Home | Business News | Browse by Publication | T | Trial

Fighting arbitration''s abuse of power.

Article Excerpt
Mandatory arbitration has long been troublesome for workers trying to vindicate their rights. The U.S. Supreme Court's decision in Circuit City Stores, Inc. v. Adams in 2001 set an even higher hurdle for employees and plaintiff lawyers seeking to enforce antidiscrimination laws in the workplace. (1)

In Circuit City, a bare majority of the Court held that the Federal Arbitration Act (FAA) applies to most employment contracts. (2) The holding encourages employers to impose mandatory pre-dispute arbitration clauses, requiring workers to waive their constitutional right to a jury trial as a condition of gaining or continuing employment.

While the FAA makes these clauses generally enforceable, it does not require that every arbitration clause must be enforced in every case. As it turned out, the plaintiff in Circuit City did not have to arbitrate his discrimination claims because, after the Supreme Court remanded his case, the Ninth Circuit held that one-sided terms in his employer's arbitration clause rendered it unconscionable as a matter of state contract law. (3)

Understanding the arguments available for fighting arbitration clauses under the FAA is critical considering the rights at stake and the disadvantages that employer-mandated arbitration can pose for workers. Employees who must resolve claims through private arbitration encounter several obstacles that they would not face in Court: (4)

No publicly accountable decision-maker. While judges are selected through public proceedings and are ultimately accountable to public bodies, private arbitrators are accountable only to the parties that appear before them. (5) This allows employers to use arbitrators with whom only they--not the employee--have a prior relationship. (6)

In addition, employers control the arbitration process, and arbitrators are compensated on a short-term, case-by-case basis. Possibly because of their relationship with the employer--and their interest in repeat business--arbitrators are widely seen as bringing pro-defense views to the bargaining table. (7) Even when employees prevail in arbitration, arbitrators tend to award smaller damages than judges or juries do in similar cases. (8)

Steep fees. Employees may also face prohibitive costs. While a court system is publicly funded, parties in arbitration must pay steep filing and arbitrator fees themselves. (9) In one case, a secretary who had to arbitrate her sexual harassment claims against a supervisor paid $18,260 in fees and costs to the American Arbitration Association (AAA). When she did not prevail in arbitration, she had to pay $207,271 for defense attorney fees under a "loser pays" provision in the employer's arbitration clause. (10)

In November 2002, AAA capped filing fees that plaintiffs in most employment cases must pay at $125. (11) Still, plaintiff lawyers should ascertain their clients' potential liability for forum costs before arbitrating claims.

Lack of precedent. Unlike the court system--which is designed to provide uniform interpretation of laws through published decisions that create binding precedent for future cases--arbitration requires plaintiffs to prepare their cases in isolation, without looking to the previous successes of similarly situated parties. (12) This loss of access to precedent is especially disabling for employees with statutory claims because it equates to a loss of uniformity that interpretation provides.

Secrecy. Arbitration proceedings are shrouded in secrecy, with many arbitration services adopting rules that bar parties from ever disclosing information obtained in or relating to their cases. (13) If Texaco, Inc., had imposed mandatory arbitration clauses against employees who claimed racial discrimination in Roberts v. Texaco,...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!