ADR agreements are not always enforceable
Arbitration agreement should be explicit and clear
By Scott A. Weiss, Esq., and Pamela H.L. Weiss, Esq.,
Principals in Weiss & Weiss LLC in Fairfield Weissnweiss@earthlink.net
Whether you deal with individual employees or with a union and its members
through collective-bargaining agreements, employment disputes are inevitable.
Clearly written and understandable employment policies serve as your
first-line defense against being embroiled in a lawsuit with an employee.
The second line of defense is having an agreement to arbitrate employment
disputes.
Arbitration, also called alternative dispute resolution (ADR), is becoming
the preferred way to resolve employment disputes. Typically arbitration
takes less time and is more informal than litigation and, as a result,
is less costly.
The courts, however, have had difficulty grappling with some issues
related to arbitration of employment disputes, particularly in regard
to an employee’s waiver of the right to sue in an arbitration agreement.
Some arbitration agreements have been ruled unenforceable, and the employees
in these cases have been allowed to sue their employer.
Support for arbitration
Federal and state courts have subscribed to the wisdom of arbitration
and provide for alternative dispute resolution in their practice rules.
Indeed, both Congress, in at least one federal statute relating to
discrimination of disabled employees (the Americans with Disabilities
Act, or ADA) and the U.S. Equal Employment Opportunity Commission encourage
alternative dispute resolution of employment discrimination claims.
Labor unions and employers for some time now have negotiated and included
in their collective-bargaining agreements arbitration clauses to deal
with employment disputes arising out of those agreements. Generally,
collectively bargained arbitration clauses are very broad and apply to
any dispute. Consequently there is a recognized federal policy favoring
arbitration. Courts presume all disputes under a general arbitration
clause are to be arbitrated, and generally defer to binding arbitration
as long as there exists an enforceable agreement to arbitrate.
What constitutes effective waiver of right to sue?
In one case, Alexander vs. Gardner-Denver Co., the U.S. Supreme Court
decided for the first time that a union could not waive an employee’s
statutory right to sue under Title VII of the Civil Rights Act. The
court therefore said the employee could pursue his employment discrimination
claims in federal court, despite the prior arbitration of his wrongful-discharge
claim.
In a later case, Gilmer vs. Interstate/Johnson Lane Corp., the Supreme
Court narrowed the application of its decision in the Alexander case.
The court decided an employee in a nonunion setting who had individually
agreed to waive his right to sue could be compelled to arbitrate his
age-discrimination claim.
What constituted an effective waiver of an employee’s statutory
right to sue for employment discrimination had not been determined until
the Supreme Court decided another case, Wright vs. Universal Maritime
Service Corp. In this case, the Supreme Court permitted a union employee
to pursue his ADA claims in federal court, despite the existence of a
broad collectively bargained arbitration clause.
The Supreme Court recognized the seeming contradiction between the Alexander
decision, which did not permit a broad and general waiver of the statutory
right to sue by a union on the employee’s behalf, and the Gilmer
decision, which recognized an individual employee’s right to waive
the statutory right. In the Wright case, the Supreme Court refused to
permit waiver of a right to sue in a collectively bargained arbitration
clause unless the waiver was explicitly stated and was clear and unmistakable.
Unfortunately, the court did not deal with the question of whether such
a waiver is enforceable.
However, lower federal appellate courts, including the one for the Second
Circuit (which covers Connecticut), have held that a waiver is sufficiently
explicit and clear and unmistakable if: (1) the employee specifically
agrees to submit to an arbitrator all federal claims arising out of his
or her employment; and (2) the collective-bargaining agreement lists
the statutes by name and citation, and the arbitration clause specifically
states that the employer will comply with those statutes and with the
terms of the arbitration clause.
What you should do
In light of the above cases, the importance of careful drafting of arbitration
agreements cannot be emphasized enough. Review with your counsel the
type of disputes to be arbitrated and the type of agreement to be provided.
An arbitration agreement, whether contained in a collective-bargaining
agreement or provided as part of an individual initial employment offer,
should be clear and written in plain language.
Some courts believe that a mutual promise to arbitrate certain claims
provides enough consideration to support an agreement to arbitrate. But
at least one Connecticut state court has said an arbitration policy that
was offered as a modification of the employment agreement, but was optional
and not agreed to by the employee, was unenforceable. In Connecticut,
a personnel policy manual may be considered an implied employment agreement.
The mere distribution of an arbitration policy will not modify an existing
employment agreement. Some consideration must be provided that was not
part of the initial employment agreement.
An arbitration agreement should clearly specify the claims, statutes
(with legal references) and individuals covered. Under Connecticut General
Statutes, Section 31-51bb, an employee may sue even though an arbitration
agreement exists. Seek a clear and unmistakable waiver of this section.
In a nonunion setting, make the arbitration agreement a separate document.
In a union setting, make it a separate section in the collective-bargaining
agreement. This will help show that the parties have an intent to arbitrate.
Also include a commitment to abide by applicable federal and state employment
discrimination laws, and incorporate not only in the arbitration clause
the arbitration of disputes arising out of the employment relationship
(particularly the statutes listed in the arbitration agreement) but also
the arbitration of the interpretation of the agreement itself.
This is, of course, not an all-inclusive list.
However, the cost savings and benefits of a carefully drafted agreement
to arbitrate employment disputes should outweigh the high cost of litigating
these disputes. For an employer seeking to protect the company’s
profit margin as well as the company itself, arbitration is a clear winner.
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