Article by Richard A. Bales
Arbitration of individual statutory employment claims exploded onto the scene in 1991 and has been growing at a steady pace ever since. The impetus for this development was the United States Supreme Court's holding in Gilmer v. Interstate/Johnson Lane Corp., permitting an employer to enforce a predispute arbitration agreement with respect to a nonunion employee's age discrimination claim.
From the beginning, the academic debate over employment arbitration tended to be fiercely partisan. Proponents such as Samuel Estreicher argued that arbitration provided dispute resolution access to low- and middle-income employees who otherwise would not be able to obtain legal representation and for whom judicial resolution therefore was not an option. Critics such as Katherine Van Wezel Stone argued that arbitration was a form of second-class justice, the modern equivalent of the yellow dog contract, particularly when employers foisted lopsided agreements upon employees whose only alternative was discharge. Meanwhile, innumerable debates raged among commentators over a series of related issues such as the debate between Stephen Ware and Jean Sternlight over whether the constitutional right to a jury trial applies to mandatory (Sternlight's word), or contractual (Ware's word), arbitration clauses. This author himself has made an academic career largely from describing the advent of employment arbitration, drawing connections to its theoretical roots, and chronicling (often critically) its subsequent development.
Today, as employment arbitration turns fifteen, it is particularly appropriate to consider whether this quinceañera is cause for a festive coming-of-age celebration, or whether instead we should be mourning the protracted demise of the individual employment rights that in the latter part of the twentieth century replaced collective bargaining as the primary source of protection for American workers. The early discourse over employment arbitration was largely descriptive and theoretical, primarily because there was so little empirical data then available and the case law was undeveloped. Today, however, thanks to scholars such as Lisa Bingham and Lewis Maltby, we have a much clearer picture of how employment arbitration works in practice, permitting a much more nuanced evaluation.
Fairly drafted and implemented employment arbitration programs have much to offer American workers, particularly in terms of access to a meaningful dispute resolution forum. Some of the early criticisms of employment arbitration, such as concerns that it would supplant judicial precedent, have proven unfounded. One criticism, however, has proven valid: some employers have used their superior bargaining power to impose on employees lopsided agreements that make it all but impossible for employees to pursue valid claims and that deter most employees from even trying to do so. This deterrent effect undermines the argument that arbitration enhances access and strengthens the criticism that arbitration functions as a prospective waiver of substantive rights.
This Article argues that two things must happen before mandatory arbitration becomes an acceptably fair method of adjudicating employment disputes. First, there must be a clear set of “due process rules” against which arbitration agreements can be measured to determine enforceability. Second, a penalty must be imposed on employers who draft flagrantly lopsided agreements to counteract the incentives employers now have to use lopsided agreements to deter valid claims. Such a penalty might be in the form of attorney's fees of employees who successfully challenge lopsided agreements. Other, better options include permitting employees to use lopsided agreements both as a justification for, and as evidence supporting, a punitive damage award in the underlying employment claim, or recognizing a separate cause of action (similar to retaliation) against employers for attempting to interfere with the enforcement of employees' statutory rights.
Part II of this Article briefly describes the development of employment arbitration. Part III examines the empirical evidence concerning employment arbitration. Part IV critically presents the arguments made in favor of employment arbitration. Part V critically presents the arguments made against it. Part VI concludes.
About the Author
Richard A. Bales. Professor of Law, Northern Kentucky University, Salmon P. Chase College of Law.
Citation
81 Tul. L. Rev. 331 (2006)