EMPLOYMENT DISPUTES POINT: ARBITRATION IS NOT APPROPRIATE By Barbara Gardner Forced arbitration is contrary to contract law, to the Federal Arbitration Act’s legislative history,1 and to the right of a jury trial cherished by our founding fathers.2 The playing field is far from level in employment arbitration: employees lose their Seventh Amendment right to a jury; confidentiality provisions keep them from telling others about their claims; and the rule against publishing decisions forecloses contributions to stare decisis and cloaks arbitrators’ biases. Often discovery of facts is limited and deadlines are short. Class actions usually are prohibited.3 The unfairness of forced arbitration in employment demonstrates the growing body of law that favors large corporations and the wealthy. Legislative Intent The FAA was never meant to apply to employment agreements. Its drafters assured senators that the bill: is not intended [to] be an act referring to labor disputes, at all. It is purely an act to give the merchants the right or the privilege of sitting down and agreeing with each other as to what their damages are, if they want to do it. Now that is all there is in this.4 As U.S. Supreme Court Justice John Paul Stevens explained in a 2001 dissent, “Indeed, neither the history of the drafting of the original bill by the ABA, nor the records of the deliberations in Congress during the years preceding the ultimate enactment of the Act in 1925, contain any evidence that the proponents of the legislation intended it to apply to agreements affecting employment.”5 But the high court held otherwise. Arbitration Is a Pro-Employer Business In arbitration, employers generally pay the bill. This gives them an unfair advantage because they can pre-select arbitrators who become repeat customers.6 Arbitrators charge hundreds of dollars per hour, in addition to fees charged by arbitration companies. Terms requiring employees to pay costs make the process prohibitive. Unlike jurors, arbitrators have a built-in monetary incentive to guard employers’ interests and, at best, to “split the baby” in decisions. If an employee prevails, which is rare, he or she cannot expect full recovery. A recent pamphlet from the Employee Rights Advocacy Institute for Law & Policy stated: “Employers are gaming America’s civil justice system and depriving millions of workers access to the courts when big business violates our nation’s employment and civil rights laws.”7 This is a lucrative business for arbitrators, which benefits employers by taking away rights of workers.8 No Informed Consent Employment arbitration exists on the false premise that employees knowingly agree to arbitrate claims, since arbitration is supposed to be a matter of contract.9 In reality, employees accept job offers and arrive at work to find a stack of “routine paperwork” that they must sign. Within the stack an “arbitration agreement” is hiding—rarely mentioned, explained, or understood, and certainly not negotiated. Employers can include their favorable terms without repercussion, and these terms may be “incorporated by reference” so they are next to impossible to locate or understand. Employees do not have the leverage to negotiate terms to their advantage. When was the last time you saw an executed arbitration agreement with an employee’s revisions? Employers can enforce arbitration agreements even when the employees never signed them or reviewed the terms. In the landmark case of In re Halliburton ,10 Meyers worked 30 years as a welder for Halliburton. The company instituted an arbitration policy and mailed a brochure, but Meyers did not recall receiving it and never signed it. The onerous arbitration terms were not even in the brochure. Halliburton put forth no evidence that Meyers “promised” to do anything. There was no bargained-for exchange, no consideration, and no meeting of the minds, all of which is required by contract law.11 But the Texas Supreme Court held that by merely continuing to work, Meyers “promised” to arbitrate. Big business and the courts have eroded employees’ right to a jury trial by promoting arbitration “agreements” that are devious, convoluted, and illusory.12 This is manifestly unfair and unjust. There is hope that the playing field will be leveled by the passage of the Arbitration Fairness Act, introduced in Congress in 2015. The AFA amends the FAA by making it unlawful for employers to impose arbitration on employees except when they knowingly and voluntarily agree to the terms after a dispute arises or pursuant to a collective bargaining agreement. This will be consistent with the law of contracts and will be fair to both employers and employees alike. Notes 1.) See subsection “Legislative Intent.” 2.) Neil Vidmar and Valerie P. Hans, American Juries: The Verdict, 16 (2007). (Thomas Jefferson: “I consider trial by jury as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.”). Andrew Guthrie Ferguson, Why Jury Duty Matters: A Citizen’s Guide to Constitutional Action, 108 (2012). (John Adams: “… [the right] to trial by jury [is] the heart and lungs of liberty.”). 3.) See D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013). 4.) Subcommittee of the Senate Committee on the Judiciary, 67th Cong., 4th Sess., 9 (1923). 5.) Cir. City Stores, Inc. v. Adams, 532 U.S. 105, 126 (2001) (dissent). 6.) See Alexander Colvin, An Empirical Study of Employment Arbitration: Case Outcomes and Processes at 18-19, Cornell University (2011) http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1586&context=articles. 7.) See Taking ‘Forced’ Out of Arbitration, The Employee Rights Advocacy Institute for Law & Policy (2016) http://employeerightsadvocacy.org/takingforcedoutofarbitration/. 8.) See Jessica Silver-Greenberg and Robert Gebeloff, Arbitration Everywhere, Stacking the Deck of Justice, New York Times (October 31, 2015) (history and compilation of cases). http://www.nytimes.com/2015/11/01/business/dealbook/arbitration-everywhere-stackingthe-deck-of-justice.html?_r=1. 9.) AT&T Technologies, Inc. v. Communication Workers of America, 475 U.S. 643, 648 (1986). 10.) 80 S.W.2d 566 (Tex. 2002). 11.) Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991). 12.) See Jessica Silver-Greenberg and Robert Gebeloff, Arbitration Everywhere, Stacking the Deck of Justice, New York Times (October 31, 2015) (history and compilation of cases). The views expressed in this article are those of the author and do not necessarily represent the policy, position, or views of, and should not be attributed to, the State Bar of Texas. BARBARA GARDNER began her career in 1983 with Bracewell & Patterson, after clerking for U.S. District Judge Carl Bue, and then spent most of her 30 years as a partner in Mandell & Wright, which became Tucker Vaughan in 2004. She now has her own law firm. Gardner is certified in labor and employment law by the Texas Board of Legal Specialization. For more information, go to gardneremploymentlaw.com. COUNTERPOINT: ARBITRATION HAS BENEFITS By John Allen Chalk Sr. Thousands of employment arbitrations are conducted every year in the United States pursuant to both state and federal arbitration statutes. The law is settled that employment discrimination and related claims are subject to arbitration agreements enforceable by existing state law contract principles.1 Many employees and ex-employees have small employment claims that are not economically feasible for litigation but can be resolved in arbitration even without legal representation. Employment arbitration provides numerous benefits to employers and employees. A “Creature of Contract” Employment relationships involve all kinds of agreements protected by applicable law. Those between an employer and an employee are treated under the law as any other contract subject to “the requirements of the general contract laws of the applicable state.”2 Both the U.S.3 and Texas4 Supreme Courts have enforced employment arbitration agreements and continue to enforce them under the Federal Arbitration Act and the Texas General Arbitration Act. Any attempt to take away an employee’s right to contract with an employer for the arbitration of future disputes deprives the employee of valuable constitutional, statutory, and common-law rights to contract.5 “Due Process” Protections6 The American Arbitration Association’s “Due Process Protocol” has been endorsed by “organizations representing a broad range of constituencies,” including the American Bar Association Section of Labor and Employment Law, the American Civil Liberties Union, the Federal Mediation and Conciliation Service, the National Academy of Arbitrators, and the Society of Professionals in Dispute Resolution. The National Employment Lawyers Association has endorsed the substantive provisions.7 The protocol has also been incorporated into the U.S. Secretary of Labor’s Task Force on Excellence in State and Local Government and cited in various court opinions.8 An Inexpensive, Flexible, Neutral, and Easy-to-Understand Arbitration Process9 The American Arbitration Association, Judicial Arbitration and Mediation Services, known as JAMS, and Conflict Prevention & Resolution, CPR, employment arbitration rules, as well as other well-known arbitral institutions, are clearly and simply written, are available on public websites at no cost, and provide both employers and employees with highly experienced, neutral arbitrators chosen by the parties, with numerous due process features that encourage economical and efficient arbitrations even for the self-represented employee. A Final Resolution Subject Only to Limited Review Both the FAA10 and the TAA11 limit the grounds on which the losing arbitration party can have an award vacated. Both the federal and state laws also provide simple and quick ways that an arbitration award can be promptly modified or corrected so long as the “merits of the controversy” are not affected.12 There is no question that both employers and employees are best served by final dispute resolution in the least amount of time, expense, and effort. The Enforcement of Contracts Afforded to Parties to All Other Kinds of Agreements Although state trial courts have appeared to welcome unconscionability defenses to arbitration agreements, the Texas Supreme Court has made it clear to Texas courts that “there is nothing per se unconscionable about arbitration agreements. In fact, historically, Texas law favors settling disputes by arbitration.”13 Texas courts have also been told that, “We should be wary of setting the bar for holding arbitration clauses unconscionable too low.”14 Adhesive agreements are enforceable in Texas including employment pre-dispute arbitration agreements. Long-standing Statutory and Caselaw We have known since 1925 that federal public policy created by the FAA favored pre-dispute arbitration agreements like that of any other contract. We have known since 1991 and 2001 that the FAA authorized the arbitration of statutory arbitration claims including all forms of employment discrimination.15 The Uniform Arbitration Act enacted in 1955 and amended in 1956 and the Revised Uniform Arbitration Act in 2000 provided state legislatures with a model law based on the FAA and on hundreds of thousands of pre-dispute arbitrations conducted in the U.S. There are no legitimate reasons that pre-dispute employment arbitrations should be denied to U.S. employers and employees. Arbitral institutions, arbitrators, advocates, and courts have continuously worked to assure a level playing field for all participants in pre-dispute employment arbitrations. Pre-dispute employment arbitration is the law. And it is beneficial to all who participate in the process. Notes 1.) Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). 2.) In re Poly-America, L.P., 262 S.W.3d 337, 347 (Tex. 2008). 3.) United Steelworkers of Am. v. American Mfg. Co., 363 U.S. 564, 570, 80 S.Ct. 1343, 4 L.Ed. 2d 1403 (1960), and the “Steelworkers Trilogy.” 4.) In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 738 (Tex. 2005). 5.) Id. at 348. 6.) See The Due Process Protocol for Mediation and Arbitration of Statutory Disputes Arising Out of the Employment Relationship, American Arbitration Association (1995); JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness and Rules (2009); Resolving Employment Disputes—A Practical Guide, American Arbitration Association (July 1, 2006). 7.) Employment Arbitration Rules and Mediation Procedures, American Arbitration Association, 9 (Amended and Effective Nov. 1, 2009). 8.) Id. 9.) Employment Arbitration Rules (Nov. 1, 2009); JAMS Employment Arbitration Rules & Procedures (July 1, 2014); Model CPR Employment Dispute Arbitration Procedure. 10.) 9 U.S.C. § 10(a). 11.) Tex. Civ. Prac. & Rem. Code § 171.088(a). 12.) 9 U.S.C. § 11; Tex. Civ. Prac. & Rem. Code § 171.091. 13.) EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90-91 (Tex. 1996). 14.) In re Olshan Foundation Repair Co., LLC, 828 S.W.3d 883, 892-893 (Tex. 2010). 15.) Gilmer, 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001). The views expressed in this article are those of the author and do not necessarily represent the policy, position, or views of, and should not be attributed to, the State Bar of Texas. JOHN ALLEN CHALK SR. practices law and alternative dispute resolution with Whitaker Chalk Swindle & Schwartz in Fort Worth. He has been named a neutral arbitrator in about 500 arbitrations, a significant number of which are employment-related. For more information, go to whitakerchalk.com.
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