An Arbitration Sign of the Times
Posted
12:12 PM
by Michael Fox
If you think arbitration is not a significant player in employment law dispute resolution, you would have to think twice when you see that the National Institute for Triall Advocacy (NITA), one of the best known training programs for trial lawyers is holding their first Arbitration Advocacy May 18-20, 2012.
The opening paragraph in the email I received made that point:
In looking at the below list of topics covered in this program your first inclination may be to think this is another of NITA's Trial Advocacy programs. While similar in some regards this 3 day learning-by-doing program is in fact NITA's first Arbitration Skills program.
And like all NITA programs, this one promises to be a hands on experience, culminating in conducting a full arbitration. Here's a link to NITA's program site if you are interested.
The fact of the matter is although the battles continue over the finer points of enforcibility, and Congressional action could in one fell swoop totally eliminate it, for the foreseeable future, arbitration of employment disputes is very much a reality.
Arbitrations are not the same as trials, and while I think it will be quite some time before we hear anyone refer to themself as an "arbitration lawyer," making sure you understand the difference between the two is important.
Arbitration is much more akin to a bench trial, but one with even more liberal standards of admissibility of documents and testimony. I think it is also a much "cooler" forum, where emotion as a general rule is much less likely to be found and to carry as much weight.
For the advocate, perhaps one of the big differences is the timing of the feedback. For better or worse, when a case is submitted to a jury, in a matter of hours, or at most days, you will know what the factfinder thought of your case. In arbitration, as with bench trials, there is no instant gratification (or depression)
Even in relatively recent times, results were delivered in the mail, but today, when you have an arbitration case pending decision, almost any email could be the one carrying the news.
Labels: arbitration
Arbitration (Is Not the Same as) Courts of Conciliation
Labels: arbitration
Jury Waivers Treated Same As Arbitration Agreements by Texas Supreme Court
Labels: arbitration
Legislative Override of Supreme Court
Labels: arbitration
Arbitration As Protection Against Class Actions
Labels: arbitration, Supreme Court
Arbitration (Awards) Not Necessarily Private in Texas
Labels: arbitration
The Potential Impact of Today's Supreme Court's 5-4 Decision on Arbitrability
Labels: arbitration
No Class Arbitration Under the FAA Unless Specifically Agreed, At Least for Now
Labels: arbitration
An Argument Against the Arbitration Fairness Act
Labels: arbitration
A Pre-Cursor to the Arbitration Fairness Act Takes Another Step
Labels: arbitration
Arbitration Fairness Act is a Trio, Not a Duo
Labels: arbitration
Arbitration Fairness Act - A Fatal Linkage for Employers
Labels: arbitration
Texas Legislature Takes Care of an Irritant in Texas Arbitration Law
Labels: arbitration
It's Not EFCA, Now It's FAN
Labels: arbitration
Employers Win Arbitration Case In Supreme Court, But Watch Out for Congress
Because today’s decision does not contradict the holding of Gardner-Denver, we need not resolve the stare decisis concerns raised by the dissenting opinions. But given the development of this Court’s arbitration jurisprudence in the intervening years, see infra, at 16–19, Gardner-Denver would appear to be a strong candidate for overruling if the dissents’ broad view of its holding, were correct. See Patterson v. McLean Credit Union, 491 U. S. 164, 173 (1989) (explaining that it is appropriate to overrule adecision where there "has been [an] intervening development of the law" such that the earlier "decision [is] irreconcilable with competing legal doctrines and policies"). [internal cites to today's opinions omitted] (2) a dispute arising under any statute intended to protect civil rights. (c) An issue as to whether this chapter applies to an arbitration agreement shall be determined by Federal law. Except as otherwise provided in this chapter, the validity or enforceability of an agreement to arbitrate shall be determined by the court, rather than the arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement. Labels: arbitration
"Manifest Disregard of Law " Now History in 5th Circuit
I'm no labor and employment lawyer, but another important facet of the case is whether it does away with all non-statutory grounds for vacatur, including "manifest disregard of the law" and "violation of public policy," the latter of which has been used to vacate arbitration awards in the employment context. The sweeping language used in the majority opinion arguably throws those babies out with the bathwater. The question before us now is whether, under the FAA, manifest disregard of the law remains valid, as an independent ground for vacatur, after Hall Street. The answer seems clear. Hall Street unequivocally held that the statutory grounds are the exclusive means for vacatur under the FAA. Our case law defines manifest disregard of the law as a nonstatutory ground for vacatur. [cites omitted] Thus, to the extent that manifest disregard of the law constitutes a nonstatutory ground for vacatur, it is no longer a basis for vacating awards under the FAA. We must therefore continue to bear the responsibility to vacate arbitration awards in the rare instances in which “the arbitrator knew of the relevant [legal] principle, appreciated that this principle controlled the outcome of the disputed issue, and nonetheless willfully flouted the governing law by refusing to apply it.” Westerbeke, 304 F.3d at 217. At that point the arbitrators have “failed to interpret the contract at all,” Wise, 450 F.3d at 269, for parties do not agree in advance to submit to arbitration that is carried out in manifest disregard of the law. Put another way, the arbitrators have thereby “exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” 9 U.S.C § 10(a)(4). Labels: arbitration
Looking for an Arbitration Award? Here's the Story
Labels: arbitration
USERRA - Not Always in Federal Court.
Labels: arbitration, USERRA
Supreme Court Employment Law Docket -- Decide Two, Add Three
Labels: arbitration, ERISA, traditional
Empirical Research and Arbitration
Firms’ use of arbitration for consumer contracts but not for nonconsumer contracts suggests that, ex ante, many firms prefer litigation over arbitration, at least for disputes with other repeat players. Moreover, the authors suggest, the use of arbitration clauses in consumer contracts may be an effort to preclude class actions — either in arbitration or court — rather than an effort to promote a fair and efficient dispute resolution mechanism for consumer disputes. Whereas past research often concluded based on more limited datasets that outcomes from employment arbitration were generally similar to those from litigation, results of the present study, which is based on a larger dataset focused on cases involving employer promulgated agreements, indicate that both employee win rates and damage awards in employment arbitration are significantly lower than in litigation. By contrast, results of the present study confirm previous research findings that time to hearing is generally shorter in employment arbitration than in litigation. As with past research, the present study finds evidence of a repeat player effect, though with some uncertainty as to the causal explanation for this effect. Self-representation of employees is found to be associated with significantly worse employee win rates and damage awards, particularly where the case involves by a repeat employer-arbitrator pairing. Lastly, the article reviews research indicating some positive impacts of employment arbitration on the adoption and operation of internal organizational dispute resolution procedures. Labels: arbitration
an appeal an arbitration decision. Any thoughts on arbitration v. a bench trial? Do you know if the EEOC has taken any position on waiver of jury trials?
: 1:15 PM
Posted
12:21 PM
by Michael Fox
In my first year of law school at the University of Texas, we had a class called "Introduction to the Study of Law." My section was taught by Professor Leon Lebowitz, one of the nicest profs at the law school, and a really good Business Associations, Securities Regs professor. Intro, at least I remember it, was known best for its endless discussions about the "forms of actions" which of course were purely historical relics even at the time. (For some reason trespass de bona asportatis sticks in my mind, how scary is that?)
I felt I was transported back to the fall of 1972 as I read Stuck in Arbitration, an op-ed piece by Professor Amalia D. Kessler of Stanford University that appeared in last week's New York Times. Professor Kessler wrote about a failed attempt in the United States in the mid-19th century to create "conciliation courts," which she described as:
When she described this as a "nearly forgotten debate" I think she was being far too kind, as I doubt that there is almost anyone who is familiar with it. (Although I wouldn't have been surprised if Professor Lebowitz knew!)
What is a stretch though is her comparison of Courts of Conciliation to modern day arbitration and her plea for Congress to pass The Arbitration Fairness Act. Reading between the lines, I am not sure that she thinks there is really an apt comparison, but I suspect more a clever way to affirm her support, for what even she concedes would not "be a panacea."
The Arbitration Fairness Act addresses arbitrations in both consumer and employment relationships, a combination that I have always felt was inappropriate as the two merit individual attention.
For those who believe that a serious look at how we resolve employment disputes should include arbitration, which means that it must be mandatory, it is good news that it will not pass in this particular Congress. The bad news is that the current partisan divide makes it unlikely we will ever have a serious review and compromise on that issue.
Like so many issues, it will be an all or nothing outcome, and unfortunately, such outcomes regardless how much one side may feel vindicated depending on which view prevails at any given time, are almost never the optimal solution.
Update (3.19.12): I was not the only one to take note of Prof. Kessler's recommendation. Three letters to the editor sounded a similar point. One of the most notable is Professor Theodore St. Antoine, who was a long time academic and very well respected, and unless I have missed something along the way, not some one who would be accused of "speaking the management line." Resolving Disputes Through Arbitration.
Professor St. Antoine I think has it right:
Note the key phrase, "pre-dispute agreements." Any legislative action that bars pre-dispute agreements as a condition of employment, is for all practical purposes a ban on arbitration in the employment law setting. And since that is what the Arbitration Fairness Act does, the title itself is quiet misleading.
Posted
2:06 PM
by Michael Fox
I would have been surprised if the decision went the other way, but today the Texas Supreme Court affirmed that an at will employee who signed a jury waiver agreement rather than be terminated was not entitled to have it set aside because he was coerced. In re Frank Kent Motor Company (Tx. 3.9.12).
The Court had to look only to its decision a decade earlier, In re Halliburton Co. (Tx 2002), where "this Court held that it was not procedurally unconscionable to premise continued employment on an acceptance of an arbitration plan."
Not a big jump to hold that "all similar dispute resolution agreements" should be treated the same.
The case does make one ironic point though. Both the trial court and the court of appeals had rejected the employer's request to strike the jury demand of the employee. Now having prevailed, the employer gets to try its case in front of the reversed trial court, with the reversed appellate court looking over its shoulder.
Posted
2:47 PM
by Michael Fox
What a difference three years makes. Unlike the opening weeks of the prior Congress when it could not act fast enough to get the reversal of the Supreme Court's decision in the Lilly Ledbetter case to President Obama's desk, the offering of the Arbitration Fairness Act by Senator Franken, faces much more difficult sledding. Franken bill would block mandatory arbitration clauses in cell phone contracts.
Although this bill has been introduced now for several sessions, the latest is at least tied to the Supreme Court's recent decision in ATT Mobility LLC v. Concepcion which upheld an arbitration agreement that prohibited class actions. See Franken's press release from earlier today here. The bill would ban mandatory arbitration both in consumer transactions and in the workplace (with an exception for arbitration provided for by collective bargaining).
Still, having testified at the Judiciary Committee hearing in the fall of 2009 where Senator Franken challenged mandatory arbitration, I have some personal experience with how strongly he feels about this bill. Here's a link to the testimony on the arbitration issue (fortunately for me I was testifying about the Gross decision).
For supporters of arbitration, although it would seem that passage of the AFA would be out of the question in this Congress, I wouldn't necessarily turn out the lights. If, and that' certainly is a big if, the idea that arbitation is unfair in a consumer setting could touch a chord in a large number of people (and it does not seem to have done so yet) this is one that could catch momentum quickly.
Particularly since arbitration is not something that most legislators have strong feelings about one way or another. For those who think it is a good thing in employment matters, the fact that prohibiting in the employment context always gets linked to banning it in consumer transactions is not comforting.
Update (05/19/2011 ) - Although the text of the bill is not yet posted on the official Senate website, it is S.B. 987 and should be available in the next few days. From seeing a copy of the bill on BNA's Daily Labor Report, one interesting thing is that the bill has dropped the ban on arbitration in franchise agreements which was present in prior versions. Presumably, that was done to remove the objections of some. See the comment from the Defense Research Institute, which also points out that the bill contains a provision that would nullify another Supreme Court arbitration decision, Rent-A-Center West, Inc. v. Jackson, 120 S. Ct. 2772 (2010). The 2011 version of the Arbitation Fairness Act requires that decisions on the enforcibility of the arbitration agreement be made by the court, not an arbitrator.
Posted
2:05 PM
by Michael Fox
Today the Supreme Court gave a powerful tool for employers to avoid collective and class actions when it overturned the 9th Circuit's decision in ATT Mobility LLC v. Concepcion (4.27.11) [pdf]. Justice Scalia writing for a sharply divided court, split on the now familiar lines, rejected attempts by states (in this case California) that would prohibit arbitration agreements which prohibit class treatment of claims.
Here, it was a consumer agreement under a system that could hardly be called unfavorable to the individual, in fact the district court had found that the individual couple who were attempting to lead a class action over the purchase of a phone, were undoubtedly better off in arbitration than as members of a class action that would last several years and likely result in a nominal payment to class members. Still to be fair, it is also hard to argue with the point made by Justice Breyer in dissent that it is unlikely that many lawyers would have been interested in taking such a case on an individual basis.
On first blush, given the rage of FLSA collective actions and the desire for larger systemic class actions reflected by the Dukes v. Walmart case, every company that does not have in place a requirement that all disputes be settled by arbitration, and in that arbitration agreement, a provision that prohibits class treatment, will now be considering it again.
This is not to say that arbitration is a panacea ---the cost advantage is being lost as more and more arbitrations are proceeding just like a lawsuit that is being litigated in court, and the lack of any ability to effectively appeal the decisions is a serious danger, both of which have to be weighed against the risk of large collective or class actions. What today's decision permits is a re-calculating those odds with more certainty that you can accomplish the aim of defusing collective/class action liability if you are willing to pay the price of accepting the downsides or arbitration in individual cases.
Everyone has and continues to wait with concern the Court's decision in Dukes v. Walmart, which offers the Court an opportunity to put parameters on broad scale class litigation if it wishes. It might be argued that today's decision augurs well for the employer community on how that case may turn out. Many employers may well wait until July when that shoe drops to do the recalculation between barring class/collective actions via arbitration or continuing to take their chances in the court system. Assuming the Court decides that case fully, it should at a minimum give even more certainty when making that calculation.
Besides companies engaging in that rebalancing, the other thing that is likely to happen is renewed talk about passage of the Arbitration Fairness Act, which would ban pre-dispute arbitration agreements between employers and employees (and also with consumers and in franchise agreements.) It seems unlikely that bill will pass during this Congress, but the there will surely be more discussion.
If the American Arbitration Association were a traded stock today, its price would be soaring.
Posted
10:53 AM
by Michael Fox
Thanks to Professor Ross Runkel for calling my attention to a case decided in my own backyard, McAfee, Inc. v. Weiss, (Tx. App. - Dallas 3.16.11), which held that a trial court's refusal to seal an arbitration opinion and award attached to a motion to confirm the award was not an abuse of discretion.
If you are not aware of the several excellent publications Ross has, you should be. This one was in his Arbitration Law Memo March 2011.
The case turned on an application of Rule 76a of the TRCP which deals with the sealing of records. Since one of the benefits of arbitration is privacy, this is an interesting twist.
The case was only decided a couple of weeks ago, so it is possible that this is not the last word as the full Dallas Court of Appeals might be asked to reconsider, or even the Texas Supreme Court.
Since the Texas Rules of Civil Procedure, including the sealing of documents, are promulgated by the Supreme Court and that Court, through its decisions has been a strong proponent for arbitration , it poses an interesting policy issue for them.
It could be addressed through a case like this one, or addressed through the rule making process. However, it is addressed it does seem worthy of serious focused review between two worthy goals, alternative dispute resolution and the open court proceedings.
Posted
10:14 AM
by Michael Fox
It is never too much a surprise when the Supreme Court reverses the 9th Circuit, nor in recent years is it a surprise when the Court hands down a decision favoring arbitration of disputes, even in employment law matters. In a narrow sense, that is the substance of today's 5-4 decision in Rent-A-Center, West, Inc. v. Jackson, (S.Ct. 6/21/10) [pdf].
The dispute was a procedural one, who has the power to determine the initial question of arbitrability in a particular set of circumstances, the court or the arbitrator. In one sense, all the Supreme Court did was lay down the guideline for how the challenge should be made if the party wishes the Court to be the interpreter. If that were the only consequence, it would be an important case for practitioners dealing with these issues, but at least the applicable law would be more clear and parties could make their arguments accordingly.
If that is the only result of today's ruling, then at least to me, this will ultimately be a rather inconsequential decision. In the short term, this employer will have won a victory (although not on the merits of the case) and parties will adapt their positions going forward to comply with the holding.
However, rather than being another good day for employers in the Supreme Court, which is much rarer than most believe, it is quite possible that employers may rue the day that Justice Kennedy cast his lot with Justices Scalia (the author of the opinion), Thomas, Roberts and Alito on this case.
I can almost guarantee, in fact it may very well occur before I finish drafting this post, that there will be a hue and outcry by Senator Leahy and others that the Supreme Court has dealt yet another vicious and erroneous blow to employee rights and that the only recourse is swift and sure Congressional action. (If that occurs, I think most objective commentators will agree that it a tremendous overstatement of what really happened today.)
The problem for employers is that the swift and sure Congressional action if it should come, is unlikely to merely undo Rent-A-Center. It is much more likely to be the enactment of the Arbitration Fairness Act, which notwithstanding what you may hear, will be the end of arbitration as a means of dispute resolution in the employment setting except for collective bargaining agreements.
I am not sure what term one uses to describe something that is far worse than a mere pyrrhic victory, but if the result of today's decision is the passage of the Arbitration Fairness Act , then the employer community will certainly need one.
Update: The first linkage (at least that I have seen to the AFA):
from a National Law Journal article discussing today's decision.
Today, five members of the Supreme Court struck a blow to our nation’s civil rights laws and the protections that American workers have long enjoyed under those laws.
And while there is no mention in the press release about the pending Arbitration Fairness Act, it doesn't take much reading between the lines to see where Senator Leahy stands:
This is a big issue, although it may not seem so to the general public. Unfortunately, that means it may be easier than some other legislation to slide by under the radar.
If you have an interest in retaining arbitration as part of a dispute resolution program, it is high time to be making sure your senators and representatives are aware of your position.
And that is as it should be. Only then will employees have a chance at justice on a level playing field. You know this is true, it is just in your professional interest to advocate otherwise.
Posted
9:45 AM
by Michael Fox
Today the Supreme Court decided a case important in the employment law field although the underlying case was a commercial dispute. The question in Stolt-Nielsen v. AnimalFeeds International (S.Ct. 4.27.10) [pdf] was whether under the Federal Arbitration Act, arbitrators could decide that class action was appropriate if the arbitration agreement was silent on that issue. Holding that the answer was no, Justice Alito wrote:
The vote was the now familiar one with Justice Alito being joined by C.J. Roberts and Justices Scalia, Kennedy and Thomas. Justice Sotomayor did not participate and Justice Ginzberg wrote the dissent. In an argument that too has become familiar, she argued that the Court was prematurely answering the question.
This is extremely good news for all the employers who have arbitration agreements which are silent on class action.
However, just like the members of the majority, the members of the dissent, and even the argument for the dissent, we all know what comes next -- the cry for Congressional reversal.
Hopefully I will be wrong, as class arbitration is something that should be undertaken only after a long and careful study. In fact, class actions may be in for such a look in the Duke v. Wal-Mart decision which ultimately has to end up on the Supreme Court's plate.
The possible pyrrhic nature of today's victory for employers could come if it sparks greater interest in passage of the Arbitration Fairness Act, which would in its present form solve the question of employment law class action cases in arbitration by doing away with arbitration in such matters altogether.
Posted
5:59 PM
by Michael Fox
The longer article is Determining if Mandatory Arbitration is “Fair:” Asymmetrically-Held Information and the Role of Mandatory Arbitration in Modulating Uninsurable Contract Risks, by Paul Bennett Marrow.
Here's the money quote from the Obiter Dicta article:
Two comments, first I am not as optimistic as the writer that the Arbitration Fairness Act will not pass; secondly, I think saying that being for mandatory arbitration is not a popular position, may be the understatement of the year.
Posted
10:16 AM
by Michael Fox
The Arbitration Fairness Act, which would ban the practice of making agreement to arbitration a condition of employment, is not likely to be voted on until sometime in the spring of 2010. However, those in favor of arbitration in the workplace can not be pleased by the survival of the Franken amendment to the Defense Appropriations Bill which bans such agreements by defense contractors.
After passing the Senate in October (the day before I was testifying in a Senate Judiciary Committee hearing involving arbitration where Senator Franken took the lead) it has now passed not only the House, but survived a conference committee. Franken Rape Amendment Included In Defense Spending Bill.
The amendment extends not only to first tier contractors, but also to sub-contractors, if either of them exceed $1,000,000. Although much of the publicity surrounding the Amendment has been focused on a rape that occurred against an employee who had an arbitration agreement, by extending its coverage to any claim under Title VII it is much broader than cases involving sexual assault.
Here is the language of the Franken Amendment that survived conference :
The bill now goes back to the Senate where passage is expected before Christmas.
(1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention; or
(2) take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that the employee or independent contractor resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress,false imprisonment, or negligent hiring, supervision, or retention.
(b) None of the funds appropriated or otherwise made available by this Act may be expended or any Federal contract awarded more than 180 days after the effective date of this Act unless the contractor certifies that t requires each covered subcontractor to agree not to enter into, and not to take any action to enforce any provision of, any agreement as described in paragraphs (1) and (2) of subsection (a), with respect to any employee or independent contractor performing work related to such subcontract. For purposes of this subsection, a ‘‘covered subcontractor’’ is an entity that has a subcontract in excess of $1,000,000 on a contract subject to subsection (a).
(c) The prohibitions in this section do not apply with respect to a contractor’s or subcontractor’s agreements with employees or independent contractors that may not be enforced in a court of the United States.
(d) The Secretary of Defense may waive the application of subsection (a) or (b) to a particular contractor or subcontractor for the purposes of a particular contract or subcontract if the Secretary or the Deputy Secretary personally determines that the waiver is necessary to avoid harm to national security interests of the United States, and that the term of the contract or subcontract is not longer than necessary to avoid such harm. The determination shall set forth with specificity the grounds for the waiver and for the contract or subcontract term selected, and shall state any alternatives considered in lieu of a waiver and the reasons each such alternative would not avoid harm to national security interests of the United States. The Secretary of Defense shall transmit to Congress, and simultaneously make public, any determination under this subsection not less than 15 business days before the contract or subcontract addressed in the determination may be awarded.
Hat tip to the Washington Labor & Employment Wire for their post on the appropriations bill.
Update (12/21/09): President Obama signed the law over the week end. Obama Signs Into Law Restriction on Arbitration Clauses.
Update (12/30/09): If you check the comments below, a reader has pointed out that I may have read the Franken Amendment too broadly when I suggested it may cover any Title VII claim. I certainly can see the point, and actually think hope he or she is correct.
However, I am apparently not the only one to read it broadly (or at least write about it that way). The
Alaska Employment Law blog's post, The Breadth of the Franken Amendment, quotes from the Legislative & Public Policy Direct of NELA:
My guess is that defense contractors will put the wording from the Franken amendment "as is" into their agreements, and then when someone seeks to enforce arbitration of a Title VII claim with no relationship to "sexual assault or harassment" and we will get our first determination that matters. Even if the commentator below is correct about Title VII being limited, it seems a little harder to apply that reasoning to "negligent hiring, supervision or retention." ]
Legislative drafting is obviously not an easy task. Not that they need it, but it definitely provides job security to judges.
: 10:36 AM
Posted
3:44 PM
by Michael Fox
A reader of my post last week, Arbitration Fairness Act - A Fatal Linkage for Employers, would be forgiven for not understanding that there is a third interest group other than employment and consumer transactions in which arbitration would be banned if the bill passes.
That ban would be for pre-dispute arbitration in franchise agreements. And as you might guess, there are differences of opinion in that industry as well, see Franchisors, Franchisees at Odds Over Arbitration Fairness Act, a story at a franchising specific blog, blue maumau.
According to the author, Lionel Hutz: The International Franchise Association opposes this bill. Franchisee groups such as the American Association of Franchisees and Dealers, the Coalition of Franchisee Associations and Dunkin’ Donuts Independent Franchise Owners supports it.
The franchise part of the bill may impact the fewest people of the three areas in which pre-dispute arbitration agreements would be banned, but it may also be the group where feelings are the deepest.
My guess is that employers who want to keep the ability to mandate agreement to arbitration for disputes as a condition of employment, ought to distance themselves from that aspect of the bill as well and should push for separate treatment. Even then, it will be an uphill fight.
: 11:47 AM
Posted
10:40 AM
by Michael Fox
The Arbitration Fairness Act would eliminate pre-dispute arbitration agreements in consumer, franchise and employee matters. I have long argued that because everyone (including me) does not like them snuck into the fine print of consumer agreements that employers were going to be in trouble unless they could break the linkage between employment and consumer agreements.
I never really had a good short rationale as to why there was a major difference, although clearly there is. Fortunately, the true distinction is highlighted in an article by Richard M. Alderman of the University of Houston Law Center, Why We Really Need the Arbitration Fairness Act: It's All About Separation of Powers. Here's the abstract of Professor Alderman's article: Congress is currently considering the Arbitration Fairness Act, which prohibits pre-dispute mandatory arbitration clauses in consumer contracts. This article reviews the use of consumer arbitration to demonstrate that in consumer cases arbitration is used to eliminate consumer disputes, not to provide an efficient alternative forum. More importantly, it is suggested that the widespread, in fact near universal, use of consumer arbitration conflicts with the core American belief in separation of powers. Through arbitration, business can effectively divorce itself from the civil justice system, eliminating the judicial branch from consumer disputes. The only way to reverse this dangerous trend is through the prohibition contained in the Arbitration Fairness Act.
I personally have handled more than twenty-five such matters which went all the way to hearing, and although the percentage of arbitration cases that go to hearing as opposed to lawsuits that goes to trial, is considerably higher, I have handled a lot more claims that were in arbitration that were resolved somewhere along the way before going to hearing.
I think that is an important distinction between the two, and a good rationale for why they should be treated differently. For those employers who have arbitration programs, it is time to act and start making this distinction and others to your legislators. My view is that is the only way employment arbitration is going to survive.
Posted
3:57 PM
by Michael Fox
When the law of arbitration in Texas was relatively unsettled, it was common for state district judges to deny motions to compel. To ensure that you were protected on appeal, an employer had to both file an interlocutory appeal AND file a mandamus action under the Federal Arbitration Act.
The reason, if the Texas Arbitration Act were applicable then the proper route to the appellate court was appeal; however, there was no comparable provision for the appeal of an action governed by the Federal Arbitration Act, mandamus was the only route. Since it was often unclear which act would control, the safe course was to appeal and file mandamus.
A few applicants were felled by this oddity, but for the most part, the parties and courts just put up with duplicative filings which caused more work and expense.
With yesterday's passage of SB 1650 by both houses of the Texas legislature, that irritant has been removed. If arbitration is denied a party will be entitled to an interlocutory appeal even if the FAA controls. The bill still has to be signed by the Governor but I can't imagine that there is any reason it will not be signed. The effective date is September 1, 2009.
Although it is certainly a nice fix, now that the law on enforcement of arbitration actions is fairly well settled -- bottom line, the motion to compel should be granted in all but the most unusual circumstances -- it may get very little use.
Still if for no reason other than it just didn't make sense, it is nice to see it cleaned up.
Posted
9:49 AM
by Michael Fox
While the EFCA debate has moved underground for awhile, perhaps the next challenge for employers may be FAN. FAN actually is not the acronym for the act in question, the Arbitration Fairness Act, but rather the Fair Arbitration Now coalition, a group formed to support it. Fair Arbitration Coalition, Website & Blog Announced. Here are links to the blog and to the website.
The bottom line of the Act, which has been introduced as H.R. 1020 is to make pre-dispute agreements to arbitrate employment or consumer disputes invalid. Not all employers will be impacted, but those who have set up alternative dispute resolution programs which culminate in binding arbitration will have those programs blown away by the legislation.
Obviously taking a lesson from the EFCA debates, the proponents are quick to point out that the act does not prohibit arbitration. Technically true, but the fact of the matter is it does prohibit arbitration as a condition of employment, which means as a practical matter, arbitration of employment law claims will be a thing of the past once the bill passes.
Will it pass? I have not seen a lot of handicapping on this one yet, but given that not all employers are impacted and that one of the big proponents of consumer arbitration, also banned, are financial institutions which are not exactly in favor with Congress (or the American public) at the moment, I would have to say the odds are in favor of its passage.
It is plainly egregious that a labor union, which has wide discretion over whether or not to pursue a grievance to final binding arbitration, can render a potentially valid individual discrimination claim moot. For the life of me I cannot understand why Justice Kennedy went along with the majority on this one. I surely hope that congress steps in.
And for the record, I am a staunch supporter of organized labor.
: 10:41 AM
Posted
10:41 AM
by Michael Fox
In one of the few employment law cases on this year's docket, the Supreme Court today came close, but according to the majority, did not technically overrule one of its oldest precedents under Title VII, Alexander v. Gardner Denver (1974). (It is so old it pre-dates my passage of the bar by one year!)
In 14 Penn Plaza LLC v. Pyett (4/1/09) (pdf) Justice Thomas wrote for the majority in a 5-4 decision, holding a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate claims arising under the Age Discrimination in Employment Act is enforceable. Justice Souter wrote a vigorous dissent, joined by Justices Stevens (who added his own dissenting opinion), Ginsberg and Breyer.
Much of the battle between Justice Thomas and Justice Souter is carried out in the footnotes, which is where in footnote 8, Justice Thomas delivered probably the best summary of today's opinion:
In order for this opinion to have an impact on any individual it would require that an employee be a member of a bargaining unit that has explicitly agreed that discrimination claims would be arbitrated rather than tried in court. Given the well documented decline in union membership, and the lack of such clauses in a large number of union contracts, the actual number of individuals is probably not all that great.
Of more immediate interest is how this case may be played out in the discussion of two pieces of potential legislation. First, EFCA opponents will use it to argue that it is another reason why it is important that employees retain the secret ballot, since they are electing a representative with the power to strip them of their right to have discrimination claims heard in court. Although I anticipate it will be used, I don't think it will have any great impact in that debate.
More significantly, I think this gives a shot in the arm to the Arbitration Fairness Act, which so far has not drawn a lot of attention. Here's the substance of that proposal: No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of--
(1) an employment, consumer, or franchise dispute; or
By precluding pre-dispute agreements, the Act would effectively kill arbitration of employment law disputes. Given today's result in 14 Penn Plaza, my guess is that the Arbitration Fairness Act will begin to get attention and pick up attraction, it will probably be revised to make it clear that it applies to a union waiver as well, so that today's opinion would effectively be overruled. That will have a tremendous impact on employers who have established mandatory arbitration programs.
Similar to the decision that led to the Lilly Ledbetter Act, today's ruling may turn out to be a very short term, if not Pyrrhic, victory for the business community.
: 8:30 AM
: 9:12 AM
Posted
1:40 PM
by Michael Fox
Although it is not an employment case, last week's decision in Citigroup Global v. Bacon (5th Cir. 3/5/09) [pdf] is important because it makes clear that the 5th Circuit will no longer reverse an arbitrator's decision on the basis of manifest disregard of the law. Judge Jolly's decision for a panel consisting of one of the most senior and the most junior of 5th Circuit judges, Judge Catharina Haynes, held that Hall Street Associates LLC v. Mattel, Inc. (Supreme Court 2008) makes clear that the exclusive grounds for vacating a decision must be found in the Federal Arbitration Act.
It makes prescient a comment on Workplace Prof's post on the Hall Street decision, Hall Street v. Mattel and the Future of Arbitration, just after it was handed down last March:
The Court's conclusion is pretty blunt:
In reaching its decision the Court surveyed what its sister circuits had done post-Hall Street and seemed to agree that a very limited version of "manifest disregard" as adopted by the 2nd Circuit might survive.
In Stolt-Nielsen SA v. AnimalFeeds Int’l Corp, (2d Cir. 2008) that Court wriote:
But the 5th Circuit emphasized how narrow that holding was and also made clear that even the phrase "manifest disregard" as a term of "legal art, is no longer useful in actions to vacate arbitration awards." Translation --- don't use it.
Posted
5:12 PM
by Michael Fox
If you have ever tried to find a copy of an arbitrator's opinions, you may have felt frustrated. At Publication and Confidentiality of Labor and Employment Arbitration Awards, the Alaska Employment Law Blog has a wonderful overview of how such awards get published (and don't) and where you can look to find them. The author, Robert W. Landau, is a full time labor arbitrator.
One hint on why they may not be available -- according to the code of arbitrator ethics, all aspects of the arbitration process, including the award, must be treated confidentially absent consent of the parties.
Posted
1:43 PM
by Michael Fox
USERRA cases are relatively rare still (probably not for long) so unusual to see two cases from different circuits on consecutive days. Both are on procedural grounds and in both cases, notwithstanding that USERRA would seem to be the quintessential federal question case, plaintiffs lost out on a federal court hearing
The 6th Circuit today joined the 5th Circuit (see post here) in holding that USERRA claims are subject to arbitration agreements. Landis v. Pinnacle Eye Care (6th Cir. 8/11/08) [pdf].
The 5th and 6th are the only two circuit courts to address the issue. While district courts have been mixed, the 6th Circuit specifically disagreed with district courts from Georgia and Kansas which had held otherwise.
In McIntosh v. Partridge (5th Cir. 8/8/08) [pdf] decided last Friday, the Court held that where a state is the employer, a federal court has no jurisdiction under USERRA when the claim is brought by the employee. According to the statute there are three situations that can arise with differing jurisdictional results: (1) In the case of an action against a State (as an employer) or a private employer commenced by the United States, the district courts of the United States shall have jurisdiction over the action.
McIntosh was employed by the state of Texas. Notwithstanding that the prior version of USERRA gave federal courts jurisdiction under such circumstances and the statute uses "may" rather "shall" in the applicable section, the Court held that federal courts have no jurisdiction for USERRA claims against a state employer.
(2) In the case of an action against a State (as an employer) by a person, the action may be brought in a State court of competent jurisdiction in accordance with the laws of the State.
(3) In the case of an action against a private employer by a person, the district courts of the United States shall have jurisdiction of the action.
38 U.S.C. § 4323(b).
Posted
1:10 PM
by Michael Fox
If he wasn't the first with the latest news from the Supreme Court's latest employment and labor law action, Ross Runkel at the LawMemo Employment Law Blog was the first that I saw.
Check here for his summary of Preston v Ferrer (S.Ct. 2/20/08). Short hand version, the Supreme Court found a California statute pre-empted by the Federal Arbitration Act. Probably nothing earth shattering here.
The second case decided today, LaRue v. DeWolff, Boberg & Assoc (S.Ct. 2/20/08) might have more impact as it allows an individual to sue for breach of fiduciary duty in connection with defined contribution ERISA plans. The Supreme Court had to distinguish a prior decision of its own where individuals were not allowed to bring a claim for their own injury in a defined benefit plan. And the differences between the two types of plans was the key distinction.
Ross also was the first to report on yesterday's Supreme Court action where they added three more labor and employment law cases to their docket. See Three new Supreme Court cases . Two deal with unions and the third is an ERISA case.
None of those three jump out at me as presenting burning issues which are begging to be decided, which raises a question for which I have been, so far unsatisfactorily, seeking an answer. Why has the Roberts Court become so interested in labor and employment law issues?
It seems to me that there have been an inordinately high number of cases where they have granted cert and/or asked for the government's view on whether cert should be granted. It's just a feeling, nothing "scientific" like the tea leaf reading that goes on over at SCOTUS Blog or Howard Bashman's How Appealing.
My best guess -- maybe there were two or three justices who were interested in employment law cases but didn't regularly attract enough votes to grant cert and maybe Roberts and/or Alito have supplied the missing link. Maybe one of the Supreme Court scholars in the blogosphere will enlighten us.
Update: The LaRue case is the more significant of the two decisions handed down yesterday. See some in depth analysis from Paul Secunda at Workplace Prof Blog, Reflections on the LaRue Decision. Stephen Rosenberg at the Boston ERISA and Insurance Blog has a preliminary first take at The Supreme Court Decides LaRue, In Probably Predictable Fashion. He has promised a more in depth look once he gets through with some court appearances, which I am sure will be worth checking back for.
: 8:25 AM
: 2:04 PM
Posted
10:11 PM
by Michael Fox
Turn the academics loose and the next thing you know they want to do something crazy -- like rely on research! I hope they realize how disconcerting that can be in the non-academic legal world.
First, from the ADR Prof Blog comes Empirical Arbitration Analysis Reveals Companies Prefer Litigation. Although the subject is Fortune 100 companies use of consumer, not employment, arbitration, the conclusion seems to be that for non-consumer agreements, the companies prefer litigation not arbitration. The conclusion drawn by Professor Cole is:
Although going back to employment arbitrations, I can suggest another reason for making sure that arbitration agreements exclude class actions, the 4th Circuit's decision in Long John Silver's Rests. Inc. v. Cole, No. 06-1259 (4th Cir., Jan. 28, 2008). The short version -- in an FLSA "class action" arbitration rather than requiring potential plaintiffs to opt-in, the arbitrator held it should be an opt out class action, and the 4th Circuit upheld the action. See Bryan Peterson's "Long John Silver's Says Arrrbitrator Disregarrrrded the Law" for the long version.
And not to be trumped, the academics over at Workplace Prof Blog have quoted the abstract from an article by Alexander Colvin of Penn State, Empirical Research on Employment Arbitration: Clarity Amidst the Sound and Fury?
The easy take away is that arbitration is not good for employees, but the last two sentences make it sound as if the findings are much more nuanced.
The fact that the Workplace Prof guys posted about the article means it will be seen, as I can personally attest from the increase in hits on my blog each time they happen to link to one of my posts.
One of the reasons all of this research is significant is that under consideration in Congress is legislation that would ban the use of pre-dispute arbitration agreements in consumer and employment situations. Which, not to put too fine a point on it, basically would mean the end of both employment law and consumer arbitration. See the Arbitration Fairness Act of 2007. [pdf].
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