Mandatory Employment Arbitration—Yes or No?

Jathan Janove, J.D. By Jathan Janove, J.D. December 3, 2021
LIKE SAVE
Mandatory Employment Arbitration—Yes or No?

​During my law practice days, I enjoyed serving as an arbitrator. An arbitrator can proactively manage cases from inception to conclusion. I worked actively with the parties' attorneys to ensure clarity of positions, focus on key issues and process efficiency. I valued transparency, including letting the attorneys know where I stood at various times in the case.

I essentially played judge and jury, and the role created an opportunity for me to rectify what I thought were weaknesses in the judicial system. According to the attorneys who appeared before me, my active engagement in their cases led to earlier, more efficient and less rancorous resolution.

However, as much as I loved being an arbitrator and felt the process superior to traditional litigation, I did not advocate including arbitration provisions as a condition of employment. When clients asked about arbitration provisions, I typically shared an observation from a prominent family law attorney about prenuptial agreements. He told me, "The negotiation and drafting of a prenup is a pretty good guarantee of its eventual use."

I told my clients that his observation about prenups struck me as relevant to arbitration clauses. "Why not," I suggested, "put your energy instead into claim prevention rather than claim resolution?" Readers of my column know that I fervently believe that but for certain commonly recurring employer mistakes, the overwhelming majority of employment law claims would either be prevented or quickly and easily resolved.

Unintended Consequences

Gretchen Carlson and others have awakened me to some unintended negative consequences when employees are required to arbitrate their disputes with employers. After settling her sexual-harassment case against former Fox News CEO Roger Ailes, Carlson formed a nonprofit organization, Lift Our Voices, which propounds state and federal legislative change to discourage or ban mandatory arbitration in employment disputes. This includes a current federal bill that would exempt employee claims of sexual assault and sexual harassment from mandatory arbitration. As of this writing, the federal bill has received strong bipartisan support.

Members of the Bar Weigh In

To get a broad perspective, I asked attorneys who represent plaintiffs and those who represent defendants to share their views.

Agatha Cole, an attorney with Pollock Cohen LLP in New York City, echoed Carlson: "The #MeToo movement has exposed how mandatory arbitration clauses are consistently used to silence victims of workplace harassment and abuse." However, she goes further than Carlson.

"The problem isn't with arbitration per se," she stated, "which can provide a fair and efficient mechanism for alternative dispute resolution if all parties are on equal footing and mutually decide that proceeding via arbitration is the best way to resolve a dispute."

"But mandatory arbitration clauses present a very different scenario and should not be condoned as a matter of public policy. Whether in an employment agreement or in the terms and conditions of consumer products, the purpose of mandatory arbitration clauses is always the same: They function as a pre-emptive waiver by the individual of his or her right to bring a future lawsuit," Cole said.

"The employer or company is basically saying, 'We may very well harm you in the future … but if you want to be employed or do business with us, you'll have to agree not to sue us.' That's plainly inconsistent with the most fundamental notions of justice and fairness," she added. "This is especially true in cases involving collective wrongs that should be certified as class actions."

Joe Beachboard, an attorney with Ogletree Deakins in Torrance, Calif., offers a contrasting view.
"The vast majority of employers don't adopt arbitration programs to silence their employees," he stated. "Rather, they simply want to avoid the delay, uncertainty and expense associated with a civil justice system desperately in need of reform."

Beachboard asserted that things would become worse if all matters currently being resolved through arbitration "were dumped on the courts. The fact is that the judicial system as currently constructed likely couldn't take on that additional burden." He believes this is especially true for plaintiffs in employment cases, "where often it is difficult for the worker to get on with his or her life until the claims have been resolved. And these cases can easily be litigated in the courts for five years [or more]." He cited the famous dictum: "Justice delayed is justice denied."

Beachboard noted that "if we want less arbitration, we need to fix the courts. Then employers will stop seeking an alternative dispute mechanism. In the meantime, arbitration continues to be a fair and efficient means of resolving employment-related disputes."

Bonnie Levine, attorney with Verse Legal in Atlanta, offered an international perspective. "Outside the United States," she said, "mandatory employment arbitration is not only unenforceable but, practically speaking, [arbitration] merely serves to augment an aggrieved employee's forum options.

"In other countries, employment is by contract and not at will, and, in many places, specialized tribunals and processes exist for adjudicating employee disputes and employers cannot deviate from them. Many countries' laws recognize the inherently unequal bargaining power in the employment relationship, and courts would simply disregard an attempt to contract around statutory protections—it can even damage an employer's credibility.

"To the extent multinational companies seek to maximize consistency globally in employment documents, arbitration clauses or agreements can introduce unnecessary confusion and risk, creating ambiguity … as well as increased potential for administrative errors."

Conclusion

It strikes me that Cole, Beachboard and Levine all make valid points. In my experience, arbitration can be a preferred alternative to the courts for both employer and employee provided three things: 1) the employer covers the cost of arbitration since arbitrator fees can be substantial and pose a barrier to entry for the employee; 2) all legal remedies—individual and group—should be available to the employee and a plaintiff should not have to sacrifice a potential remedy by going through arbitration; and 3) the panel of potential arbitrators should be sufficiently broad to guard against potential unconscious bias where an arbitrator might unwittingly favor an employer that can hire him or her in another arbitration.

As for the issue Carlson, Cole and others raise of confidentiality provisions protecting serial harassers, as opposed to banning arbitration, the solution could be banning confidentiality requirements. An alleged victim of sexual harassment could bring a claim either in court or in arbitration without being silenced. Further, an employer would not be able to condition settlement of a harassment claim on future nondisclosure.

What do you think? I would be interested to hear the views of other HR professionals.

Jathan Janove, J.D., is the author of Hard-Won Wisdom: True Stories from the Management Trenches (HarperCollins/Amacom, 2017). He is president of Organization Development Network Oregon and was named by Inc. magazine as one of the Top 100 Leadership Speakers for 2018. If you have questions or suggestions for topics for future columns, write to JathanJanove@comcast.net.

LIKE SAVE

SHRM HR JOBS

Hire the best HR talent or advance your own career.

When Was Your Handbook Last Updated?

Let our Employee Handbook Builder assist you. It includes legally binding policies and the most up-to-date state and federal requirements.

Let our Employee Handbook Builder assist you. It includes legally binding policies and the most up-to-date state and federal requirements.

Update Your Handbook Today!

SPONSOR OFFERS

HR Daily Newsletter

News, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day.