration hearing can be somewhat informal (no robes; no courtrooms; no jury). Formal rules of evidence are rarely followed. Yet the hearing proceeds in a way that it similar to a court trial. Each side makes an opening statement describing the situation. Each side calls witnesses and presents documents. Witnesses get cross-examined. At the end, each side makes closing arguments - sometimes orally and sometimes by written briefs.
- The decision. The arbitrator's job is to make a decision based on the evidence presented at the hearing. The decision usually is in writing, and explains how and why the arbitrator reached a particular result.
- Final and binding. Because an arbitrator's decision (called an award) is final and binding, there is no appeal process. Courts have extremely limited power to overturn an arbitration award, and it rarely happens.
- Enforcing the award. Usually the losing party will comply with what the arbitrator says. If not, then the winning party can file a suit and get a court to enforce the award.
|
|
Order compelling arbitration not reviewable
July 05, 2006 by Ross Runkel at LawMemo
"We recognize there is some one-sidedness in reviewing only orders that deny arbitration, but not orders that compel it. Yet both the Federal and Texas acts leave little uncertainty that this is precisely what the respective legislatures intended."
So says the Supreme Court of Texas in In Re Palacios (Texas 06/30/2006).
The decision is short and sweet, and the Texas court indicates that it will try to read the Federal Arbitration Act and the Texas Arbitration Act in a harmonious manner.
|
|
EEOC | NLRB | Supreme Court | Employment Law Blog | Arbitration Blog | Employment Law 101
