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Employee Rights and Employment Policy Journal


Volume 1 1997 Number 1

NERI'S POSITION ON MANDATORY ARBITRATION OF EMPLOYMENT DISPUTES

[P.263]This inaugural issue of the Employee Rights and Employment Policy Journal contains an article by Professor Susan FitzGibbon enti-tled Reflections on Gilmer and Cole. 1 The article makes an important contribution through its discussion of the benefits to employees of ar-bitration of employment disputes, and provides a useful discussion of the Gilmer 2 and Cole 3 decisions. However, the article also concludes that employer-promulgated mandatory arbitration is beneficial to em-ployees. It is the position of the National Employee Rights Institute (" NERI") that this conclusion is incorrect and that it is sufficiently threatening to the well-being of employees that the officers of NERI should reply.

NERI strongly supports non-mandatory arbitration of employ-ment disputes as part of an employer's internal dispute resolution pro-cess. The availability to employees of a voluntary process can produce fair treatment of employees and can benefit employees as well as em-ployers. Counseling, informal fact-finding, internal mediation and ap-peals, and arbitration all are useful as non-litigation means for resolution of employment disputes. But arbitration benefits employ-ees only if it is truly voluntary and optional.

Why does NERI support voluntary post-dispute arbitration of employment disputes? Arbitration can serve as a beneficial alterna-tive to litigation, especially for employees with small claims that do not justify litigation. Even for claims that would be of interest to a plaintiff's lawyer, arbitration may offer advantages. Arbitration gen-erally is faster and less expensive than litigation. The rules of evi-dence applicable in federal and state courts are relaxed, permitting an easing of the plaintiff's burdens of production and proof, as well as the employer's burdens of production and defense. No summary judg-ment is available in arbitration, and time consuming and expensive motion practice is avoided. Both sides in a dispute can benefit from the finality of an arbitration award, and employers benefit from the confidentiality of the process. Employers with voluntary arbitration as part of an internal dispute resolution program also can benefit from [P.264] 264 EMPLOYEE RIGHTS AND EMPLOYMENT POLICY JOURNAL [Vol. 1: 263 improved employee morale and avoidance of substantial litigation costs.

Binding arbitration can place an employee at a serious disadvan-tage. For example, the limited discovery opportunities in arbitration can impair an employee's ability to meet his or her burdens of produc-tion and proof. Nevertheless, if access to arbitration is voluntary, an employee may use the threat of litigation to force an employer to agree to appropriate discovery as a pre-condition to arbitration.

Arbitration must provide remedies that are equivalent to those available in court. Arbitrators must be authorized to award prevailing employees attorney's fees on grounds applicable in court; appropriate equitable relief must be available; back pay, emotional pain and suf-fering awards and punitive damages must be available on the same basis as in court; and reinstatement or front pay must be available where appropriate and sought by the prevailing employee. Adequate remedies are likely to be available to employees if the arbitration is voluntary, but may not be available if arbitration is mandatory be-cause the employee will be unable to opt out of the process. 4 Ade-quate discovery, fair and neutral arbitrators, written arbitration decisions, and access to judicial review on issues of law are necessary, and can be demanded if the arbitration process is voluntary for employees.

The advantages of arbitration discussed above result from the ba-sic nature of arbitration, independent of the question of whether the arbitration is mandatory or voluntary. It is clear, however, that no employee will benefit because an arbitration is mandatory rather than voluntary. At the same time, an employer might believe that mandatory arbitration will help it avoid statutory and common law protections for employees. These protections were achieved through the most important civil rights movement in the recent history of our nation, and courageous Americans devoted their lives and lost their lives in the struggle. Mandatory arbitration of employment disputes threatens these protections and is not beneficial to employees. In-stead, it constitutes de facto repeal of the substantial body of statutory protection for employees, nullification of state common law rights of employees, and nullification of progressive Supreme Court decisions over the last three decades. Mandatory arbitration of employment [P.265] discrimination disputes undermines social policies against employ-ment discrimination and impedes judicial participation in developing and insuring compliance with employment discrimination laws. Mandatory arbitration deprives employees of jury trials presided over by judges trained in the law, deprives employees of the benefits of discovery and other protections under rules of courts, and deprives employees of meaningful judicial review on legal issues.

NERI's opposition to mandatory arbitration of employment dis-putes is consistent with the July 10, 1997 EEOC Policy Statement on Mandatory Arbitration. 5 The Policy Statement contains the following language:

    The imposition of mandatory arbitration agreements as a condition of employment substitutes a private dispute resolution system for the public justice system intended by Congress to govern the en-forcement of the employment discrimination laws. The private arbi-tral system differs in critical ways from the public judicial forum and, when imposed as a condition of employment, it is structurally biased against applicants and employees.

At the same time, EEOC expressed "strong support of voluntary alternative dispute resolution programs that resolve employment dis-crimination disputes in a fair and credible manner, and are entered into after a dispute has arisen." EEOC concluded:

    The use of unilaterally imposed agreements mandating arbitration of employment discrimination disputes as a condition of employ-ment harms both the individual civil rights claimant and the public interest in eradicating discrimination. Those whom the law seeks to regulate should not be permitted to exempt themselves from federal enforcement of civil rights laws. Nor should they be permitted to deprive civil rights claimants of the choice to vindicate their statu-tory rights in the courts -an avenue of redress determined by Con-gress to be essential to enforcement.

As noted by Professor FitzGibbon, mandatory arbitration of em-ployment disputes is opposed by the National Academy of Arbitra-tors, 6 the National Employment Lawyers Association, 7 and the [P.266] Dunlop Commission. 8 Professor FitzGibbon did not identify organi-zations that favor mandatory arbitration of employment disputes, although it is generally understood that many employers favor mandatory arbitration because of actual or perceived benefits to them. She also did not cite scholarly materials suggesting that mandatory arbitration would be in the best interests of employees, and there is considerable scholarship that demonstrates the opposite. 9 Our review of law review articles that discuss the advantages and dis-advantages of mandatory arbitration of employment disputes identi-fies no advantage to employees that would not also be available through voluntary arbitration. 10 Similarly, the extensive discussion by Professor FitzGibbon of the advantages of mandatory arbitration sim-ply identifies advantages to employees of arbitration in general, with there being no need for the arbitration to be mandatory.

Nevertheless, Professor FitzGibbon argues that employers won't adopt arbitration systems unless they are mandatory for employees. In our view, some employers may take this position, but only if their motive is to take advantage of employees or if they do not recognize the benefits of voluntary arbitration combined with internal dispute resolution programs for constructively and fairly dealing with employ-ment problems and disputes. NERI believes that such programs can be good for both employees and employers. Mediation can be espe-cially effective, and optional arbitration can serve the legitimate inter-ests of the parties without the legal, equitable, political and personnel problems caused by mandatory binding arbitration. 11 [P.267]

Professor FitzGibbon made other statements with which NERI disagrees, two of which we will address. She stated the following, in support of her argument that mandatory arbitration might benefit em-ployees even if punitive damages are not available: "The fact that Congress did not provide for punitive damages or for jury trials in Title VII cases until 1991 supports this assertion, i. e. for over 25 years the statutory purposes of Title VII were served by other proce-dures." 12 We find this statement to be surprising, to say the least. The 1991 Civil Rights Act added compensatory and punitive damages to Title VII remedies because existing remedies were inadequate, espe-cially for sexual and racial harassment cases in which a back-pay rem-edy would not compensate for emotional injury. The addition of jury trials was needed, among other reasons, to place litigation of Title VII cases on a parity with litigation of race discrimination cases under 42 U. S. C. Section 1981, age discrimination cases under the Age Discrimi-nation in Employment Act of 1967, and employment discrimination cases under various state laws. The combination of jury trials, com-pensatory damages for emotional pain and suffering, and punitive damages brought federal statutory remedies in line with state tort and statutory remedies. Plainly, Congress deemed the 1991 amendments to be necessary for achieving the purposes of the federal anti-discrimi-nation statutes.

Professor FitzGibbon discussed "attempts to provide an arbitral forum for the resolution of disputes between non-union employees and employers [which] if realized. . .would have resulted in increased protection of at will employees without depriving them of the protec-tion of courts and administrative agencies in cases of statutory rights claims." 13 She used as an example of these attempts the Model Uni-form Employment Termination Act. 14 In NERI's view, the Model Act would deprive employees of the protection of courts and adminis-trative [P.268] agencies because the price to be paid for "good cause" job pro-tection is statutorily required mandatory arbitration. Among other deficiencies, the Model Act would deprive an employee of common law causes of action arising from termination and would place the bur-den of proof on an employee to prove that the employer lacked good cause for the termination. Moreover, it contains large loopholes for employers that undermine employees' rights. Therefore, it is not sur-prising that employee rights organizations, including NELA, vigor-ously opposed it and that all states that have considered adopting the Model Act have rejected it. 15

NERI's purpose in co-publishing the Employee Rights and Em-ployment Policy Journal is to stimulate debate and encourage scholar-ship and empirical research on the subject of what is best for employees, and we welcome articles with diverse views on this subject. We believe that Professor FitzGibbon performed a useful service by being so stimulating that she pulled the officers of NERI into the mandatory arbitration debate in the inaugural issue. We hope that our voice in response to hers will advance the welfare of employees in the workplace.

Paul H. Tobias
Chair, Board of Directors, NERI

Wayne N. Outten
President, NERI

Douglas D. Scherer
Vice President, NERI

Penny Nathan Kahan
Secretary, NERI

FOOTNOTES

1. Susan A. FitzGibbon, Reflections on Gilmer and Cole, 1 EMPLOYEE RIGHTS AND EM-PLOYMENT POLICY JOURNAL 221 (1997).

2. Gilmer v. Interstate/ Johnson Lane Corp., 500 U. S. 20 (1991).

3. Cole v. Burn, Int'l Sec. Serv., 105 F. 3d 1465 (D. C. Cir. 1997).

4. Mandatory arbitration increases the likelihood that a non-union employee will be placed at a disadvantage because the employer, unlike the employee, is a "repeat player" in the arbitration process. See Lisa B. Bingham, Employment Arbitration: The Repeat Player Effect, 1 EMPLOYEE RTS. AND EMPLOYMENT POLICY J. 189 (1997).

5. Cited in EEOC Policy Statement on Mandatory Arbitration, Daily Lab. Rep., July 11, 1997, available in LEXIS, 1997 DLR 133 d30. This EEOC Policy Statement followed an earlier EEOC Policy Statement, issued on July 17, 1995, that also opposed mandatory arbitration of employment disputes. EEOC, EEOC Policy Statement on Alternative Dispute Resolution, Daily Lab. Rep., July 18, 1995.

6. FitzGibbon, supra note 1, at 221. The Board of Governors of the National Academy of Arbitrators issued a statement on May 21, 1997 opposing "mandatory employment arbitration."

7. FitzGibbon, supra note 1, at 239-40. The National Employment Lawyers Association (" NELA"), the bar association of and for lawyers who represent individual employees, is at the forefront of the battle against mandatory arbitration of employment disputes. NELA's position is reflected in an article by California attorney and former NELA Board Member Cliff Palefsky. Cliff Palefsky, Arbitrary Arbitration: The Founders Would Frown on Mandatory ADR, Attach- ment I to Wayne N. Outten, Negotiating and Drafting Severance Agreements on Behalf of Em-ployees, 548 PLI/ LIT 957 (1996).

8. FitzGibbon, supra note 1, at 242. The Commission on the Future of Worker-Manage-ment Relations, commonly referred to as the "Dunlop Commission," was appointed by the Sec-retaries of Labor and Commerce to consider, among other things, the use of alternative dispute resolution techniques for the resolution of workplace disputes. Its REPORT AND RECOMMENDA-TIONS were issued in January 1995 and expressed opposition to binding arbitration imposed as a condition of employment. COMMISSION ON THE FUTURE OF WORKER-MANAGEMENT RELA-TIONS, U. S. DEPT. OF LABOR AND U. S. DEPT. OF COMMERCE, REPORT & RECOMMENDATIONS (Jan. 1995).

9. See, e. g., Joseph R. Grodin, Arbitration of Employment Discrimination Claims: Doctrine and Policy in the Wake of Gilmer, 14 HOFSTRA LAB. L. J. 1 (1996); Katherine Van Wezel Stone, Mandatory Arbitration of Individual Employment Rights: The Yellow Dog Contract of the 1990s, 73 DENV. U. L. REV. 1017 (1996).

10. See, e. g., Michele L. Giovagnoli, To Be or Not To Be?: Recent Resistance to Mandatory Arbitration Agreements in the Employment Arena, 64 UMKC L. REV. 547, 582-584 (1996); Brian K. Van Engen, Post-Gilmer Developments in Mandatory Arbitration: The Expansion of Mandatory Arbitration for Statutory Claims and the Congressional Effort to Reverse the Trend, 21 J. CORP. L. 391, 412-415 (1996).

11. Some company programs (e. g., Polaroid and TRW) make submission to arbitration mandatory for employees, but do not make the results binding on the employee. U. S. GENERAL ACCOUNTING OFICE, REPORT TO THE CHAIRMAN, SUBCOMMITTEE ON CIVIL SERVICE, COMMIT-TEE ON GOVERNMENT REFORM AND OVERSIGHT, HOUSE OF REPRESENTATIVES, ALTERNATIVE DISPUTE RESOLUTION: EMPLOYERS' EXPERIENCES WITH ADR IN THE WORKPLACE, 46-48, 53-56 (August 1997). Significantly, Polaroid reports that, during the several years the program has been in operation, no employee has gone to court after losing in arbitration. Id. at 48. In NERI's view, mandatory non-binding arbitration can have benefits for employees and is less problematic than mandatory binding arbitration because it preserves the employee's right to go to court. Nevertheless, NERI is concerned about potential burdens on employees and prefers truly voluntary arbitration.

12. FitzGibbon, supra note 1, at 254-55.

13. FitzGibbon, supra note 1, at 233.

14. The MODEL UNIFORM TERMINATION ACT was adopted on August 8, 1991 by the Na-tional Conference of Commissioners of Uniform State Laws. It is reprinted in 9A LAB. REL. REP. (BNA) 540: 21 (August 8, 1991).

15. See the excellent discussion of the MODEL UNIFORM EMPLOYMENT TERMINATION ACT in Ann C. McGinley, Rethinking Civil Rights and Employment At Will: Toward a Coherent Na-tional Discharge Policy, 57 OHIO ST. L. J. 1443, 1506-1509 (1996).

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