Earlier this month the United States Supreme Court decided to hear three cases which will resolve the split between various Courts of Appeals (discussed in our prior post here) as to whether individual arbitration agreements barring class arbitration actions in employment-related matters are enforceable. While the Court held in 2011 that the Federal Arbitration Act would allow companies to avoid consumer class actions by insisting upon individual arbitrations in their contracts, AT&T Mobility v. Concepcion, workers have contended that employment contracts are different. They have successfully argued that the National Labor Relations Act prohibits class waivers since it would impinge upon worker’s rights to engage in “concerted activities”. The Seventh Circuit Court of Appeals accepted such an argument in Epic Systems Corp. v. Lewis (discussed in our prior post here), and the Ninth Circuit accepted such an argument in Ernst and Young v. Morris. The Fifth Circuit Court of Appeals rejected the same argument in National Labor Relations Board v. Murphy Oil U.S.A. Continue Reading Mandatory Employee Arbitration Split To Be Heard By Supreme Court
Normally, by the time an issue has been processed through the various steps of the grievance procedure, both parties know what the facts and relevant documents are prior to the arbitration. But sometimes that process breaks down and the parties fail to fully develop the factual foundation prior to the arbitration hearing. Then the union may come knocking at your door requesting information. Sometimes these information requests are short and to the point, and some of them, quite frankly, are fishing expeditions.
If they are short and to the point, and it is material that the company is going to use as part of their case in chief, I have no problem sharing that information with the union prior to the arbitration. Indeed, sometimes, the sharing of that information even leads to settlement discussions. But if the request looks more like a fishing expedition, I am more likely to dig in my heels. And while the union may quote the National Labor Relations Act as authority for them obtaining such information, the Board has made it clear that the NLRA is not a mechanism for pre-arbitration discovery. That being said, I also realize that an arbitrator does not like, nor should the company appear to be, playing hide the ball regarding relevant facts. Hence the first thing I do is normally contact the union representative and find out what they really need in the way of information and try to reach a compromise resolution. At least at that point the company will appear reasonable in front of the arbitrator if the matter ultimately is not resolved by the time of hearing. I also make it clear, and establish in writing, that just because the company is providing the information in this particular instance does not mean that they are going to provide it in the future in a similar context. And while I realize there are certain statutory provisions in the law that provide for a subpoena process, such as the Missouri Arbitration Act, unions almost uniformly fail to utilize those provisions, or frankly, blotch the procedures and requirements under the statute in attempting to obtain the information.
Bottom line, just be practical about the matter. There is no reason to give away the farm, but there is also no reason to appear difficult and come off as the “bad guy” in front of the arbitrator. There are usually ways of coming to an appropriate and reasonable resolution to such information requests so long as you follow the guidelines as set forth above.
I am commonly asked what I believe is the most important issue when it comes to arbitration. For me the answer is always the same, whether we are talking about a labor arbitration, a construction dispute, or any other arbitration. The most important issue in any arbitration is the selection of the arbitrator. There are a variety of on-line resources to obtain information as to those arbitrators that are part of any panel selection process. And whatever the selection process is, make sure that it is for a limited geographic scope. Dealing with an arbitrator which you, or others who you trust, have used in the past is a significant advantage over dealing with an arbitrator you may never see again. So unless there is some overwhelming need to have a more than regional scope for selection of an arbitrator, keep it local. Once you receive the panel, again, do as much background review regarding prior decisions and others’ experiences with the selected arbitrators in similar disputes. Quite frankly, the attorney you select to assist you in the arbitration process should know the backgrounds of the vast majority, if not all, of the arbitrators on the panel.
The second most important item in any arbitration is framing the issue. An appeal is next to impossible in most arbitrations. The most likely source of an appeal will be where the arbitrator exceeds his or her authority. Hence, establishing the basis of the arbitrator’s authority should be done with a great deal of preparation. Keep the issues specific and focused. Included within the framing of the issue is the remedial aspects of the case, if a finding of fault is established during arbitration. So it is also important to limit the power and authority of the arbitrator regarding any remedial aspects of an arbitration award. Finally, while, normally, the framing of the issue is established on the record during any arbitration, in the absence of a court reporter, I strongly suggest that it be stipulated in writing and made a part of the record in that fashion.
So be wise in your selection of the arbitrator. But regardless of the ultimate outcome in that process, make sure you do not give the arbitrator too much authority that can result in a disastrous outcome if the issues are not framed in a limited fashion.
Although ADR programs have been in existence for many years, given the recent green light by the Supreme Court regarding the use of arbitration, its application is being reassessed and applied by a number of entities in an effort to control the overwhelming cost of litigation, both in terms of the process and the outcome. And while, at one time, I was not a strong advocate of an internal ADR program, I now believe that they are a better way of handling disputes of many kinds versus using the court system.
Pros For Using Arbitration
The pros have been around for a long time in terms of why arbitration is found to be a favorable forum including the speed of the process, the privacy of the process, and the cost of the process. Those are usually the primary drivers for utilizing arbitration over the standard litigation process. What has become even more important, due to the recent rash of class actions, is the ability to restrict arbitrations to be single-claim processing versus class or collective actions. While the NLRB may think otherwise, the Courts of Appeal have now made it clear that they do not embrace the Board’s position regarding the unlawful nature of a class-action waiver in arbitration agreements. For certain companies who are more subject to class-action litigation, be it wage and hour or product claims or security breaches, this restriction on using a class methodology can be of tremendous assistance in limiting the costs associated with class type claims.
Cons Regarding Arbitration
The biggest con, from my perspective, has been the inability to utilize, in most cases, a summary judgment process in an arbitration setting. AAA and other resources have now made that more of a possibility, be it still an awkward one for the ADR process compared to normal litigation within the court system. On the other hand, given the current state of employment law in Missouri summary judgment is not likely, if not impossible, in the state courts, where the bulk of the litigation in employment matters takes place. So if your focus is to eliminate employment litigation, this is less of a concern at this point. The other major drawback to arbitration is that it is extremely difficult to have any sort of appellate review of an arbitration decision, given the standard of review established regarding such matters. On the other hand, the Eighth Circuit Court of Appeals is a fairly conservative court, so there is some value in maintaining claims within the federal judiciary system.
As in every situation, all the facts have to be weighed to fit the individual needs of every entity who is assessing the pros and cons of using an ADR process in lieu of the standard court proceedings. There are certainly reasons on both sides to utilize either process, it is just simply a matter of weighing the options and selecting a process. Obviously seeking counsel with experience in this area is key in making any such determination.
The acting general counsel for the National Labor Relations Board (NLRB), Lafe Solomon, has addressed a number of workplace topics, including social media policies, at-will employment statements and class action waivers in arbitration agreements. In addition, a new NLRB webpage describes the rights of employees, even if they are not in a union. Both of these activities demonstrate that the labor watchdogs are not taking a summer vacation – and neither should diligent employers. Social Media Policies On June 11, 2012, Solomon said approximately 100 social media-related unfair labor practice charges were pending at the NLRB. This should not be surprising news for anyone following the agency’s activity over the past year. Since August 2011, the NLRB has issued three guidance memoranda on the issue. In these memoranda, the acting general counsel explains what social media actions are protected by the National Labor Relations Act (the Act) and what types of employer policies on social media violate the Act. Notably, Solomon pointed out that his most recent memorandum (issued May 30, 2012) contained the full text of an approved social media policy and provided guidance for employers struggling to develop guidelines that would withstand a challenge under the Act. At-Will Employment Statements Solomon also talked about employers’ use of at-will disclaimers in employee handbooks. Specifically, he discussed a controversial complaint issued earlier this year by the NLRB in Phoenix, Ariz. The complaint alleged that a number of an employer’s policies were unlawful, including an at-will statement similar to those used by employers nationwide. Solomon explained that he did not approve of this complaint before it was issued, but rather became aware of it later. He stated that, in his view, an employer would not violate the Act if the employer simply told its employees that they were employed at-will. He suggested that it would also not be unlawful for an employer to tell its employees that the at-will nature of their employment cannot be changed by an oral statement alone. Solomon explained that this particular employer’s at-will statement went too far because it implied that unionization would not change an employee’s at-will status. Many employers agree to “just cause” provisions in collective bargaining agreements with unions, which alter the at-will status of employment. For this reason, Solomon said, the employer at issue in the Arizona case was in potential violation of the Act. Solomon said the case had been settled, so the NLRB’s theory would not be further tested at this point. Class Action Waivers Finally, Solomon addressed the recent conflict between the NLRB’s decision in D.R. Horton, which held that an employer’s arbitration agreement violates the Act when it requires employees to waive the right to arbitrate as a class, and the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion, where the court held that the Federal Arbitration Act authorizes precisely such waivers. Solomon stated that he saw no conflict between the decisions because, in his view, the Act pre-empts the Federal Arbitration Act. He did acknowledge, however, that most federal courts considering the issue disagreed, holding instead that Concepcion overrode D.R. Horton. What This Means to You Recent NLRB statements regarding employers’ social media policies, at-will employment disclaimers and class action waivers should serve as a reminder to employers who have not updated their policies in recent years that such updates may now be warranted. At a minimum, employers are encouraged to review their social media policies and ensure that they are narrowly tailored to the employer’s business needs and corporate culture. At-will statements must not be overly broad or imply that unionization would be futile for employees. Other policies should also be reviewed with an eye toward employees’ rights under the Act. This way, employers may be able to avoid unfair labor practice charges alleging that the employer is impinging upon employee rights.