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)
1
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
2
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: “[w]here 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.”
3
Alexander v. Gardner-Denver
416 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 employee’s statutory rights
– arbitration and EEOC/courts different forums with
different authority
• arb - interpret CBK
• EEOC - enforce Title VII
4
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)
5
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
6
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.”
7
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
8
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.”
9
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
10
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
11
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
12
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
13
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?
14
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
15
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
16
Outcomes of Employment Arbitration
(Colvin, 2007)
• Employee “win rates” in 1990’s 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
17
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%
18
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
– 99—00 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
19
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 employerarbitrator 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
20
Arbitrator Data (Block, 2009)
LABOR AND EMPLOYMENT ARBITRATION CASES,
NAA MEMBERS AND NON-NAA ARBITRATORS,
January 1, 2003 - December 31, 2007
Mean No.
No. ResponMean No. Labor
Employment
dents
Arbitrations
Arbitrations
NAA Members
Non-NAA
Members
Mean Pct.
Employment
Arbitrations
173
216.3
5.6
2.52%
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%
21
Arbitrator Data (Block, 2009)
REASONS EMPLOYMENT ARBITRATION
NOT HEARD, JANUARY 1, 2003DECEMBER 31, 2007, NAA ARBITRATORS
REASONS
Frequency
Percent
No Time
15
16.3%
Concerns About
Employment
16
17.4%
Arbitration
Not on List
List Not Offered
Case
No Desire Hear
Cases
Not Qualified
Total
43
46.7%
6
6.5%
9
9.8%
3
92
3.3%
100%
22
Arbitrator Data (Block, 2009)
TABLE 9
TYPE OF EMPLOYMENT ARBITRATION CASE BY PERCENTAGES,
ARBITRATORS WITH AT LEAST 10 EMPLOYMENT ARBITRATION CASES
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%
23