Employment Arbitration

1
Employment Arbitration

• A substitute for litigation
• Labor arbitration a substitute for industrial
  conflict
• Federal Arbitration Act of 1925
• 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 any contract
• Interpretation arbitration contracts are
  enforceable and valid unless the matter to be
  arbitrated has been excluded from arbitration by
  law (statutory or common)

2
Employment Arbitration (cont.)

• Two important Supreme Court cases
• Gilmer v. Interstate/Johnson Lane Corp. (1991)
• An employee who signed an agreement to arbitrate
  any dispute, claim or controversy arising out
  of employment required to arbitrate a claim of
  age discrimination (all brokers required to sign
  NASD arbitration agreement before hiring)
• Agreement to arbitrate voluntary
• Unequal bargaining power not relevant
• Fraud or coercsion not involved
• No evidence that arbitration panel would have
  been biased or incompetent to consider the ADEA
  claim
• Nothing in ADEA text or legislative history
  considering the statutory claim through voluntary
  arbitration
• ADEA mentions mediation, and conciliation as ways
  to resolve the dispute

3
Employment Arbitration (cont.)

• Circuit City Stores v. Adams (2001)
• FAA enforceability applies to most contracts of
  employment
• Federal Arbitration Act exclusion from coverage
  of contracts of employment of seamen, railroad
  employees, or any other class of workers engaged
  in foreign or interstate commerce is limited to
  only such transportation workers
• Court relies on statutory construction rule of
  ejusdem generis where general words follow
  specific words in a statutory enumeration, the
  general words are construed to embrace only
  objects similar in nature to those objects
  enumerated by the preceding specific words.

4
Alexander v. Gardner-Denver416 U.S. 36 (1974)

• Voluntary filing of a grievance under a CBK
  alleging discrimination does not foreclose
  employee from filing suit under Title VII
• ee must meet jurisdictional requirements
• CBA does not waive an employees statutory rights
• arbitration and EEOC/courts different forums with
  different authority
• arb - interpret CBK
• EEOC - enforce Title VII

5
Waiver of Statutory Rights?(cont.)

• Wright v. Universal Maritime Service Corp,
  U.S.Supreme Court, 1998
• Is there a conflict between
• Gardner-Denver (ee covered by a CBA may go to
  court on statutory claim regardless of outcome of
  grievance procedure)
• Gilmer (ee may waive statutory right to file if
  ee agrees to submit dispute to arb)

6
Wright (continued)

• Incorporation of statutory law in CBK does not
  alter fact that this a statutory claim, not a
  claim under CBK
• Presumption of arbitrability only extends to
  those issues which can be decided better by
  arbitrators than by courts - issues under CBK,
  not a federal statute
• Waiver of statutory rights must be clear and
  unmistakable must be explicitly stated in CBK
• Court unwilling to infer a Gilmer-like individual
  waiver of statutory rights from a collective
  agreement
• No explicit incorporation in agreement of ADA, as
  there was with OSHA

7
Relationship Between External Law and CBA

• The dispute in the present case, however,
  ultimately concerns not the application or
  interpretation of any CBA, but the meaning of a
  federal statute. The cause of action Wright
  asserts arises not out of contract, but out of
  the ADA, and is distinct from any right conferred
  by the collective-bargaining agreement. . . . To
  be sure, respondents argue that Wright is not
  qualified for his position as the CBA requires,
  but even if that were true he would still
  (emphasis in original) prevail if the refusal to
  hire violated the ADA.

8
14 Penn Plaza LLC v. Pyett, U.S. Supreme Court,
105 FEP Cases 1441, 186 LRRM 2065, April 1, 2009

• Employee covered by a collective bargaining
  agreement that requires all discrimination claims
  to be submitted to the grievance and arbitration
  procedure as the sole and exclusive remedy does
  not have the right to file a federal
  anti-discrimination claim through EEOC and
  courts e.g., the agreement to arbitrate
  statutory claims is enforceable

9
Penn Plaza CBA Language

• 30 NO DISCRIMINATION. There shall be no
  discrimination against any present or future
  employee by reason of race, creed, color, age,
  disability, national origin, sex, union
  membership, or any other characteristic protected
  by law, including, but not limited to, claims
  made pursuant to Title VII of the Civil Rights
  Act, the Americans with Disabilities Act, the Age
  Discrimination in Employment Act, the New York
  State Human Rights Law, the New York City Human
  Rights Code, or any other similar laws, rules,
  or regulations. All such claims shall be subject
  to the grievance and arbitration procedures
  (Articles V and VI) as the sole and exclusive
  remedy for violations. Arbitrators shall apply
  appropriate law in rendering decisions based upon
  claims of discrimination.

10
Penn Plaza Rationale

• ADEA does not prohibit union from bargaining in
  good faith for a CBA provision that requires all
  employment discrimination claims to be remedied
  through grievance procedure and arbitration
• Courts may not nullify a CBA provision unless it
  is clearly illegal
• No ADEA prohibition on judicial waivers of right
  to sue under ADEA
• Individual employee may agree to a judicial
  waiver, per Gilmer
• Collective bargaining representative may agree to
  a judicial waiver for represented employees

11
Penn Plaza Rationale (cont.)

• Gardner-Denver
• addressed question of whether an arbitration
  provision could preclude an employee from
  pursuing a subsequent statutory claim
• No requirement in CBA that discrimination claims
  must be submitted to grievance and arbitration
  procedure
• did not address question of whether CBA that
  requires arbitration of such claims enforceable
• Penn Plaza does not involve a waiver of statutory
  right to remedy ADEA claims, only a change in
  forum

12
Penn Plaza Rationale (cont.)

• Courts over the past three decades have become
  increasingly comfortable with arbitration as a
  means of resolving statutory disputes
• Possibility that individual interests of employee
  will be subordinated to collective union
  interests irrelevant
• Not part of statutory structure
• NLRA had majority rule as governing principle
• Union actions limited by
• Union duty of fair representation
• Union liability under ADEA for discrimination

13
Penn Plaza Dissents

• Stevens No reason to overrule precedent
• No changes in governing statute
• Court views on superiority of judiciary to
  address discrimination claims still relevant
  (Gardner Denver)
• Union has no authority to waive a judicial forum
  for a represented employee (Wright)
• Individual employee may waive own right (Gilmer)
• Souter Precedent should not be overruled
• Majoritarian nature of CB unsuited to enforcing
  individual rights
• All courts of appeals have supported principle
  that CBA cannot waive individual federal rights

14
Arbitration Proceedings

• In Penn Plaza, Union did not take cases to
  arbitration but permitted employees to take cases
  to arbitration
• Suppose union filed grievance but lawfully
  refused to take case and lawfully refused to
  permit employees authority to arbitrate case?
• Suppose employer has refused to arbitrate because
  it claimed only union could take case under CBA?

15
Concerns About Employment Arbitration

• Fairness of procedures due to unilateral employer
  adoption
• Cost distribution
• If employer pays, will it influence arbitrator?
• If parties split fee, does employee have
  sufficient resources?
• Repeat player problem

16
Incidence of Employment Arbitration (Colvin, 2007)

• Estimate of incidence
• 14 -25 of firms
• A higher percentage of employees
• Determinants of arbitration adoption by employers
• Firm experience with litigation
• Perception of litigation environment in industry
• Perception of litigation environment in state
  (California)
• Perception that juries award more damages than an
  arbitrator
• lay vs. professional

17
Outcomes of Employment Arbitration (Colvin, 2007)

• Employee win rates in 1990s based on AAA
  cases, non-statutory claims
• 61-68 with cases alleging breach of employment
  contract
• Usually highly paid executives and managers
• Usually negotiated arbitration procedures
• 21- 39 in cases involving alleged breach of
  employer policies/personnel manual
• Usually mid-level employees
• Usually employer-adopted arbitration procedures

18
Outcomes of Employment Arbitration (Colvin, 2007)

• Approximate employee win rates on statutory
  claims usually discrimination
• Courts 36-44
• Arbitration 26.2
• Approximate employee win rates on common law
  claims (implied contract, good faith and fair
  dealing, public policy)
• Courts -57
• Arbitration - 51

19
Outcomes of Employment Arbitration (Colvin, 2007)

• Damages/Remedies
• 97-01
• Mean of 108,694 for the securities industry arb
  cases
• Mean of 126,682 for discrim cases in S.D. NY
• 9900 Civil Rights Claims
• 8 civil rights arbitration awards
• under negotiated agreements median and mean
  award of 32,500
• Employer-promulgated agreements median award of
  56,096 and a mean award of 259,795
• 408 federal court employment discrimination
  trials the median award was 150,500 and the
  mean award was 336,291
• 68 state court employment discrimination trials
  from 96-01, median award of ) and a mean award
  of 478,488
• 136 employment discrimination case verdicts from
  1998 and 1999 in California a median award of
  200,000

20
Outcomes of Employment Arbitration (Colvin, 2007)

• Repeat Player Issue
• 203 AAA employment arbitration awards from 93 to
  95,
• employers who participated in multiple
  arbitration cases associated with employee 23.3
  ee win rate
• employers who participated in only one
  arbitration the employee win rate was 67.0
• 836 employment arbitration awards from 03-06
• Employee win rate of 11.3 of 124 cases involving
  a repeat employer-arbitrator pair
• Employee win rate of 21.2 of 712 cases not
  involving a repeat employer-arbitrator pair
• Possible explanations
• Repeat play effect
• Employer experience with arbitration process
• Filtering at pre-arbitral steps

21
Arbitrator Data (Block, 2009)
LABOR AND EMPLOYMENT ARBITRATION CASES, LABOR AND EMPLOYMENT ARBITRATION CASES, LABOR AND EMPLOYMENT ARBITRATION CASES, LABOR AND EMPLOYMENT ARBITRATION CASES, LABOR AND EMPLOYMENT ARBITRATION CASES,
NAA MEMBERS AND NON-NAA ARBITRATORS, NAA MEMBERS AND NON-NAA ARBITRATORS, NAA MEMBERS AND NON-NAA ARBITRATORS, NAA MEMBERS AND NON-NAA ARBITRATORS, NAA MEMBERS AND NON-NAA ARBITRATORS,
January 1, 2003 - December 31, 2007 January 1, 2003 - December 31, 2007 January 1, 2003 - December 31, 2007 January 1, 2003 - December 31, 2007 January 1, 2003 - December 31, 2007
  No. Respon-dents Mean No. Labor Arbitrations Mean No. Employment Arbitrations Mean Pct. Employment Arbitrations
NAA Members 173 216.3 5.6 2.52
Non-NAA Members 21 6.67 16.33 71.0
         
NAA Members with a J.D. 111 221.7 7.3 2.90
NAA Members who are Full-Time 108 279.9 7.5 2.25
NAA Members with a J.D. and Full-Time 106 230.25 7.73 3.00
22
Arbitrator Data (Block, 2009)
REASONS EMPLOYMENT ARBITRATION REASONS EMPLOYMENT ARBITRATION REASONS EMPLOYMENT ARBITRATION
NOT HEARD, JANUARY 1, 2003- NOT HEARD, JANUARY 1, 2003- NOT HEARD, JANUARY 1, 2003-
DECEMBER 31, 2007, NAA ARBITRATORS DECEMBER 31, 2007, NAA ARBITRATORS DECEMBER 31, 2007, NAA ARBITRATORS
REASONS Frequency Percent
No Time 15 16.3
Concerns About Employment Arbitration 16 17.4
Not on List 43 46.7
List Not Offered Case 6 6.5
No Desire Hear Cases 9 9.8
Not Qualified 3 3.3
Total 92 100
23
Arbitrator Data (Block, 2009)
TABLE 9 TABLE 9 TABLE 9 TABLE 9
TYPE OF EMPLOYMENT ARBITRATION CASE BY PERCENTAGES, TYPE OF EMPLOYMENT ARBITRATION CASE BY PERCENTAGES, TYPE OF EMPLOYMENT ARBITRATION CASE BY PERCENTAGES, TYPE OF EMPLOYMENT ARBITRATION CASE BY PERCENTAGES,
ARBITRATORS WITH AT LEAST 10 EMPLOYMENT ARBITRATION CASES ARBITRATORS WITH AT LEAST 10 EMPLOYMENT ARBITRATION CASES ARBITRATORS WITH AT LEAST 10 EMPLOYMENT ARBITRATION CASES ARBITRATORS WITH AT LEAST 10 EMPLOYMENT ARBITRATION CASES
JANUARY 1, 2003- DECEMBER 31, 2007 JANUARY 1, 2003- DECEMBER 31, 2007 JANUARY 1, 2003- DECEMBER 31, 2007 JANUARY 1, 2003- DECEMBER 31, 2007
  Percent Alleging Employment Contract Violation Percent Alleging Violation of Law Percent Alleging Violation of a Company Policy
Valid 20 21 19
Missing 1 0 2
MEAN 65.0 56.2 59.3