I.            INTRODUCTION

                        As economic analysts have reported that the economy may be headed toward a recession, many employers are taking cost‑saving measures designed to increase operational efficiency.  Perhaps the most widely utilized method of reducing labor costs is the reduction in force, or “RIF.”   However, if not carefully planned in advance, RIFs can result in substantial liability which may offset any initial savings the employer achieves through the reduction itself.  Disputes arising in the context of workforce reductions present numerous labor law issues and challenges for employers, as well as claims managers and underwriters charged with EPL coverages.  Nonetheless, with proper planning and advice, employment claims in the wake of upcoming layoffs can be either avoided, or managed appropriately. 

            A.            Recent Increase In Number Of Layoffs

            The number of layoffs in recent months has increased significantly – a sobering development likely to continue for the near future at the very least.  New claims filed with state agencies for unemployment insurance benefits climbed by 18,000 to a total of 383,000 during the week ending March 31, 2001, the highest level since July 1998.  In addition, the Bureau of Labor Statistics reported on May 17, 2001 that the number of mass layoffs lasting at least 31 days totaled 1,664 in the first quarter of 2001 and resulted in job loss for 305,227 workers, as compared to only 208,082 in the first quarter of 1998.  These numbers represent the highest totals found by the agency since it commenced tallying such statistics in 1995.  Sixteen percent of these mass layoffs involved the permanent closure of worksites, with the greatest number occurring in general merchandising stores.  Of the 1,664 mass layoffs occurring in the first quarter of this year, 26 involved the termination of 1,000 or more employees.

            B.            Alternatives To Layoffs May Reduce The Risk Of Claims

                        Although employers are capable of realizing short‑term savings through RIFs, large layoffs can cause companies to incur hidden costs.  For example, economically-driven RlFs may require the involuntary termination of good workers.  Such adverse employment actions impact negatively on morale, affecting both the employees who leave the company and those who remain.  In addition, large scale terminations can eliminate disproportionate numbers of older, female and minority employees. This creates the potential for class action and individual wrongful discharge lawsuits.  In the absence of proper documentation, an employer may find it difficult to convince a court, administrative agency or other third party of the true reasons for its actions.

Therefore, before planning a reduction in force, employers should consider whether other options are available, including:  (1) hiring freezes; (2) wage freezes; (3) postponement of wage increases; (4) reducing fringe benefits, including employee sharing of insurance premiums, increased insurance deductibles and limited benefit eligibility for newer employees;  (5) work furloughs;  (6) reducing work hours with proportionate pay cuts;  (7) assessing expected job attrition; (8) allowing affected employees to transfer to other vacant positions within the organization; (9) job sharing; (10) terminating employees with substantial performance problems; (11) terminating recent hires within their introductory periods; and (12)  discontinuing the use of temporary and part-time employees and redistributing their work.  Some employers look to early retirement programs, while others ask for volunteers by offering enhanced severance benefits.  While less severe than involuntary layoffs, these measures still require sensitivity to the manner in which they are communicated and the effect on employee morale. Explaining the company’s financial position can enlist employee support rather than resentment.  Management should seek a team approach to problem solving and increasing productivity, without making unrealistic promises of job security.

C.            When Layoffs Are Unavoidable, Proper Planning May Reduce Risk Of             Employment Disputes

                        Once a determination is made that a reduction is necessary, the task generally falls to operations, human resources and legal counsel to devise a plan which minimizes the risks of litigation.   To be effective, a reduction in force requires advance planning. The following outline summarizes some of the steps that should be considered before any adverse employment actions are taken:

                        1.            Planning the RIF.

                                    a.            Document the financial conditions necessitating the RIF.

b. Identify the goals of the staff reduction, in terms of labor costs to be eliminated and/or the number of employees by which the organization is overstaffed.

c. Identify the job functions and/or skills that will be essential to successful operations after the RIF.

d. Eliminate and/or consolidate unnecessary jobs.

e. Set a timetable for carrying out the RIF. (Unless business conditions require a series of reductions, attempt to act quickly and decisively in an effort to minimize morale problems.)

f. Be careful of cases where an employee can show that he was laid off close to the time he would have qualified for a benefit (e.g., pension vesting rights, retirement eligibility).  Even if technically lawful, these cases can appear so inequitable that a judge might stretch the law.

g. Try not to use a layoff as a substitute for terminating an employee based upon poor performance.

h. Check state laws regarding:  payment of wages, insurance benefit continuation, severance benefits, letters of recommendation, personnel record access, and the like.  Many states have specific requirements applicable to involuntary terminations.

i. Investigate whether the layoff will trigger vesting in pension or benefit plans for employees laid off.  Also determine whether the layoff is a partial termination of a pension or benefit plan, requiring a reportable event under ERISA.

j. Check to be sure that the terminations do not constitute withdrawal from a multi-employer pension plan, which can result in substantial liability.

k. Avoid the use of form letters when denying benefits to benefit plan participants.

l. Deliver news of layoff decision very carefully to the employee affected.  Inappropriate or poorly communicated notification can result in claims of emotional distress.

m. Be prepared when notifying employees about a layoff; have answers ready for potential inquiries and avoid the appearance that the decision was poorly or hastily made.

n. Consider the timing of the layoffs under the federal plant closing law (“WARN”) or under applicable state laws (see below).

o. Determine what notices are required under ERISA (e.g., Summary Annual Reports, Summary Plan Descriptions) and ensure that the employees receive all notices required.

p. Assess limitations and/or liabilities created by collective bargaining agreements, employment contracts, and the like.

q. Establish eligibility for severance benefits very specifically, and be wary of giving extra credits for employees age 40 or older, since such treatment can violate state discrimination laws; and do not preclude retiring employees from severance pay eligibility.

r. Determine whether a de facto severance pay plan already exists for employees involuntarily terminated; such plans may require compliance with ERISA reporting requirements and may already bind the employer to provide the benefit to all affected employees.

s. Avoid discriminatory transfer policies.  Workers should have the same transfer opportunities regardless of age, or other protected categories.

t. Do not use age as a distinction in early retirement benefits provided as a result of a workforce reduction.  For example, do not offer different benefits to employees under age 60 than those age 60 or older.

u. Do not make layoff decisions solely on the basis of payroll dollars saved; this could be deemed age discrimination.

                        2.            Making key policy decisions – – how to select among employees.

                                    a.            By length of service/seniority;

                                    b.            By identifying and eliminating unnecessary job classifications;

c. By classes of employees, e.g., eliminating all temporary, part-time or contract workers initially, and

d. By strict use of pre-existing job appraisal data.

i. Initially select employees who have been disciplined for severe or persistent performance problems;

ii. Thereafter, select from remaining employees by evaluating and comparing their ability to perform the essential job duties that will remain after the RIF is completed.

3. Strive for an objective comparison of employees where job qualifications and skills are considered in making reductions.

a. Consider the use of a RIF Committee;

b. Prior to implementation, selection decisions should be evaluated to see whether individuals in protected classes are disproportionately affected by the proposed RIF;

c. If a disparate impact exists, and cannot be justified by business necessity, alternate selections should be made; and

d. In analyzing the comparative performance of employees, emphasis should be placed on comparing the job functions and skills that will remain to be performed after the RIF is completed.

i. Wherever possible, performance comparisons should be made on the basis of ratings given on prior performance appraisals;

ii. New performance appraisals should be conducted for any employee who has not been evaluated within a reasonable period of time preceding the RIF.

4. Prior to implementing a RIF, factors militating against the selection of certain employees should be considered.

a. Can employees be transferred into existing vacancies?

b. Is special high-level management review warranted for certain highly-paid or long-term employees?

c. Are older, minority or female employees disproportionately affected by the company’s initial selection procedures?

i. If so, can the selection of these individuals be justified by business necessity?

ii. If not, alternative selections of individuals outside such protected classifications should be considered.

5. Employers can attempt to limit their potential liability by obtaining general releases from employees affected by a RIF, in return for enhanced severance benefits or other valuable consideration.

a.                   However, under the Older Workers’ Benefit Protection Act (“OWBPA”), many procedural requirements must be satisfied before an employee’s release or waiver of federal age discrimination claims will be considered enforceable.

b.                  Releases waiving claims or rights under the federal Age Discrimination in Employment Act (“ADEA”) must be knowingly and voluntarily executed.

i. The waiver must be written in easily understandable terms.

ii. The waiver must specifically refer to rights and claims existing under the ADEA.

iii. The waiver cannot extend to rights or claims that may arise after the date the release is executed.

iv. The consideration offered in return for the waiver must be unrelated and in addition to whatever the individual is entitled to upon termination under existing company policies. (e.g., If company policy provides for the payment of accrued but unused vacation days upon termination, such sums are not additional consideration capable of supporting a waiver of ADEA rights and claims.)

v. The individual must be advised in writing of his or her right to consult with legal counsel prior to executing the release.

c.                   If the individual considering the waiver has not filed any administrative charges of age discrimination with the EEOC, or a lawsuit alleging a violation of the ADEA, the following notice requirements must be observed:

i. The individual must be given at least 45 days to consider the release. (Note: In individual termination situations where no EEOC charge or ADEA lawsuit has been filed, the employee must be allowed to consider the release for 21 days, and afforded an additional 7 days after execution to revoke the agreement if desired.)

ii. The company must notify the individual, in easily understandable written terms, of any eligibility requirements for participating in the employment termination program and all time limits applicable to the program.

iii. The individual must also be informed, in easily understandable written terms, of the job titles and ages of all individuals who are eligible or being selected for the termination program, and the ages of all individuals in the same job classification or organizational unit who are ineligible or not being selected for the program.

d.                  If the individual has filed an age discrimination charge with the EEOC, or a lawsuit alleging a violation of the ADEA, the company must provide him or her with a “reasonable” period of time to consider the execution of a waiver of ADEA rights and claims.

e.                   An individual cannot waive his or her right to file a discrimination charge with the EEOC, or to participate in an EEOC investigation.

6. Wherever possible, outplacement services should be offered to assist displaced individuals in obtaining subsequent employment.

7. Employees affected by a staff reduction should be advised of the RIF in as professional and supportive a manner as possible.

a. If possible, two members of management should meet with affected employees individually;

b. The communicators should be brief, direct and firm as to the company’s decision;

c. The communicators should be able to briefly explain the basis for the decision, if asked;

d. The communicators should also explain:

i. Recall/rehire rights, if any;

ii. Severance benefits (if any), health insurance conversion rights and other monetary issues; and

iii. Outplacement or other transitional services being offered, if any.

e. The communicators should be prepared to cope with employee shock, surprise and inability to absorb the information being imparted.

8. After the implementation of a RIF, remaining employees must be enlisted as partners committed to future growth.

a. Often, RlFs are not isolated events. Business conditions may require a series of RlFs before budgetary or manpower goals are satisfied;

b. To the extent possible, consecutive RIFs should be scheduled in close proximity to each other;

c. Remaining employees should be provided with prompt and accurate information about the desired goals and anticipated timetables associated with the RlF(s), and

d. If possible, remaining employees can be provided with modest economic, or non-economic incentives for increased productivity.

9. Workforce reductions provide unique opportunities for reorganizing and streamlining operations.

a. To maximize the cost savings effected through staff reductions, existing workflows and/or operating procedures should be redesigned to improve efficiency and to eliminate the duplication of effort and expense.

i. Cross-training allows fewer individuals to perform a greater number of job functions;

ii. Reporting relationships can be restructured to avoid unnecessary layers of supervision or management.

b. Existing business practices should also be re-evaluated with an eye toward reducing hidden costs.

i. Travel and entertainment expenses and/or budgets can be scaled back;

ii. Recruitment efforts and expenses can be curtailed if not eliminated.  Wherever possible, post-RIF job vacancies which occur should be filled by transferring or promoting qualified individuals from within the company.

D.            Notice Requirements Under The Worker Adjustment And Retraining             Notification Act

                        The number of employees to be laid off also may trigger the implications of the Worker Adjustment and Retraining Notification Act (“WARN”), 29 U.S.C. Sections 2101-2109, or possibly a state plant closing statute.  The following outline summarizes the general requirements of the WARN act:

                        1.            WARN applies to employers that have, nationwide:

                                    a.            100 or more employees (excluding part‑timers); or

                                    b.            100 or more employees (including part‑timers) whose total weekly                                                             work hours (excluding overtime) are at least 4,000 hours per week.

                        2.            WARN requires an employer to give 60 days written notice, as described                                         by the             Act and Department of Labor regulations, of a “plant closing” or                                             “mass layoff” to:

a. All affected employees (including supervisors), OR if the employees are represented by a labor organization, the international body of the union; AND

b. The State dislocated workers unit and the chief elected official of the local governmental unit where the affected facility is located.

                        3.            A “plant closing” is defined as:

a. A permanent or temporary shutdown of a single site of employment, or of one or more facilities or operating units within a single site of employment; IF

b. The shutdown results in an employment loss at the single site of employment during any 30‑day period (this period is extended by WARN and the Department of Labor Regulations to 90 days) for 50 or more employees (excluding any part‑timers and employees who have not suffered an employment loss);

c. An “employment loss” is defined as:

i. An employment termination, other than a discharge for cause, voluntary departure, or retirement;

ii. A layoff exceeding 6 months; OR

iii. A reduction in an individual’s working hours of more than 50% during each month of any 6‑month period.

4. A “mass layoff” is defined as a reduction in workforce which is not the result of a plant closing; AND

a. Which results in an employment loss at a single site of employment during any 30‑day period (this period is extended by WARN and the Department of Labor Regulations to 90 days), for at least 50 employees (excluding part‑timers and employees who have not suffered an employment loss), if they comprise at least one‑third of the workforce at the single site of employment; OR

b. Which results in an employment loss at a single site of employment during any 30‑day period (this period is extended by WARN and the Department of Labor Regulations to 90 days), for at least 500 employees (excluding part‑timers and employees who have not suffered an employment loss).

5. The Act provides limited exceptions which may permit employers to provide less than 60 days notice of a plant closing or mass layoff if the failure to provide the requisite 60 days notice is due to:

                        a.            Unforeseeable business circumstances;

                        b.            A faltering company (in plant closing situations only); OR

                        c.            A natural disaster.

            6.            State and local notice requirements

                                    The requirements of WARN supplement those contained in personnel    policies, employment contracts or any other statute. States that have      enacted statutes which may impact on plant closings or relocations         include: Hawaii, Maine, Maryland, Massachusetts, Michigan, Oregon,   South   Carolina, Tennessee and Wisconsin. In addition, some cities and municipalities have enacted plant closing ordinances.

I.            CONCLUSION

              Unfortunately, it appears that the business community’s recent wave of workforce reductions will continue through at least the second and third quarters of 2001.  However, a wide range of options exist for employers who wish to reduce labor costs without sacrificing operational efficiency.  If the option selected is a reduction in force, significant litigation costs can be avoided with proper advance planning and legal advice.

H:\DuffD\layoffs 3.21.01.doc



Copyright © 2001 Jacquelin F. Drucker, Esq.


A. Introduction

Little more than a decade ago, any analysis of arbitration in the workplace would have involved a discussion largely limited to arbitration which occurs under collective bargaining agreements. In late 1991, however, attention focused on an emerging form of workplace arbitration which was expected to rapidly expand after the United States Supreme Court issued its decision in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (5/13/91). Throughout the 1990s, debate raged as to whether an employer could require an employee, as a condition of employment, to agree to arbitrate statutory claims. Now, ten years later, after most of the U. S. Courts of Appeals, including the maverick Ninth Circuit, have opined on the matter, the Supreme Court in Circuit City Stores, Inc. v. Adams, 149 L. Ed.2d 234, 121 S. Ct. 1302 (3/21/01), seems to have resolved the preliminary question and to have endorsed the enforceability of employer-imposed plans. The analysis thus shifts from the question of whether such arbitration will occur to how it may most effectively be developed.

This shift sets the stage for a juxtaposed examination of the two substantially different forms of workplace arbitration, each of which occupies a different level of evolutionary advancement. Labor arbitration is a sturdy, effective species that emerged after a substantial period of rigorous development and consideration. Employment arbitration, by contrast, is the upstart, a newer species of arbitration which remains subject to intense scrutiny and skepticism and for which the defining characteristics still are taking shape. The two species are not competing for the same niche, and their functions are significantly different. Labor arbitration traditionally, but perhaps less so today, was an alternative to labor strife and an extension of bargaining, while employment arbitration, like the broader concept of commercial arbitration, is an alternative to litigation. This paper, however, posits the theory that both forms might benefit from comparison of one with the other, which should lead to identification of those aspects in which one process would profit by emulating the other as well as those aspects in which emulation might be illogical or would impair the process.

Labor arbitration, a highly evolved and widely respected process, is preferred for resolution of disputes under collective bargaining agreements and is accorded substantial deference by the courts. While there have been and continue to be periodic causes for alarm about the well-being of labor arbitration, recent decisions of the United States Supreme Court solidly have reaffirmed labor arbitration’s vaunted status. Employment arbitration, in its popular incarnation regarding statutory claims, is a much newer process which poses a variety of procedural and substantive concerns and uncertainties. As the dust settles from the debate of the 1990s, counsel, parties, and arbitrators should turn their attention to making this species of arbitration an efficient and effective means of providing employees with a forum through which they will have the opportunity to vindicate their statutory claims. In this effort, the process of employment arbitration might benefit if it were to emulate its successful predecessor, labor arbitration, in certain of the ways that have brought the predecessor widespread respect. In other aspects, however, it is imperative that the distinctions between the two be strongly maintained.

By the same token, employment arbitration is developing some attributes which, if adopted within labor arbitration (if that older and stronger species were receptive), could strengthen that process. Such comparative analysis may spark critical examination of aspects of labor arbitration that have fallen into disrepair or may give rise to reconsideration of matters which are done a certain way for no better reason than that they always have been done that way. Even if comparative discussion leads to the conclusion that there is nothing one process might learn or borrow from the other, the discussion at a minimum provides a context in which to highlight the distinctions between the two common forms of workplace arbitration and to examine productively the procedural concerns regarding each. In order to frame the discussion appropriately, however, the categories must be defined.

B. Definitions

For purposes of this paper, the term “employment arbitration” refers to the arbitration of disputes which arise from employment relationships and are submitted to the arbitral forum in accordance with agreements which arise in one of two ways: they either are contained in individually negotiated employment contracts or are set forth in employer-promulgated plans to which employees must agree as a condition of employment (often referred to as “mandatory pre-dispute arbitration agreements”). While grouped together under the category of “employment arbitration” and often governed by the same arbitration rules, (1) these two types of employment arbitration cases differ in some significant ways. Employment-contract arbitrations often involve executive-level personnel who had the opportunity to engage in detailed negotiations of all terms of the employment relationship, including the arbitration clause. By contrast, employer-promulgated plans seldom are the product of negotiation and, rather, are agreements which employees are required to sign, without modification, if they wish to secure (or, in some cases, to continue) employment. Mere inequality of bargaining power does not invalidate a contractual commitment to arbitrate, but some courts apply a heightened level of scrutiny to such agreements, looking to see if the employee knowingly waived the right to have access to the courts. Other courts (2)are reluctant to do so, even when statutory claims are at issue, because the contract-law principles which govern an agreement to arbitrate do not release a person from agreed obligations merely because he failed to take the necessary steps to educate himself regarding the content of the agreement being signed. (3)

In addition, disputes under individual employment contracts frequently involve only contract claims, whereas disputes under employer-promulgated plans usually involve statutory claims, most notably allegations of discrimination in violation of Title VII, the ADEA, or the ADA. In fact, it was the distinction between the arbitration of employees’ statutory causes of action as opposed to contract claims that the U. S. Supreme Court addressed in Gilmer, from which most of the decade-long debate over and special considerations regarding employer-promulgated plans have emanated.(4) Thus, where useful for purposes of this paper, comparisons and contrasts will be drawn among three categories — labor arbitration, employment-contract arbitration, and employer-promulgated-plan arbitration — rather than merely between labor arbitration and the less-differentiated category of employment arbitration.

With regard to “labor arbitration,” the term in this context shall relate to arbitration of grievances arising under collective bargaining agreements. As such, the matters in dispute may be assumed to involve primarily issues of contract interpretation and just cause. In some instances, however, the discussion of labor arbitration also will address statutory claims which may be arbitrated under a collective bargaining agreement, subject to the principles set forth in Alexander v. Gardner-Denver Co., 415 U.S. 36, 39 L. Ed. 2d 147, 94 S. Ct. 1011 (1974), Wright v. Universal Maritime Service Corp., 552 U.S. 70, 119 S. Ct. 391, 396; 142 L. Ed. 2d 361, 159 LRRM 2769 (November 16, 1998), and its progeny in the circuits, discussed below.

C. The Purpose of the Discussion

With these definitions in place, the various comparisons of the processes may be drawn and considered. The goal in doing this is to ascertain whether points of potential improvement or perhaps stark avoidance might be identified by examining various aspects of each process in tandem with the other. Surely, even though labor arbitration enjoys a long history which has given rise to time-tested practices, traditions, and expectations, it is subject to improvement. In fact, if the arbitration of statutory protections incorporated into collective bargaining agreements were to become more commonplace (or exclusive, if Gardner-Denver were found to be passé)(5), the labor arbitration process would have to be scrutinized to determine what aspects of employment arbitration should be incorporated into the system to ensure the opportunity for full vindication of statutory rights.

In addition, the arbitration of labor grievances has taken on a more legalistic tenor in recent years. Although debate continues regarding the merits of this trend,(6) the labor arbitration community should be aware of the expectations and experiences of parties and counsel who also function in the more legalistic world of employment arbitration and litigation. Examination of emerging trends and practices in the newer post-Gilmer, post-Circuit City area of employment arbitration may provide ideas for the betterment of some aspects of the labor arbitration process. This is especially true when one considers that complacency, a byproduct of years of acceptance, often leads to sloppiness in protection and consideration of rights and foundational concepts. In this regard, consideration of the concerns and approaches developing in employment arbitration may be useful in the on-going vigilance necessary to maintain the integrity, efficacy, and acceptability of labor arbitration.

On the other hand, fundamental underlying differences in the two processes may be so significant that the value of examination may rest solely in its value as a cautionary tale. Employment arbitration is a substitute for litigation whereas labor arbitration generally is regarded as an extension of the bargaining process. Therefore, rather than examining the processes for identification of possible mutual benefits, the reverse may be true, and comparative study may flag trends of which the labor arbitration community must be wary, lest the time-honored benefits of labor arbitration be lost through increasing formalization.

Viewing the exercise from the other perspective, it is likely that the newer field of employment arbitration could be improved by a study of some aspects of labor arbitration. Labor arbitration has dealt successfully with workplace issues and dynamics and, throughout the course of half a century, has earned the respect of the judiciary and the parties. Commercial arbitration also has enjoyed a level of respect, even when dealing with statutory claims,(7) but shortcomings of the process may have led to a general sense that arbitration produces second-rate justice. Of even greater concern are the negative perceptions of and experiences with the former securities-industry arbitration system, in which a number of employment claims had been arbitrated, resulting in a widespread and highly publicized sense of skepticism about arbitration as a fair and adequate process. (8) Thus, employment arbitration, seeking to lift itself from the impressions made in the commercial and securities fora, may benefit from consideration of some of the bases for labor arbitration’s success.

In large part, of course, the status of labor arbitration stems from the recognition that labor arbitrators possess a specialized expertise in the law of the shop. Yet more is involved than the mere recognition that arbitrators have a special understanding of the workplace and the dynamics of labor relations. The process itself has evolved in a way which has fostered long-standing respect, and examination of this process may help to lay a foundation upon which employment arbitration may garner a similar, solid basis of its own. Arbitration is intended to be more streamlined and informal than court proceedings but, at the same time, it must ensure effective vindication of statutory rights. Thus, benefits may flow from a consideration of which, if any, aspects of the reasonably efficient, flexible, and workplace-sensitive labor-arbitration tradition would, should, or could profitably be carried into the arena of employment arbitration and, of course, which aspects need assiduously to be avoided. In fact, the NAA captured this potentiality in its Guidelines on Arbitration of Statutory Claims under Employer-Promulgated Systems (Adopted May 21, 1997), to wit: “the arbitrator should seek a comfortable balance between the traditional informality and efficiency of [labor] arbitration and court-like diligence in respecting and safeguarding the substantive statutory rights of parties.”

This paper is intended to provide a starting point for consideration of these comparisons. The ideas set forth herein are intended simply to generate thought, to consider whether the exercise is useful, and, if so, to begin the discussion. Before delving into comparisons, contrasts, and concerns, however, a general overview of new developments in both arenas sets the stage.

II. RECENT DEVELOPMENTS: STRONG ENDORSEMENTS OF ARBITRATION FROM TOP COURTS A. Supreme Court in Circuit City Eliminates Many But Not All Questions about Enforceability of Employer-Imposed Arbitration Agreements Of the U. S. Courts of Appeals that have considered the general enforceability of arbitration agreements to which employees, as a condition of employment, are required to agree, all except the Ninth Circuit (9) held that, if proper procedural elements are met, such agreements to arbitrate individual statutory claims will be enforceable.(10) These decisions involved application of the Federal Arbitration Act, 9 U.S.C. §1 et seq., which all circuits except the Ninth had found to be applicable to contracts of employment. In Circuit City, the Supreme Court resolved this split between the Ninth Circuit and all other Circuits and concluded that the Ninth Circuit had erred in refusing to apply the FAA to these employment cases. The Supreme Court held that the FAA’s exclusionary language must be read narrowly, with the result being that the exclusion from FAA coverage is limited to employment contracts of transportation workers.(11) To hold otherwise, reasoned the Court, would raise complexities and uncertainties regarding the enforceability of arbitration agreements in employment contracts, “call[ing] into doubt the efficacy of alternative dispute resolution procedures adopted by many of the Nation’s employers, in the process undermining the FAA’s proarbitration purposes and ‘breeding litigation from a statute that seeks to avoid it.'” Id., quoting Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995). This holding then leaves solidly intact the body of federal jurisprudence emanating from every circuit except the Ninth and reconfirms that employment arbitration enjoys the favored status which federal law extends to arbitration, even when used to resolve statutory claims. The Court in Circuit City, however, did not address directly the question of whether an employer may require employees to agree, as a condition of employment, to arbitrate all statutory claims against the employer. By its context, however, the analysis the Court used in Circuit City strongly suggests that such requirements are, as the non-Ninth circuits have held, enforceable as long as certain procedural elements are present. Indeed, the United States District Court for the Central District of California in Olivares v. Hispanic Broadcasting Corp., 2001 U. S. Dist. LEXIS 5760 (C. D. CA., 4/26/01), has held that, “in light of the Supreme Court’s pronouncement in Circuit City, the Ninth Circuit’s decision in Duffield should not preclude arbitration” of state or federal employment discrimination claims. B. Federal Courts Continue to Enforce Employer-Imposed Arbitration Plans

A recent addition to the line of United States Courts of Appeals cases upholding, at least in general concept, the enforceability of arbitration plans imposed as conditions of employment comes from the Sixth Circuit. In Haskins v. Prudential Insurance Company of America, 230 F.3d 231, 83 Fair Empl. Prac. Cas. (BNA) 1329 (6th Cir., 8/28/00), cert. denied, 121 S. Ct. 859, 69 U.S.L.W. 3479 (1/16/01), the Sixth Circuit rejected the approach which would require examination of whether the employee’s waiver of access to a judicial forum was knowing and voluntary, as required in the Ninth Circuit before Duffield, in Prudential Insurance Co. of America v. Lai, 42 F.3d 1299 (9th Cir., 1994).(12) The court also expressly rejected the analysis used by the First Circuit in Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc, 170 F.3d 1 (1st Cir., 2/24/99), a case nearly identical to Haskins, in which the employee was found not to be bound by a U-4 agreement to arbitrate because she had not been given a copy of the National Association of Securities Dealers, Inc.’s (NASD’s) rules setting forth the details of the arbitration procedures.

The Sixth Circuit applied a contract-law standard, incorporating the conclusive presumption that one who accepts a written contract knows its contents and assents to them. The court concluded that, “absent a showing of fraud, duress, mistake, or some other ground upon which a contract may be voided, a court must enforce a contractual agreement to arbitrate.” Responding to the employee’s argument that, as had been the case with the plaintiff in Rosenberg, he had not been given the NASD’s rules and therefore was never informed of the rights he would surrender by agreeing to arbitrate, the court held that “ignorance as to the terms of the U-4 Form is no defense.” To hold otherwise, said the court, would absolve parties signing such a form of all responsibility to read and understand it.

The Sixth Circuit in Haskins also rejected the plaintiff’s argument that, because he was a bargaining-unit employee covered by a collective bargaining agreement between the employer and the United Food and Commercial Workers, a requirement to arbitrate would interfere and foster tension with his collectively bargained rights. The plaintiff argued that the labor contract is the only agreement which may govern arbitration. The court, however, found that the U-4 Form gave rise to an agreement between plaintiff and the NASD, not the employing securities firm. Therefore, the court concluded that the U-4 arbitration agreement remains in effect, even though the plaintiff, in the court’s words, “has entered into a separate collective bargaining agreement.” Haskins, 2000 U.S. App. LEXIS 21757, page 6, n.2. (13)

In addition, in mid-1999, the Second Circuit joined this chorus of appellate voices, addressing the issue for the first time in Desiderio v. National Association of Securities Dealers, Inc., 191 F.3d 198 (2nd Cir., 9/22/99), cert. denied, 148 L. Ed. 2d 659, 121 S. Ct. 765 (1/8/01), and holding that the pre-dispute arbitration agreement which was part of the securities industry’s Form U-4 was enforceable with regard to Title VII claims. The case arose in a manner different from most of the challenges to the pre-dispute arbitration agreements. In Desiderio, Florida’s Suntrust Bank had extended to plaintiff an offer of employment, conditioned upon completion of the U-4 Form. The plaintiff signed the form but deleted the arbitration provision. When the NASD refused to accept the altered form and therefore would not allow the plaintiff to register, Suntrust revoked its offer of employment. The plaintiff initiated an action against the NASD, and the district court dismissed the matter on a Fed. R. Civ. P. 12(b)(6) motion.

Affirming the dismissal, the Second Circuit applied the analysis prescribed in Gilmer and found that there was no evidence that Congress in Title VII intended to preclude waiver of access to the judicial forum.(14) The court also found that the U-4 arbitration agreement was not an unconscionable contract of adhesion, for it did not present a situation in which there was an “absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” Desiderio, 191 F. 3d. at 204, quoting 8 Williston, A Treatise on the Law of Contracts, § 18:9, at 54 (Richard A. Lord ed., 4th ed. 1998). The plaintiff also had argued that her rights under the Fifth and Seventh Amendments and Article III of the United States Constitution had been violated. The court rejected these claims for lack of a sufficiently close nexus to state action.

C. Supreme Court of California Adopts Standards for Enforceable Arbitration Plans

The Supreme Court of California in 2000 resolved a spilt among the California appellate courts when it handed down its analysis of what it called “mandatory employment arbitration agreements.” In Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83, 6 P. 3rd 669 (Calif. Sup. Ct., 8/24/00), the court held as follows:

We conclude that such claims are in fact arbitrable if the arbitration permits an employee to vindicate his or her statutory rights. As explained, in order for such vindication to occur, the arbitration must meet certain minimum requirements, including neutrality of the arbitrator, the provision of adequate discovery, a written decision that will permit a limited form of judicial review, and limitations on the costs of arbitration.

Id. at 90 (emphasis in original).

Under the foregoing analysis, the court denied enforcement of the specific arbitration agreement at issue in Armendariz, a case involving claims for state-law discrimination and wrongful termination based on tort and contract theories. The court found (1) that the agreement was unconscionably unilateral in that it required the employee but not the employer to arbitrate all claims arising out of a wrongful termination and (2) that this “unconscionable one-sidedness” was compounded by a limitation on the full recovery of damages for employees while placing no such restriction on the employer.(15)

The decision in Armendariz set the stage for resolution of a number of cases which were pending on appeal from lower court judgments regarding employer-imposed arbitration agreements. In several high-profile cases, the California Supreme Court had granted petitions for review, “depublished” the lower-court decisions, and deferred further action pending consideration and disposition of Armendariz. These included Maciejewski v. Alphasystems Lab, Inc., 89 Cal. Rptr 2d 834 (Cal. Sup. Ct., 10/6/99), from the Fourth Appellate District; Ramirez v. Circuit City Stores, Inc., 94 Cal. Rptr. 2d 1, 995 P.2d 137 (Cal. Sup. Ct., 3/15/00), from the First Appellate District; and Pichly v. Nortech Waste, 89 Cal. Rptr 2d 833 (Calif. Sup. Ct., 10/6/99), from the Third Appellate District, in which the appellate court, on remand after Armendariz, compelled arbitration. Pichly v. Nortech Waste, 87 Cal. App. 4th 599 (Calif. 4th App. Dist, 3/2/01).

D. Courts of Appeals Ponder the Post-Wright Status of Gardner-Denver: Reservations Remain, Except in the Fourth Circuit

After Gilmer and, now, after Circuit City, questions remain regarding the continued vitality of the United States Supreme Court’s holding in Alexander v. Gardner-Denver Co., 415 U.S. 36, 39 L. Ed. 2d 147, 94 S. Ct. 1011 (1974), and whether the right of an individual employee to pursue statutory claims in court may be waived through a collective bargaining agreement. The United States Supreme Court in Gardner-Denver held that “an individual does not forfeit his private cause of action if he first pursues his grievance to final arbitration under the nondiscrimination clause of a collective-bargaining agreement.” Gardner-Denver, at 49. This holding was drawn into question in 1991 by Gilmer. When the Supreme Court was presented with the question in late1998 in Wright v. Universal Maritime Service Corp., 552 U.S. 70, 119 S. Ct. 391, 396; 142 L. Ed. 2d 361, 159 LRRM 2769 (November 16, 1998), however, the Court merely acknowledged the tension between Gilmer and Gardner-Denver but did not address whether, in light of Gilmer, the right of a unit employee to a judicial forum for individual statutory claims could be waived through a collective bargaining agreement. The Court held only that, if such a waiver could be made, it would have to be set forth in contract language which is clear and unmistakable.

With one exception, the United States Courts of Appeals which have addressed the issue have continued to follow Gardner-Denver, rejecting the theory that Gilmer and Wright sounded the death knell for the principles reflected in that 1971 decision.(16) The Fourth Circuit presently stands alone in holding that, after Gilmer, Gardner-Denver no longer is good law and that appropriate language in a collective bargaining agreement will result in a waiver of the right of a unit employee to a judicial forum for resolution of individual statutory employment-related claims. Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875 (4th Cir., 3/12/96), cert. denied, 519 US 980 (11/12/96), and Brown v. Trans World Airlines, 127 F.3d 337, 126 LRRM 2481 (4th Cir., 10/6/97). After Wright, the Fourth Circuit continued to adhere to this theory, but until recently it had not decided a case involving language the court found sufficient under Wright to effect a waiver of the right to a judicial forum. Carson v. Giant Foods, Inc., 175 F.3d 325 (4th Cir., 4/29/99), and Brown v. ABF Freight Systems, Inc, 183 F.3d 319 (4th Cir., 7/13/99). In Carson and Brown v. ABF Freight, however, the Fourth Circuit set the stage for such a finding by articulating two alternate ways by which the clear and unmistakable waiver required by Wright could be established, to wit: (1) an explicit submission of statutory causes to arbitration, for which the contract “must contain a clear and unmistakable provision under which the employees agree to submit to arbitration all federal causes of action arising out of their employment”; or (2) if the parties are using “broad but nonspecific language in the arbitration clause, they must include an ‘explicit incorporation of statutory antidiscrimination requirements’ elsewhere in the contract.” Carson at 16, quoting Wright. If the discrimination statutes are unmistakably part of the agreement, the Fourth Circuit held, the employees will be bound to arbitrate their federal employment claims.

Thereafter, the Fourth Circuit in Safrit v. Cone Mills Corp., 248 F.3d 306, 85 FEP 833 (4th Cir., 4/27/01), found language which it concluded fulfilled the second of the two means of achieving an effective waiver under Wright. The collective bargaining agreement in that case (involving a UNITE local) contained specific agreements by the parties not to discriminate and to abide by all the requirements of Title VII. It also provided that “unresolved grievances arising under this Section are the proper subjects for arbitration.” This combination of provisions, held the Fourth Circuit in Safrit, “indubitably” provided the clear and unmistakable waiver envisioned by Wright. Comparing the right to waive an employee’s right to a judicial forum with the right to waive the right to strike, the court noted that “the union and its members decide that the price of giving up the right to strike or the right to litigate is worth the benefits that they will receive in return.”

Taking the more common approach that Gardner-Denver is still good law, the Second Circuit in Rogers v. New York University, 220 F.3d 73, 164 LRRM 2854 (2nd Cir., 7/17/00), cert. denied, 148 L. Ed. 2d 535, 121 S. Ct. 626 (12/4/00), concluded that an individual employee’s right to a judicial forum for statutory claims (in this case, claims under the ADA, FMLA, and city and state human rights laws) may not be waived through a collective bargaining agreement.(17) In the per curiam opinion, the court held that, even if the Supreme Court’s decision in Wright were read as permitting union-negotiated waivers under certain circumstances, the language contained in the collective bargaining agreement between New York University and Local 3882, United Staff Association of NYU, NYSUT, AFT, AFL-CIO would not suffice. Applying the analysis employed by the Fourth Circuit in Carson v. Giant Foods, Inc., 175 F.3d 325 (4th Cir., 4/29/99), the court in Rogers noted that the contract did not explicitly express a waiver of the unit employees’ right to a judicial forum for individual federal statutory claims, nor did it specifically identify and incorporate anti-discrimination statutes in a manner which would make compliance a contractual commitment subject to the arbitration provision. Rogers, 220 F.3d 73, 77.

E. Twice in One Term, the Supreme Court Reaffirms the Highly Limited Scope of Judicial Review of Labor Awards

Twice in the 2000-2001 term the United States Supreme Court issued decisions underscoring the continuing significance of the Steelworkers Trilogy and the principles of arbitral finality and substantially limited judicial review it articulated more than forty years ago. Revisiting and underscoring the highly limited nature of the public policy basis for vacatur of arbitrator awards (see below), the Supreme Court in Eastern Associated Coal Corp. v. United Mine Workers of America, District 17, 531 U.S. 57, 121 S. Ct. 462, 148 L. Ed. 2d 354 (11/28/00), found that the Fourth Circuit did not err in refusing to vacate, on public policy and other grounds, an arbitration award which ordered reinstatement of a mobile equipment operator who twice had tested positive for marijuana use. The Court refocused the analysis in cases such as this by stressing that, when an arbitrator acts within the scope of the contractual authority, the courts must treat the award “as if it represented an agreement between [the employer and the union] as to the proper meaning of the contract’s words, ‘just cause,'” and that the award then becomes indistinguishable from the contract. The Court also emphasized that the question was not whether the drug use violates public policy but, rather, whether the reinstatement, which must be viewed as a contractual agreement, does. The Court stated as follows:

We agree, in principle, that courts’ authority to invoke the public policy exception is not limited solely to instances where the arbitration award itself violates positive law. Nevertheless, the public policy exception is narrow and must satisfy the principles set forth in W. R. Grace [v. Rubber Workers, 461 U. S. 757, 766 (1983)] and Misco [United Paperworkers International Union v. Misco, 484 U.S.29; 108 S. Ct. 364, 98 L. Ed. 2d 286, 56 U.S.L.W. 4011 (1987)]. (18)

The Court then went on to apply these principles and concluded that it could not find in the applicable statute, regulations, or any other legal precedent an “‘explicit,’ ‘well defined,’ dominant’ public policy to which the arbitrator’s decision ‘runs contrary.'” Id., quoting Misco and W. R. Grace.

Even more recently, the Supreme Court in a per curiam opinion in Major League Baseball Players Association v. Garvey, 2001 U.S. LEXIS 3811, 94 DLR E-5 (5/14/01), took the Ninth Circuit to task for second-guessing an arbitrator’s credibility determination and noted that the lower court had applied the concepts of limited judicial review in a way that the Court found to be “nothing short of baffling.” The Court reiterated that when the arbitrator is construing a contract and acting within the scope of his authority, even a “serious error” by that arbitrator does not justify vacatur. The Court held, “when an arbitrator resolves disputes regarding the .application of a contract, and no dishonesty is alleged, the arbitrator’s ‘improvident, even silly, factfinding’ does not provide a basis for a reviewing court to refuse to enforce the award.” Id., quoting Misco.


A legitimate question and concern in both areas of arbitration relates to the capabilities, backgrounds, experience levels, and diversity present in the pools from which arbitrators are selected. The following sections set forth some basic reflections on the composition of the pools from which arbitrators are drawn within each area.

1. Who are the arbitrators of labor cases?

By gazing about at bar association meetings, at conferences, or in the halls at AAA, one might conclude that the demographics of the pool of labor arbitrators gradually are moving away from the concentration of white men aged 60 and older. It is difficult to track such perceived movement because of the unavailability of directly comparable numbers covering an appropriate span of time, but a comparison of studies within the past two decades suggests slight but slow movement toward increased diversity but little movement toward a more youthful corps of labor arbitrators (perhaps, as will be discussed below, for good cause).

The National Academy of Arbitrators’ Research and Education Foundation recently sponsored a survey in which the National Academy of Arbitrators (NAA) and the Cornell Institute on Conflict Resolution produced a profile of the NAA’s 1998 membership and also delved into the degree to which NAA members are serving as neutrals in settings beyond labor arbitration. In assessing the findings, however, it is important to bear in mind that the study was limited to the 1998 membership of the NAA, an organization which admits only experienced arbitrators who perform no advocacy work and maintain established labor arbitration practices.(20) Thus, one might speculate that the changes in the characteristics of the NAA membership lag a number of years behind any changes in the characteristics of the entire population of active labor arbitrators, for trends and diversity which may be present in the pool of newer arbitrators will not be reflected in NAA membership until the newer arbitrators become ready for NAA membership. Nonetheless, the NAA does have within its ranks the busiest and most prominent labor arbitrators and thus its membership is reflective of the pool of arbitrators at the height of the profession who perform a substantial portion of the country’s labor arbitration. (19) In that regard, the statistics remain highly useful as a profile not only of the NAA membership but also of the country’s most active labor arbitrators.

The NAA study reports, “The average NAA member is 63 years old, has been an arbitrator for 26 years, has been a member of the Academy for 16 years, and earned 76 percent of his or her income during 1996-1998 from work as a neutral.”(21) When only full-time arbitrators are examined, the average age drops to 61. A much higher percentage of female than male arbitrators are full-time neutrals: 66.1% of women in the NAA devote themselves to neutral work on a full-time basis, while only 47.4% of the men in the NAA do. The female members also are younger, with a mean age of 56, as compared to men, who have a mean age of 64. Looking to the past, in 1982, the average age of NAA members was 59.2, and, in 1987, it was 59.8. (22) As the authors of the 1987 study observe, labor arbitrators “are elderly and may be getting more so.” (23) Given the conventional pathway and the desirable experience levels required for movement into a career in arbitration, however, it is doubtful that the average age will change significantly. Indeed, one would question whether it should, beyond efforts necessary to increase diversity. In the field of labor arbitration, there is little that may substitute for the actual, preferably in-depth, experience in labor relations or labor and employment law that arbitrators are expected to bring to the profession. Such experience usually carries a price in years.

With regard to gender and race, the study indicates that fewer than six percent of NAA members are what the study classified as “nonwhite,” and only 12% are female. The 1987 study reports that 96.4% of NAA members were male and 99.49% were “white, non-Hispanic.”(24) Thus, while some improvement might be perceived in gender distribution, the woeful under-representation of people of color does not appear to have improved. Programs such as the NYSBA Labor and Employment Law Section Arbitrator Mentoring Program may help to draw greater diversity into the profession, as will targeted efforts by providers such as AAA and FMCS.

In assessing education levels, the survey indicated that the majority of NAA members are attorneys, which is of special relevance in the discussion of employment arbitrators, below. Of all NAA members, 61.4% hold law degrees and, among those who are full-time neutrals, an even greater number — 66.5% — have law degrees. (25) Twelve and one-half percent (12.5%) have .doctorates and 26.8% have a master’s degree as the highest level of education completed. (26) The 1987 survey reports that 58.6% of NAA members had law degrees.(27)

The NAA study also examined the degree to which NAA members have moved into ADR services beyond the labor-relations field. The report indicates that 46% have arbitrated one or more non-union employment disputes, 23% have mediated one or more non-union employment disputes, and 25% have arbitrated one or more non-employment matters.(28) Some NAA members, on the other hand, are not inclined or willing to work outside of the labor relations field; seven percent indicated that they would not accept arbitrations outside union-management relations, 17% would not accept mediations of that nature, and 19.9 % would not accept non-employment arbitration cases.

2. Who are the arbitrators of employment cases?

Employment arbitrations, especially those under employer-promulgated plans, are conducted by arbitrators obtained through a variety of methods and providers. The composition of the AAA’s National Employment Dispute Resolution Panel, as one example, is reflective of the general belief that it is important for arbitrators of employment matters, especially statutory claims, to have a solid grounding in employment law and a familiarity with the litigation procedures which would apply were the matter in court. This does not mean that the arbitrator should replicate judicial proceedings, but it is essential for an employment arbitrator to appreciate the underlying legal theories, as well as the frame of reference and expectations of the parties and legal counsel who, especially on the employee’s side, may have had little exposure to arbitration.

In an effort to ensure substantive expertise, the AAA’s employment arbitration panel has a significant representation of practicing attorneys, and the full-time neutrals listed thereon have recognized substantive expertise in employment law and often have had prior experience as employment litigators. Nearly all members of this panel are attorneys.

These characteristics reflect fulfillment of the qualifications set forth in AAA NRRED Rule 11, Qualifications to Serve as Arbitrator and Rights of Parties to Disqualify Arbitrator, which provides as follows:

a. Standards of Experience and Neutrality (i) Arbitrators serving under these rules shall be experienced in the field of employment law. . . . . (iii) The roster of available arbitrators will be established on a non-discriminatory basis, diverse by gender, ethnicity, background and qualifications. (iv) The Association may, upon request of a party or upon its own initiative, supplement the list of proposed arbitrators in disputes arising out of individually negotiated employment contracts with persons from the regular Commercial Roster, to allow the Association to respond to the particular needs of the dispute. In multi-arbitrator disputes, at least one of the arbitrators shall be experienced in the field of employment law.

These considerations and practices are in stark contrast to the observations made by The Honorable Harry Edwards in Cole v. Burns International Security Services, 105 F.3d 1465 (DC Cir., 2/11/97), and reiterated more recently in his article, “Where Are We Heading with Mandatory Arbitration of Statutory Claims in Employment?,” 16 Ga. St. U. L. Rev. 293 (Winter 1999), wherein he notes questions as to “the competence of arbitrators to analyze and decide purely legal issues in connection with statutory claims.” Judge Edwards observes, “Many arbitrators are not lawyers and they have not traditionally engaged in the same kind of legal analysis performed by judges. And many arbitrators concededly do not even try to keep abreast of developments in public law.” In support of this assertion, Judge Edwards relies on statistics set forth in a now-antique study from 1976 which indicated that at least 16% of arbitrators had never read any judicial opinions involving Title VII and 40% did not read advance sheets to keep abreast of developments under Title VII. Id., 298 and n. 5. In addition to being antiquated, however, these studies relate only to labor arbitrators, not to the pool of arbitrators who handle employment claims. Moreover, even if examination is limited solely to labor arbitrators, the 25-year-old statistics cited by Judge Edwards no longer are reliable indicia of the characteristics and practices of that population.

The post-Gilmer attention on and expansion of employment arbitration has resulted in development of panels of arbitrators who possess expertise in the legal issues of the workplace, a full appreciation for the role and process of arbitration, and an understanding of the procedures which would have applied if the matter had gone to a judicial forum. See Due Process Protocol for Mediation and Arbitration of Statutory Disputes Arising out of the Employment Relationship, created by the Task Force on Alternative Dispute Resolution in Employment and adopted May 9, 1995; and AAA NRRED Rule 11, Qualifications to Serve as Arbitrator. Nearly all arbitrators on the AAA’s employment panel are attorneys, and 66.5% of full-time neutrals in the NAA are attorneys. Moreover, parties are free to specify in their agreements, plans, or requests to appointing agencies that the list from which they select their arbitrator include names of only arbitrators who also have law degrees or who have previously practiced employment law.

The efforts of providers to compile panels of arbitrators with specific substantive expertise also may help increase diversity within the pool of employment arbitrators. When movement into the profession can be accomplished in a significant way without a departure from current employment, the potential increases for a more broadly based pool. The use of practicing attorneys as neutral arbitrators, however, may come with costs and risks, which should be monitored. First, questions of disclosure and disqualification become more complex with an attorney who practices, especially if the practice is maintained with a firm. (This is discussed below.) Second, the appointing agencies and selecting parties must exercise caution to ensure that a practicing attorney will be able to make a successful transition, both inwardly and outwardly, into the role of a neutral. For some, this is more difficult than it would seem. Finally, as a related matter, when comparing labor arbitration with employment arbitration, a question that must be posed is whether the high regard in which labor arbitration has been held has been derived in part from the predominance of arbitrators who are fully neutral, engaging in no workplace advocacy of any type. As further explored below in the context of disclosure, it is not just the trust and respect of the professional community which are essential to the success of arbitration. Also essential are the trust and respect of the parties and participants themselves. A question worthy of examination is whether faith in the process is impaired by an awareness that, while today the decisionmaker is a neutral arbitrator, tomorrow he or she will be vigorously advocating on behalf of an employer or employee on the same kinds of issues. These are questions to which there may be no ready answers, but awareness and vigilance clearly are appropriate.

3. Employment-contract arbitrations and three-arbitrator panels

The AAA’s NRRED Rule 12 provides that the arbitration will be conducted by a single arbitrator unless the parties specify otherwise. Most employer-promulgated plans provide for a single arbitrator. With regard to individual employment contracts, however, it is quite common, especially in the New York City area, for arbitration clauses to provide for arbitration by a panel of three neutral arbitrators (as opposed to two party-appointed arbitrators who then select a third, neutral arbitrator). The choice to proceed with three neutral arbitrators leads to substantially .higher costs, as the parties are incurring the fees for three arbitrators at hearing.(29) The use of three neutral arbitrators also seriously compounds the complexity of scheduling and decreases the likelihood of prompt hearing dates.

B. What Are the Arbitrators’ Disclosure Obligations and Practices?

One of the grand, albeit often unspoken, advantages of arbitration is that the parties have the opportunity to choose their decisionmaker. This is a significant benefit, especially when specialized knowledge, attributes, or experience would enhance both the process itself and acceptance of the process. In addition, a party is free to identify arbitrator characteristics which, in a given case, it wishes to avoid. Such considerations in the selection process are fully appropriate and help to maximize the level of satisfaction with the process.

When selecting arbitrators, parties have access to formal and informal sources of information about the arbitrator. Among the most important of the formal sources of information is what the arbitrator says about himself or herself in the official biography maintained by the provider agency. Arbitrators in any field are required by their codes of ethics to place certain information, such as current employment, in their biographies. In addition, however, when an arbitrator learns that he or she has been selected to serve, the arbitrator has an obligation to advise the parties of any situations which might be perceived as conflicts of interest or might taint the appearance of impartiality. (30) Such disclosures are essential elements in the protection of the process; they give complete effect to the right of the parties to make a fully informed choice of decisionmaker. These general obligations and goals are the same regardless of the type of arbitration being conducted. Different codes, rules, and traditions, however, apply in labor as compared to employment arbitration, and the scope of matters subject to disclosure and the means by which the disclosures are made differ in some significant ways.

1. Labor Arbitration

With regard to disclosure obligations, labor arbitrators are bound by the Code of Professional Responsibility for Arbitrators of Labor-Management Disputes as well as principles of law, the contracts under which they are serving, and, of course, personal ethics. Rule 2 (B) of the Code provides as follows:

B. Required Disclosures

1. Before accepting an appointment, an arbitrator must disclose directly or through the administrative agency involved, any current or past managerial, representational, or consultative relationship with any company or union involved in a proceeding in which the arbitrator is being considered for appointment or has been tentatively designated to serve. Disclosure must also be made of any pertinent pecuniary interest.

a. The duty to disclose includes membership on a Board of Directors, full-time or part-time service as a representative or advocate, consultation work for a fee, current stock or bond ownership (other than mutual fund shares or appropriate trust arrangements) or any other pertinent form of managerial, financial or immediate family interest in the company or union involved.

2. When an arbitrator is serving concurrently as an advocate for or representative of other companies or unions in labor relations matters, or has done so in recent years, such activities must be disclosed before accepting appointment as an arbitrator. .

An arbitrator must disclose such activities to an administrative agency if on that agency’s active roster or seeking placement on a roster. Such disclosure then satisfies this requirement for cases handled under that agency’s referral.

a. It is not necessary to disclose names of clients or other specific details. It is necessary to indicate the general nature of the labor relations advocacy or representational work involved, whether for companies or unions or both, and a reasonable approximation of the extent of such activity.

b. An arbitrator on an administrative agency’s roster has a continuing obligation to notify the agency of any significant changes pertinent to this requirement.

c. When an administrative agency is not involved, an arbitrator must make such disclosure directly unless the arbitrator is certain that both parties to the case are fully aware of such activities.

3. An arbitrator must not permit personal relationships to affect decision-making.

Prior to acceptance of an appointment, an arbitrator must disclose to the parties or to the administrative agency involved any close personal relationship or other circumstance, in addition to those specifically mentioned earlier in this section, which might reasonably raise a question as to the arbitrator’s impartiality.

a. Arbitrators establish personal relationships with many company and union representatives, with fellow arbitrators, and with fellow members of various professional associations. There should be no attempt to be secretive about such friendships or acquaintances but disclosure is not necessary unless some feature of a particular relationship might reasonably appear to impair impartiality.

4. If the circumstances requiring disclosure are not known to the arbitrator prior to acceptance of appointment, disclosure must be made when such circumstances become known to the arbitrator.

5. The burden of disclosure rests on the arbitrator. After appropriate disclosure, the arbitrator may serve if both parties so desire. If the arbitrator believes or perceives that there is a clear conflict of interest, the arbitrator should withdraw, irrespective of the expressed desires of the parties.

In addition, the AAA’s Labor Arbitration Rules, Amended and Effective January 1, 1996, provide in Rule 17, as follows:

No person shall serve as a neutral arbitrator in any arbitration under these rules in which that person has any financial or personal interest in the result of the arbitration. Any prospective or designated neutral arbitrator shall immediately disclose any circumstance likely to affect impartiality, including any bias or financial or personal interest in the result of the arbitration. . . . Upon objection of a party to the continued service of a neutral arbitrator, the AAA, after consultation with parties and the arbitrator shall determine whether the arbitrator should be disqualified and shall inform the parties of its decision, which shall be conclusive.

In functioning under these rules, the question for the labor arbitrator often is whether a particular connection might be “likely to affect impartiality” or “might reasonably appear to impair impartiality.” While the arbitrator knows the limits of his or her ability to disregard connections, the question of appearance is more difficult to assess. There is no dispute within the labor relations community about the obligation of an arbitrator to disclose past employment by a party or counsel, regardless of how remote in time, and any financial interest, such as the ownership of stock in a corporate employer. It is in the area of personal and professional contacts, however, that some debate arises.

A general rule by which all arbitrators should function is that, if a circumstance is such that the arbitrator thinks perhaps a disclosure should be made, then he or she should make the disclosure and sleep well for having done so. The labor relations community, however, is relatively small and, in many regions, professionally interactive and congenial. With those characteristics sometimes arises a general expectation that everyone knows everyone else; it becomes absurd to make disclosures of certain professional organizational contacts, such as when an arbitrator and counsel both serve on the executive committee of a section of a bar association. In fact, the Rule 2(B)(2) of the Code, cited above, indicates that the listing by the arbitrator of certain items on the biography on file with the administering agency may be sufficient disclosure. When a direct .connection is present, however, it is advisable for the labor arbitrator to make a specific written disclosure upon selection rather than assuming that the parties or counsel have reviewed the biography.

Rule 2(B) of the Code addresses personal relationships developed through professional organizations and provides that “disclosure is not necessary unless some feature of a particular relationship might reasonably appear to impair impartiality.” A pertinent inquiry, however, is whose perception is being assessed. In view of that concern, it is better to err on the side of full, even excessive, disclosure. Arbitrators and counsel must remember that those who may be most directly affected by the proceeding (i.e., the grievant, the supervisor, the department head, etc.) usually are not part of the professional labor relations community and may not understand an arbitrator’s familiarity with counsel unless it is explained to them and they are reassured by their own representatives. Hence, disclosure by the arbitrator followed by the attorney’s discussion of the disclosure with the client will help to protect the essential appearance of fairness which engenders broad faith in the process and acceptance of its outcome.

Indeed, the Supreme Court in Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 89 S. Ct. 337, 21 L. Ed. 2d 301 (1968), advised that arbitrators should err on the side of disclosure. Although the Court was addressing financial and business relationships in the commercial context, the following passage from Commonwealth Coatings nonetheless is apt:

And it is far better that the relationship be disclosed at the outset, when the parties are free to reject the arbitrator or accept him with knowledge of the relationship and continuing faith in his objectivity, than to have the relationship come to light after the arbitration, when a suspicious or disgruntled party can seize on it as a pretext for invalidating the award.

Even taking a very broad view of disclosure in the labor context, it is unlikely that parties and arbitrators would feel that an arbitrator is obligated to disclose the number and nature of prior cases he or she has had with any of the parties or their counsel or the fact that a considerable volume of the arbitrator’s practice is derived from one of the parties or its law firm. In fact, Formal Advisory Opinion No. 22 (1991) by the NAA’s Committee on Professional Responsibility and Grievances states as follows:

Previous or current service as a neutral arbitrator for a particular employer and/or union is not a relationship requiring disclosure under the Code. Absent some personal relationship or other special circumstance mandating disclosure, such service is not a “circumstance . . . which might reasonably raise a question as to the arbitrator’s impartiality.”

By contrast, disclosures of this nature are specifically and wisely required in the employment context, as addressed in the next section. In this and other regards, then, an examination of the stricter approach taken to disclosure in employment arbitration may offer a useful perspective for revisiting practices in labor arbitration, with regard to which it has been observed that arbitrators, parties, and counsel may have become a bit “too chummy.”

2. Employment Arbitration

The arbitrator’s obligation to disclose is more specific in the employment context, at least under AAA’s NRRED, the Code of Ethics for Commercial Arbitration, and also certain state requirements. Indeed, within the employment context, because some of the participants are likely to have had minimal exposure to the process and are less familiar with the reputations of various arbitrators, full and expanded disclosure becomes a critical element of their right to make an informed choice of arbitrator and is essential to ensure post-award satisfaction with the process.

In this regard, Rule 11 of AAA’s NRRED provides as follows:

b. Standards of Disclosure by Arbitrator

Prior to accepting appointment, the prospective arbitrator shall disclose all information that might be relevant to the standards of neutrality set forth . in this Section, including but not limited to service as a neutral in any past or pending case involving any of the parties and/or their representatives or that may prevent a prompt hearing.

Under this rule, it is expected that the arbitrator will disclose all prior cases with any of the parties, their counsel, or their counsel’s law firms.

Arbitrators of employment disputes also are governed by the Code of Ethics for Arbitrators in Commercial Disputes, approved in 1977 by the AAA and a special committee of the ABA. Canon II provides, “An arbitrator should disclose any interest or relationship likely to affect impartiality or which might create an appearance of partiality or bias.” This is similar to the labor arbitrator’s obligation under the Code of Professional Responsibility for Arbitrators of Labor-Management Disputes, which requires disclosure of relationships or circumstances which “might reasonably raise a question as to the arbitrator’s impartiality.” The Code of Ethics for Arbitrators in Commercial Disputes provides greater elaboration and more specificity, however, in the following provisions:

Introductory Note

This code reflects the prevailing principle that arbitrators should disclose the existence of interests or relationships that are likely to affect their impartiality or that might reasonably create an appearance that they are biased against one party or favorable to another. These provisions of the code are intended to be applied realistically so that the burden of detailed disclosure does not become so great that it is impractical for persons in the business world to be arbitrators, thereby depriving parties of the services of those who might be best informed and qualified to decide particular types of case. [Footnote quoting Commonwealth Coatings omitted. See discussion above.]

This code does not limit the freedom of parties to agree on whomever they choose as an arbitrator. When parties, with knowledge of a person’s interests and relationships, nevertheless desire that individual to serve as an arbitrator, that person may properly serve. .


A. Persons who are requested to serve as arbitrators should, before accepting, disclose

1. any direct or indirect financial or personal interest in the outcome of the arbitration;

2. any existing or past financial, business, professional, family or social relationships which are likely to affect impartiality or which might reasonably create an appearance of partiality or bias. Persons requested to serve as arbitrators should disclose any such relationships which they personally have with any party or its lawyer, or with any individual whom they have been told will be a witness. They should also disclose any such relationships involving members of their families or their current employers, partners or business associates.

B. Persons who are requested to accept appointment as arbitrators should make a reasonable effort to inform themselves of any interests or relationships described in the preceding paragraph A.

C. The obligation to disclose interests or relationships described in the preceding paragraph A is a continuing duty which requires a person who accepts appointment as an arbitrator to disclose, at any stage of the arbitration, any such interests or relationships which may arise, or which are recalled or discovered.

While the foregoing language is broad, especially with regard to the obligations to inquire of family members, the specific obligations regarding prior service as a neutral are found in the provider rules(31) and, in California, in the California Code of Civil Procedure. Cal. Code Civ. Pro. §1297.121(c)

In California, matters of disclosure become even more detailed. In accordance with the requirements of the California Code of Civil Procedure §§170.1, 1282.6, 1281.9, and 1297.121, arbitrators in California employment cases administered by AAA are asked to complete an 11-point questionnaire which touches on issues such as personal knowledge of disputed facts, past attorney-client relationships with a party or counsel, and “any other existing or past financial, business, professional, family or social relationship which is likely to affect your impartiality or might reasonably create an appearance of partiality or bias, including any relationship with a witness or lawyer for a party.” All of these questions pertain not only to the arbitrator but also to the arbitrator’s spouse and to any persons within the third degree of consanguinity to the arbitrator. (This includes parents, grandparents, great grandparents, brothers, sisters, nieces, nephews, aunts, uncles, children, grandchildren, or great grandchildren.) The arbitrator is subject to a continuing duty to make reasonable efforts to remain informed about such relationships and interests of his or her own, of the arbitrator’s spouse, and of children living in the arbitrator’s household.

On the California disclosure form, the arbitrator also is asked whether “any party or lawyer for a party has been before you in any non-collective bargaining arbitration proceedings in which you were serving as a neutral or party-appointed arbitrator.” If the answer is affirmative, the arbitrator must provide a list with the names of parties to each case, the results of each case which was arbitrated to conclusion, identification of the prevailing party, names of counsel, and the amounts awarded. (Arrangements may be made for the arbitrator to withhold names of parties to maintain confidentiality.)

. C. Who Pays the Arbitrator’s Fees?(32)

The common practice in labor arbitration and employment-contract arbitration, by rule and by actual contract language, is for the fees and expenses of the arbitrator to be shared equally by the parties. When dealing with employer-imposed plans applied to employees’ statutory claims, however, this practice has been deemed in some jurisdictions to be unacceptable. The concerns which led to these holdings are peculiar to the context of mandatory arbitration of statutory claims, but there has been some overlap of principles into employment-contract arbitration and, to a much lesser extent, the labor arbitration forum. These are discussed below.

1. Employment arbitration: employer-promulgated plans

a. The Cole Requirement: Employer Must Pay

When an employer requires that employees enter into a pre-dispute arbitration agreement as a condition of employment, the arbitration plan will be unenforceable in several jurisdictions unless it provides that the employer will pay the fees and expenses of the arbitrator. The U. S. Courts of Appeals for the District of Columbia, Tenth, and arguably the Eleventh Circuits have held that, when dealing with employer-imposed pre-dispute agreements to arbitrate statutory claims, the employee may not be required to assume more than a nominal forum fee, and arbitrator’s fees must be paid by the employer.(33) A variety of federal district courts have endorsed this view, as did the California Supreme Court in its recent decision in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83, 6 P. 3rd 669 (Calif. Sup. Ct., 8/24/00).

The Court of Appeals for the District of Columbia in Cole v. Burns International Security Services, 105 F.3d 1465 (DC Cir., 2/11/97), was the first court to set forth the employer’s obligation as a requirement for an enforceable agreement to arbitrate statutory employment claims. In Cole, Judge Harry Edwards enforced an employer-imposed plan requiring arbitration of statutory claims, but only after reading into the otherwise silent agreement an obligation for the employer to pay the arbitrator’s fees and expenses. The court reasoned that, had the employee not foregone his right to proceed in a judicial forum, he would proceed to court, where he would not have to pay for the judge’s services. Noting that there had been no need for the Supreme Court in Gilmer to address the matter, as arbitration fees in the securities industry routinely were paid by the employers, the court in Cole concluded that “there is no reason to think that the [Supreme] Court would have approved a program of mandatory arbitration of statutory claims in Gilmer in the absence of employer agreement to pay arbitrators’ fees. Because public law confers both substantive rights and a reasonable right of access to a neutral forum in which those rights can be vindicated, we find that employees cannot be required to pay for the services of a ‘judge’ in order to pursue their statutory rights.” Cole at 1468.(34)

.The 10th Circuit followed the principle stated in Cole but refused to reform the contract and therefore denied enforcement of the arbitration agreement in Shankle v. B-G Maintenance Management of Colorado, 163 F.3d 1230 (10th Cir., 1/5/99). The court observed that the employer in Shankle required the employee to agree to arbitration “yet failed to provide an accessible forum in which he could resolve his statutory rights.” Shankle at 14. This situation, concluded the court, undermines the remedial and deterrent functions of the federal anti-discrimination laws. Also, in Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054 (11th Cir., 2/4/98), the 11th Circuit found that restrictions on remedial relief and the possibility that the employee would have to pay one-half the “hefty” costs of arbitration were legitimate grounds upon which to conclude that the arbitration clause did not “comport with statutory policy.” Paladino at 24.

Recently, the California Supreme Court in Armendariz held that, among the elements of fairness in an enforceable employer-imposed arbitration plan is the requirement that the employer pay the cost of the arbitration. Specifically, the court stated that “the arbitration agreement or process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” Armendariz, slip opinion at 29 (emphasis in the original). The court held that when an agreement contains California state discrimination law within its scope, silence on the question of the arbitrator’s fees will be read as impliedly obligating the employer to pay “all types of costs that are unique to arbitration.” (35)

b. Courts That Have Rejected the Cole Requirement

Other U. S. Courts of Appeals have disagreed or, given the procedural posture of the cases before them, have found no reason to adopt the theory of Cole. The Fifth Circuit in Williams v. Cigna Financial Advisors, Inc., 197 F.3d 752 (5th Cir., 12/6/99), cert. denied, 120 S. Ct 1833, 146 L. Ed. 2d 777 (5/1/00), addressed the question of the arbitrator’s fees when it dealt with a motion to vacate an arbitration award in a case in which, five years earlier, the court had compelled arbitration of the statutory employment claims of the securities-industry employee. The court was not persuaded that the decision of the arbitrator providing for the employee to pay a share of the costs of arbitration (in which his claims were dismissed) was contrary to public policy. The court held that “Gilmer does not so clearly imply that no part of arbitral forum fees may ever be assessed against federal anti-discrimination claimants, although it plainly indicates that an arbitral cost allocation scheme may not be used to prevent effective vindication of federal statutory claims.”

The Fifth Circuit observed in Williams that the claimant, who earned a six-figure income in his new employment, provided “no evidence that the prospect of incurring forum fees hampered or discouraged [him] in the prosecution of his claim.” The court compared this claimant’s situation to those of the employees in Shankle and Cole, stating as follows:

There is no evidence that the amount of the forum fees prevented him from having a full opportunity to vindicate his claims effectively or prevented the arbitration proceedings from affording him an adequate substitute for a federal judicial forum. The evidence in this case does not indicate that Williams is unable to pay one-half of the forum fees or that they are prohibitively expensive for him. Cf. Shankle, 163 F.3d at 1230 (plaintiff “could not afford such a fee”); Cole, 105 F.3d at 1484 (fees “prohibitively expensive for an employee like Cole”).

Williams, 197 F.3d at 764. .The Fourth Circuit subsequently addressed the issue and, in Bradford v. Rockwell Semiconductor Systems, Inc., 238 F. 3d 549 (4th Cir., 1/22/01), heartily endorsing the analysis of the Fifth Circuit in Williams, reached the same conclusion, expressing rejecting the analysis of Cole. The Fourth Circuit held that “the appropriate inquiry is one that evaluates whether the arbitral forum in a particular case is an adequate and accessible substitute to litigation, i.e., a case-by-case analysis that focuses, among other things, upon the claimant’s ability to pay the arbitration fees and costs, the expected cost differential between arbitration and litigation in court, and whether that cost differential is so substantial as to deter the bringing of claims.” The ultimate inquiry, concluded the Fourth Circuit, is not where the employee’s expenditures go, but, rather, what the overall cost of the proceeding is. The court observed, “we fail to see how a claimant could be deterred from pursuing his statutory rights in arbitration simply by the fact that his fees would be paid to the arbitrator where the overall cost of arbitration is otherwise equal to or less than the cost of litigation in court.” Id., 556.

In addition, the First Circuit, one of the first Circuits to address the issue after Cole, said in Rosenberg v. Merrill Lynch Pierce Fenner & Smith, 170 F.3d 1, 16 (1st Cir., 2/24/99), that arbitration often is “far more affordable to plaintiffs and defendants alike than is pursuing a claim in court.” The court noted that, in the securities industry, it was standard practice for the employers to pay the arbitrators’ fees, and, therefore, the possibility of unreasonable fees was a matter which could be raised after the arbitration. Similarly, the Seventh Circuit in another securities-industry case, Koveleski v. SBC Capital Markets, 167 F. 3d 361 (7th Cir., 2/4/99), cert. denied, 1999 US LEXIS 4839 (10/4/99), held that the mere possibility that fees would be split is not a sufficient reason to invalidate an arbitration agreement.

The Second Circuit has not yet addressed the question of whether an employer-promulgated plan is rendered invalid if it could result in the employee having to pay a portion of the arbitrator’s fees and expenses. Several decisions of the U. S. District Courts for New York, however, have addressed the matter. In Arakawa v. Japan Network Group, 56 F. Supp. 2d 349 (S.D. N.Y., 7/11/00), the employee argued that, because the arbitration agreement required her to share with the employer the costs of arbitration, she should not be compelled to arbitrate her Title VII claim. The court recognized that the Second Circuit “has not opined on the issue of whether an arbitration agreement that leaves open the possibility that the plaintiff may have to pay the fees of the arbitration can provide an adequate forum for the redress of Title VII rights,” and concluded as follows:

The mere fact that a plaintiff faces the possibility of being charged arbitration fees, including sharing the arbitrator’s compensation if directed to do so by the arbitrator, does not make the agreement to arbitrate Title VII claims unenforceable as a matter of law. A fee splitting arrangement is only contrary to the remedial and deterrent aims of Title VII if the fees are so great and the plaintiff’s financial situation is such that the imposition of the fees would make the plaintiff unable to, or would substantially deter plaintiff from seeking to, enforce his or her statutory rights.

Arakawa at 354 (citations omitted). Accord, Quinn v. EMC Corp., 109 F. Supp. 2d 681 (S. D. Texas, 8/21/00).

In a prior case, Sobol v. Kidder Peabody & Co. 49 F. Supp. 2d 208 (S. D. N. Y., 2/23/99), the Southern District of New York distinguished Cole, noting that Cole had not arisen under a securities industry U-4 Form. The court held that, “Given that the sharing of forum fees is authorized by NASD rules, and that arbitration is generally less expensive than litigation, the assessment of half of the forum fees [$24,650.00] against Sobol will neither discourage arbitration nor offend public policy.” Sobol at 224. In addition, in Ahing v. Lehman Brothers, Inc., 2000 U. S. Dist. LEXIS 5175 (S.D. N.Y., 4/20/00), a secretary who had signed an NASD arbitration agreement, sought to have an award vacated on a number of grounds, most of which she previously had raised in opposition to the employer’s motion to compel arbitration. The employee contended that the arbitrators had manifestly disregarded the law by requiring in the award that she pay $1950.00, one-half the costs of the arbitration. The employee relied heavily on the Tenth Circuit’s decision in Shankle. The court rejected the employee’s argument and distinguished Shankle by noting the conceptual difference between the question of enforceability of a mandatory arbitration fee-sharing agreement and the question of whether an award should be vacated because of the apportionment of costs. Unlike the court in Howard (addressed below), however, the Ahing court concluded that the issue of fee splitting was “disputed among the circuit courts.” The court concluded that, if a problem is presented by fee-splitting provisions, it arises from “the amount of the fee relative to the plaintiffs ability to pay” and that, in this case, the “fees assessed were objectively moderate and plaintiff has not shown that they are so great relative to her financial circumstances that their imposition prevented her from having a full opportunity to vindicate her Title VII rights in the arbitration forum.” Ahing at 40.

In another case, Howard v. Anderson, 36 F. Supp. 2d 183 (S.D. N.Y., 2/17/99), the District Court for the Southern District of New York was not persuaded by claims of hardship made in advance of the arbitration hearing but expressed confidence that “once the relevant law [Cole, Shankle, and Paladino] is brought to the arbitrator’s attention, he will conduct a proceeding that will vindicate [the employee’s] statutory rights.” Howard at 187. The court in Howard denied the claimant’s motion to compel the employer to pay all but $150.00 of the fees associated with arbitration under a pre-dispute employment arbitration agreement. The AAA, under its hardship rule, had allowed the employee to pay only $500.00 of the filing fee, with the remainder or a reduced sum to be due at the conclusion of the case. With regard to the arbitrator’s fees, AAA had advised that it could not waive or defer the arbitrator’s compensation and that these fees would be due with AAA on the commencement of the hearing. The question to the court was whether the employee was without recourse to arbitration because she was unable to afford the fees. The court refused to modify AAA’s filing fee and, because no issue in dispute had yet arisen regarding remaining fees, refused to order the employer to pay all other fees. The court observed that under AAA’s NRRED rules, ultimately the employee might not be responsible for any fees.

.The Third Circuit, like the Second, has not yet addressed the issue, but, in a recent trio of decisions, the Eastern District of Pennsylvania has solidly rejected the sweeping prohibitions set forth in Cole and Shankle. Zumpano v. Omnipoint Communications, 2001 U.S. Dist LEXIS 376 (E. D. Pa., 1/18/01) (expressly endorsing the reasoning set forth above in Arakawa); Goodman v. ESPE America, Inc., 2001 U.S. Dist. LEXIS 433 (E. D. Pa., 1/19/01) (relying on Green Tree Financial Corp. v. Randolph, 121 S. Ct. 513, 148 L.Ed.2d 373, 84 Fair Empl. Prac. Cas. 769 (12/22/00)); Blair v. Scott Speciality Gases, 2000 U.S. Dist. LEXIS 16809 (E.D. Pa., 11/20/00).

c. Green Tree Financial Corp. v. Randolph: The U.S. Supreme Court Grazes the Issue

The United States Supreme Court has not opined on the specific question of the sharing of fees in statutory cases under employer-imposed plans, but it did address the issue of fees in a recent decision involving commercial arbitration of statutory claims brought by a purchaser against a financing company in Green Tree Financial Corp. v. Randolph, 121 S. Ct. 513, 148 L. Ed. 2d 373, 84 Fair Empl. Prac. Cases 769 (12/22/00). Having first concluded that an order compelling arbitration and dismissing all underlying claims is an appealable final order under the Federal Arbitration Act (FAA), 9 U.S.C. §§1 et seq., the Court considered the issue of arbitral fees and found that the Eleventh Circuit erred “in deciding that the arbitration agreement’s silence with respect to costs and fees rendered it unenforceable.” Chief Justice Rehnquist, writing for the majority, acknowledged that “the existence of large arbitration costs could preclude a litigant such as [the claimant] from effectively vindicating her federal statutory rights in the arbitral forum” but found that the record did not establish that she would bear such costs if she proceeded to arbitration. The Court concluded as follows:

We have held that the party seeking to avoid arbitration bears the burden of establishing that Congress intended to preclude arbitration of the statutory claims at issue. [Citing Gilmer and McMahon, supra.] Similarly, we believe that where, as here, a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs. [The claimant] did not meet that burden. How detailed the showing of prohibitive expense must be before the party seeking arbitration must come forward with contrary evidence is a matter we need not discuss; for, in this case neither during discovery nor when the case was presented on the merits was there any timely showing at all on the point.

Green Tree, slip opinion at 22, 23. Justice Ginsberg, concurring in part and dissenting in part, wrote that she would have vacated the Court of Appeals decision and remanded the matter for “closer consideration of the arbitral forum’s accessibility.” Green Tree, Ginsberg, concurring in part and dissenting in part, slip opinion, page 24. Justices Stevens and Souter joined in Justice Ginsberg’s full opinion, and Justice Breyer joined in the opinion except for a discussion challenging the placement of the burden on the claimant.

2. Employment Arbitration: Employment-Contract Cases

The concerns and analyses which led to the employer-pays requirement stated by the District of Columbia, 10th, and 11th Circuits and the California Supreme Court arise from the mandatory nature of the arbitration plan and the presence of statutory claims. This distinction was noted in Brown v. Wheat First Securities, Inc., 101 F. Supp. 2d 1 (D.C., 6/13/00), in which the District Court for the District of Columbia distinguished statutory-claim cases from the tort, contract, and wrongful termination claims raised in the case before it. The court reasoned that the restriction stated in Cole, being based on the theory that American jurisprudence does not require the beneficiary of federal statutes to pay for the services of the judge, is limited to instances in which statutory claims are raised. The court in Brown therefore denied the employee’s motion to vacate an arbitration award in which the employee had been assessed fees of $6,000.00. With regard to remaining unresolved statutory claims, however, the court compelled arbitration but cautioned the arbitrators to assess arbitrator(s)’ fees and expenses in accordance with Cole. See also LaPrade v. Kidder, Peabody & Co., 2001 U.S. App. LEXIS 7381 (D.C. Cir., 4/24/001), in which the District of Columbia Circuit found that in allocating a portion of costs to an employee-claimant, the arbitrators did not engage in manifest disregard of the legal precedent established in Cole, for the claimant did not establish that the sums she was required to pay were associated with her statutory rather than non-statutory claims nor did she show that they reflected arbitrators’ compensation. Cole, held the court, “does not bar the assessment of all forum fees” against an employee who had been required to execute an arbitration provision as a condition of employment.

3. Labor Arbitration

By far the most common practice under collective bargaining agreements is for the employer and the union to share equally the cost of the arbitration. Some collective bargaining agreements, more common outside of New York, contain a “loser pays” provision. (36) Under such provisions, the question of who “wins” and who “loses” sometimes raises additional issues in dispute, requiring the arbitrator to apportion his or her fees in accordance with partial or mixed victories. See, e.g., Custom Cartage Services Division and International Brotherhood of Teamsters, Local 710, 111 LA 353 (A. Wolff, 1998).

Even under contracts which explicitly provide only for equal sharing of the arbitrator’s fees and expenses, however, a few arbitrators have determined that, in instances of abuse of the contractual grievance-arbitration processes, the full or a larger portion of the cost of the proceeding may be allocated to the abusing party. For example, in Dewitt Mailing Services Inc. and Van Storage Drivers, Packers, Warehousemen & Helpers, Teamsters Local 389, 92 LA 238 (Scholtz, 1989), the arbitrator warned the employer that, notwithstanding contractual language requiring the parties to split the costs of arbitration, future failures of the employer to make timely health and welfare contributions, to remit union dues, or to make retroactive wage payments would result in the employer being assessed the full cost of the resulting arbitration and attorneys fees. See also Vesuvius USA Corp. and Glass, Molders, Pottery, Plastics & Allied Workers International Union, 114 LA 940 (Rivera, 2000).

With the exception of these few and unusual cases, the common practice of splitting arbitration costs has never been a concern in the labor arena. (37) Indeed, the factors which fuel the issue in employment arbitration simply are not present in the labor context. In labor, the employer and the union are the parties to the dispute, even when it involves the discipline of a single employee. These two entities are presumed to have a degree of familiarity with the process, to have entered into it by virtue of a joint agreement which was the product of collective bargaining, and to be seeking adjudication of rights under the collective bargaining agreement rather than rights arising independently under the statutes. The situation therefore differs from employment arbitration, and the idea that the employer should pay the full arbitrator’s tab in labor arbitration has not received serious attention.

In dictum in Giles v. City of New York, 41 F. Supp.2d 308, 160 LRRM 2879 (S.D. NY 3/11/99), however, the court transported into the labor context the employment-arbitration theory that the employer should pay the cost of the arbitration. Giles involved an action by city employees for overtime compensation under the Fair Labor Standards Act (FLSA). The court held that, under the Supreme Court’s holding in Wright, the arbitration provision of the collective bargaining agreement (CBA) could not be interpreted as requiring that the statutory claim be arbitrated. In any event, held the court, such a requirement would be in contravention of Gardner-Denver,(38) the Second Circuit’s holding in Tran, and other precedents regarding the right of employees to have access to a judicial forum for individual statutory-rights claims. Giles at 14. (39)

The court went on to note, however, that even if some CBA arbitration provisions could cover statutory rights, this one “cannot because the union, the only party who can bring the claim, must pay half of the arbitration fees.” The court observed that, when individual rights are at issue, “courts often refuse to enforce arbitration agreements requiring fee splitting” because requiring claimants to “pay for access would surely deter the bringing of an arbitration, running counter to congressional intent underlying such statutory rights.” Giles at 12 (citations and internal quotation marks omitted). Elaborating, the court stated as follows:

In the CBA context, however, the problem is worse because any financial burden on the union only exacerbates the existing problem that the union may have insufficient incentive to press a member’s individual statutory claim vigorously. Accordingly, a CBA mandatory arbitration provision featuring fee-splitting is unenforceable because it deprives individuals of the required “reasonable right of access to a neutral forum.” Cole, 105 F.3d at 1468-69. Giles at 13.

This specific issue, while interesting, has been rendered moot within the Second Circuit by Rogers, in which the Second Circuit held that the principles of Gardner-Denver still apply and preclude the waiver, through a collective bargaining agreement, of unit employees’ access to a judicial forum for individual statutory claims. The approach taken by the district court in Giles, however, indicates an endorsement of the requirement that the employer pay the arbitrator’s fees in arbitrations of statutory claims. This view, however, may be out of step with other holdings within the Southern District of New York, as addressed above, in Paragraph 2.

D. What Is the Preferred Form of the Arbitrator’s Award? 1. The tradition of reasoned opinions in labor arbitration

In accordance with tradition, rules, contractual provisions, analytical approach, and the expectations of the parties, labor arbitration awards generally are accompanied by formal opinions which set forth findings of fact and the reasoning by which the arbitrator reached the decision. The absence of such an award is a deviation from the norm, generally resulting from a specific agreement by the parties and a highly customized process. As the United States Supreme Court stated in the Steelworkers Trilogy, “Arbitrators have no obligation to the court to give their reasons for an award.” United Steelworkers of America v. Enterprise Wheel and Car Corp., 36 U.S. 598, 80 S. Ct. 1358, 4 L. Ed. 2d 1424 (6/20/60). Nonetheless, full opinions have come to be expected and serve a variety of purposes.

Among the many functions of the reasoned award are: the establishment of precedent or analytical structure for future questions under the language at issue; the acknowledgment that arguments were understood and the explanation of why they were not persuasive; the provision of a context for matters that affect the relationship between the parties; and the documentation of efforts made by the parties and the performance by the union in fulfillment of its duty of fair representation. The analytical exercise of writing the award, too, is invaluable for the arbitrator. At least once in nearly every arbitrator’s career he or she encounters an analysis that simply does not hold together when the arbitrator tries to explain it in writing. This, of course, leads to a useful reexamination of the arbitrator’s considerations, logic, and decision-making process. Even when an analysis flows as expected, the process of writing brings the facts into clearer focus, clarifies the arbitrator’s thinking, and generally leads to a superior arbitral work product. In addition, the reasoned award often addresses considerations which are relevant under Spielburg Manufacturing Co., 112 NLRB 1080, 36 LRRM 1152 (1955), Collyer Insulated Wire, 192 NLRB 837, 77 LRRM 1931 (1971), and Alexander v. Gardner-Denver Co., 415 U.S. 36, 39 L. Ed. 2d 147, 94 S. Ct. 1011 (1974).

2. The nature of awards in employment arbitration The nature of the award is one of the central elements which differentiates employment arbitration from commercial arbitration. The tradition in commercial arbitration has been that the less said in an award, the better. It is thought that an outcome-only award, in addition to being more rapidly and economically produced, is less vulnerable to judicial tampering. In fact, the AAA’s Commercial Arbitration Rules provide in Rule 44 (b), as follows: “The arbitrator need not render a reasoned award unless the parties request such an award in writing prior to appointment of the arbitrator or unless the arbitrator determines that a reasoned award is appropriate.”

Employment arbitration may present few of the grounds upon which the labor-arbitration tradition of fully reasoned opinions is based, but when statutory claims are at issue, concern for the durability of the award makes a reasoned award preferable. In fact, the AAA NRRED Rule 34(c) provides the reverse of the commercial context. If the parties do not specify otherwise, the arbitrator is expected to render a reasoned award, and, at least in cases involving statutory rights, the trend is in favor of a statement of law and application of the facts to the law.(40) The AAA encourages its employment arbitrators to write awards which are less elaborate than the typical labor award but far more extensive than the result-only paragraph common in commercial arbitration. In striking a balance between what some regard as the excesses of labor awards and the emptiness of commercial awards, AAA’s employment arbitrators have been advised in training(41) to produce opinions and awards which are similar to per curiam judicial opinions in detail and style. The parties, of course, may agree to have the arbitrator develop a more detailed statement of fact and analysis or to dispense with all elaboration. For reasons which are developed below, however, the latter is heartily discouraged when statutory claims are at issue.


The preference for the reasoned award in employment arbitrations emerges primarily from two intertwined factors: the manner in which an employee becomes a party to an arbitration agreement and the nature of the claims likely to be asserted. Employees who have been required to agree to arbitration in order to secure their jobs are likely to be skeptical about the fairness of the process. For such parties, a written explanation of reasons for the outcome promotes acceptance of and respect for the arbitral process. The other, more substantive basis for the preference for reasoned awards in the employment context stems from the statutory nature of the claims being resolved. In this regard, counsel often appreciate insight into the arbitrator’s thought process, and the arbitrator’s analysis of complex legal theories often is sharpened by the exercise of writing the rationale. The primary claim-based value of the reasoned award, however, turns on the need to enhance the finality and durability of the award. While the taciturn tradition of commercial arbitration presumes that durability is found in minimalism, employment arbitration acknowledges that, when statutory claims are at issue, the award must withstand judicial scrutiny under a standard of review commonly regarded as “manifest disregard of the law.”

B. Overview of Standards of Review The circumstances under which courts may vacate arbitration awards are highly limited and are found both in statutes and at common law. Under the FAA, an award may be vacated when the challenging party establishes, for example, that the award was procured by corruption or fraud, that there was evident partiality or corruption in the arbitrator, that the arbitrator refused to hear pertinent and material evidence, or that the arbitrator exceeded his or her powers. Beyond these statutory standards, the courts also recognize several highly limited, non-statutory grounds for vacatur. These include findings that the award is arbitrary and capricious, fails to draw its essence from the agreement, or is completely irrational. (42) Another basis, often argued in labor arbitration cases involving employee drug use, is the question of whether the award is contrary to explicit and well defined public policy. (43) When statutory claims are being arbitrated or when legal rather than contractual issues emerge, the courts sometimes apply yet another judicially developed standard of review, examining awards to determine if they are in manifest disregard of the law. C. Manifest Disregard of the Law: Approaches Used by the Circuits All of the U.S. Courts of Appeals, with the recent addition of the Fifth Circuit, now are in agreement that an award may be vacated if it is in manifest disregard of the law. The Supreme Court approved the concept, noting in First Options of Chicago, Inc. v. Kaplan that parties are bound by an “arbitrator’s decision not in ‘manifest disregard’ of the law,”(44) but the Supreme Court has not defined the term. Thus, the U. S. Courts of Appeals have developed various approaches by which they evaluate whether an award is in manifest disregard of the law. Most of the circuits have adopted standards which involve an initial inquiry into whether the arbitrators knew the law and, then, if they did, whether they ignored it, refused to follow it, or were willfully inattentive to it. The applicable legal principle disregarded, however, must be “clearly defined and not subject to reasonable debate.” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir., 11/15/95). The courts also look for more than a mere “error or misunderstanding with respect to the law.” Merrill Lynch Pierce Fenner & Smith, Inc. v. Bobker, 808 F.2d 930 (2nd Cir., 12/23/96).(45) The 11th Circuit’s review of an employment arbitration award in Montes v. Shearson Lehman Brothers, 128 F.3d 1456 (11th Cir., 11/24/97), is a good example of a case in which all of the foregoing factors were found. In Montes, the arbitrators had been advised of the applicable provisions of the Fair Labor Standards Act, 29 U.S.C. §201 et seq., and there was no debate regarding interpretation of the statute’s requirements. The respondent/employer, however, repeatedly encouraged the arbitrators to choose not to follow the law. Therefore, when the arbitrators issued an award which seemed on the facts to be contrary to law and offered no written analysis from which the court could conclude otherwise, the court vacated the award. The Second Circuit has had several opportunities to apply this standard in the context of employment arbitration, with what Judge Harry Edwards has called “confusing results.” (46) The Second Circuit in DiRussa v. Dean Witter Reynolds, Inc. 121 F.3d 818 (2nd Cir., 8/5/97), cert denied, 118 S. Ct. 695 (1998), rehearing denied, 118 S. Ct. 1180 (1998), denying the prevailing claimant’s motion to vacate or modify an ADEA-based award which had not provided attorneys’ fees, quoted Bobker, supra, as follows: The error must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator. Moreover, the term “disregard” implies that the arbitrator appreciates the existence of a clearly governing legal principle but decides to ignore or pay no attention to it. The court in DiRussa found that there was “no persuasive evidence that the arbitrators actually knew of – and intentionally disregarded – the mandatory aspect of the ADEA’s fee provision.” The confusion cited by Judge Edwards arose a year later when the Second Circuit issued its attention-grabbing decision in Halligan v. Piper Jaffray, Inc., 148 F.3d 197 (2nd Cir., 7/9/98), cert. denied 143 L. Ed. 2d 378, 119 S. Ct. 1286 (1999). In Halligan, the court examined not just whether the award was in manifest disregard of the law but also whether it was in manifest disregard of the facts as the Second Circuit saw them. Lower courts within the Second Circuit since Halligan have tended to refer to “manifest disregard of the law or facts,” but they continue to apply the standard(47) with disciplined hand, noting (and even relying on Halligan as authority) that, in keeping with Bobker and DiRussa, manifest disregard of the law is a severely limited standard. For example, in Campbell v. Cantor Fitzgerald & Co., 21 F. Supp. 2d 341,1998 U.S. Dist. LEXIS 16632 (S. D. N. Y., 10/21/98), aff’d, 1999 U.S. App. LEXIS 34081 (2nd Cir., 1999), cert. denied, 529 U.S. 1099, 121 S. Ct. 483, 148 L. Ed. 2d 456 (2000), Judge Denny Chin noted the extreme circumstances and overwhelming evidence apparent in Halligan and rejected the possibility of a broader interpretation, holding that “Halligan does not stand for the proposition, however, that district courts may reweigh the evidence and second-guess the arbitrators’ credibility determinations.”(48) The Fifth Circuit, reviewing an employment arbitration award in Williams v. Cigna Financial Advisors, Inc., 197 F. 3d 752 (5th Cir., 12/6/99), cert. denied, 120 S. Ct. 1833, 146 L. Ed. 2d 777 (2000), adopted manifest disregard of the law as an appropriate standard of review for arbitration of federal employment-rights cases. Crafting a definition specifically for employment cases, the court found that, in Williams, the evidence solidly supported the arbitrators’ rejection of age discrimination and retaliation claims. The court articulated the following two-part analysis: First, where on the basis of the information available to the court it is not manifest that the arbitrators acted contrary to the applicable law, the award should be upheld. Second, where on the basis of the information available to the court it is manifest that the arbitrators acted contrary to the applicable law, the award should be upheld unless it would result in significant injustice, taking into account all the circumstances of the case, including powers of arbitrators to judge norms appropriate to the relations between the parties. These and other decisions addressing the question of whether arbitrators have engaged in manifest disregard of the law make it clear that the standard does not open the door to wholesale appellate review of awards which decide statutory claims. Courts, however, may be expected, as hinted in Cole, to engage in a more focused review of arbitral resolution of statutory employment claims. Thus, as noted in DiRussa, it is prudent, to say the least, for arbitrators to ensure that they understand the governing law. They then are obliged to engage in a reasoned application of the law to the facts. In employment arbitration, as provided in the AAA’s Rule 34(c) of the National Rules for the Resolution of Employment Disputes, the analysis and reasoning should be summarized in a written opinion. D. Importance of the Reasoned Award under the Standard of Manifest Disregard In most of the cases cited above in which employment arbitration awards have been vacated, the lack of a reasoned opinion sealed the award’s ill fate, even though these courts also said that they were not holding that arbitrators are required to state the reasons for their decisions. In Halligan, for example, the Second Circuit noted that arbitrators are not required to provide reasoning for their awards but, “when a reviewing court is inclined to hold that an arbitration panel manifestly disregarded the law, the failure of the arbitrators to explain the award can be taken into account.” Another example of the effect of an analytical void is seen in Neary v. The Prudential Insurance Company of America, 63 F. Supp. 2d 208 (D. Conn., 8/27/99), in which the court vacated an NASD arbitration panel’s award granting “summary judgment” to the employer. As was the case with most securities-arbitration awards at that time, the arbitrators had provided no statement of reasoning. In an effort to piece together what had led to the arbitrators’ decision, the court found that the arbitrators appeared to have disregarded “overwhelming” evidence in support of the employee’s allegations of wrongful termination and “certainly disregarded the requirement that all reasonable inferences must be drawn in favor of the non-movant on a motion for summary judgment,” having focused inquiries on the merits of the claim rather than on the question of whether there was a genuine issue of material fact. The court observed, “The failure of the arbitration panel to explain its decision in this case also buttresses this court’s determination.” Similarly, armed with damning evidence that the arbitrators repeatedly had been invited to disregard the law, the Eleventh Circuit in Montes cited the “absence in the decision, or otherwise in the record, indicating the arbitrators rejected [the] plea to manifestly disregard the law.” Indeed, even in DiRussa, in which the Second Circuit refused to vacate or modify the award, the court noted that, without a statement of reasons, it was faced with the “difficult task” of “inferring from the facts of the case whether the arbitrators appreciated the existence of a clearly governing legal principle but decided to ignore or pay no attention to it.” None of the foregoing cases has given rise to a holding that reasoned awards are required, but the cases illustrate the weakened finality (and, perhaps, weakened arbitral judgment) which may result from the lack of a written analysis. Some state courts, in fact, have concluded that, to be enforceable, an employer-imposed, pre-dispute plan for the arbitration of statutory employment claims must provide for an award which includes a statement of reasoning. The California Supreme Court in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83, 6 P. 3rd 669 (Calif. Sup. Ct., 8/24/00), seeking to ensure a basis for adequate, albeit limited, judicial review, held that a mandatory employment arbitration plan must provide for a “written arbitration decision that will reveal, however briefly, the essential findings and conclusions on which the award is based.” See also Rembert v. Ryan’s Family Steakhouses, Inc., 235 Mich. App. 118, 596 N.W.2d 208 (Mich. Ct. App., 4/9/99), appeal denied, 461 Mich. 923, 605 N.W.2d 318 (1999). Regardless of whether a reasoned award is required by the courts or rules, it is preferred in arbitrations resolving statutory employment claims because it promotes the durability of the award on review, enhances the participants’ faith in and satisfaction with the process, and ensures that the arbitrators engage in a thoughtful and responsible analytical process. Query whether the arbitrators in cases such as Montes and Neary would have made the same, ultimately vacated decisions if had they engaged in the critical analysis required to write and hone a statement of reasoning. Arbitrators must take seriously their obligation to discern and adhere to governing law. When this is done, and when courts apply the disciplined and limited level of review expected of them, an award which sets forth a concise and cogent analysis of the law and facts should readily withstand judicial scrutiny. In the end, both the process and the parties will be better served. 1. For example, the American Arbitration Association (AAA) applies its National Rules for the Resolution of Employment Disputes, effective January 1, 1999, (NRRED) to any disputes “arising from the employment relationship,” unless the parties have expressly agreed otherwise. When a dispute arises as to whether these or the AAA’s Commercial Arbitration Rules apply, resolution is left to the arbitrator. 2. See Prudential Insurance Co. of America v. Lai, 42 F.3d 1299 (9th Cir., 1994); Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83, (Calif. Sup. Ct., 8/24/00); Rosenberg v. Merrill Lynch Pierce Fenner & Smith, 170 F.3d 1 (1st Cir., 2/24/99). 3. In Haskins v. Prudential Insurance Company of America, 230 F. 3d 231, 83 Fair Empl. Prac. Cas. (BNA) 1329 (6th Cir., 8/28/00), cert. denied, 69 U.S.L.W. 3479 (January 16, 2001), the Sixth Circuit specifically rejected application of a heightened standard of knowing waiver in assessing the enforceability of employer-mandated arbitration agreements. The court concluded, under traditional contract theory, that mere inequality of bargaining power does not alter the binding nature of the contract nor does it require the introduction of special safeguards. See also Seus v. John Nuveen & Co., 146 F.3d 175 (3rd Cir., 6/8/98), cert denied, 143 L. Ed. 2d 38, 119 S. Ct. 1028 (2/22/99). In Emeryone v. CAI International, Inc., 2001 U.S. Dist. LEXIS 5335 (D.C. Dist., 4/17/01), the court noted that under state law “a signature on a contract indicates ‘mutuality of assent’ and a party is bound by the contract unless he or she can show special circumstances relieving him or her of such an obligation.” The court did not accept as special circumstances the plaintiff’s testimony that she did not recall having signed the agreement amid other hiring-related paperwork and that the arbitration provision had not been explained to her. The court also rejected her argument that there was no clear waiver of her access to the courts. 4. In Gilmer, the Court held that the plaintiff, who had executed a securities-industry U-4 Form which resulted in an agreement to submit employment claims to arbitration, was required to arbitrate his Age Discrimination in Employment Act (ADEA) claim. The Court concluded that such agreements to arbitrate would apply to statutory claims unless the party seeking to avoid arbitration demonstrated that Congress had intended to preclude the waiver of access to a judicial forum for claims under the given statute. This intention, said the Court, would be established either by Congress’ express intent or by a showing of inherent conflict between the goals of the statute and the arbitral forum. Relying on the Mitsubishi Trilogy, cited below, the Court reaffirmed the concept, applicable in this case to the ADEA and arguably to other laws against discrimination in employment, that arbitration provides effective vindication of statutory rights and results only in a change of forum, not an alteration of the relevant substantive statutory rights. 5. This assumes, perhaps inappropriately, that unions would be inclined to agree to the requisite language to achieve an effective waiver of the judicial forum under Wright. But see, Zimny, “Arbitration of Statutory Employment Discrimination Claims under Collective Bargaining Agreements,” Contemporary Issues in Labor and Employment Law, Proceedings of the New York University 49th Annual Conference on Labor (Kluwer Academic Publishers, Dordrecht, Holland, 1997). 6. See, e.g., Rubin, “Presidential Address: Where Have We Been? Where Are We Going? Do We Know?” Arbitration 1998: The Changing World of Dispute Resolution: Proceedings of the 51st Annual Meeting of the National Academy of Arbitrators (BNA, 1998) 7. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614 (1985); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987); and Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989), known collectively as the “Mitsubishi Trilogy.” 8. See, for example, the New York Times story, “Fired Workers Fire Back, Then Fall Hard,” New York Times, May 9, 2001, recounting the experience of employees involved in claims that were arbitrated by an NASD three-member panel chaired by an attorney who had not disclosed that his primary employment was with a firm which relied upon brokerage and insurance firms for business and, as the Times put it, was “a lawyer on his day off from a job that might influence his thinking.” 9. Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir., 5/8/98), cert denied, 142 L. Ed. 2d 399, 119 S. Ct. 445, (11/9/98), and motion granted, cert. denied, 124 L.Ed.2d 418, 119 S. Ct. 465 (1998). 10. See Cole v. Burns International Security Services, 105 F.3d 1465 (DC Cir., 2/11/97); Rosenberg v. Merrill Lynch Pierce Fenner & Smith, 170 F.3d 1 (1st Cir., 2/24/99) (vacating and replacing opinion issued in 12/98); Desiderio v. NASD, 191 F.3d 198 (2nd Cir., 9/22/99), cert. denied, 148 L. Ed. 2d 659 (1/8/01); Seus v. John Nuveen & Co., 146 F.3d 175 (3rd Cir., 6/8/98), cert denied, 143 L. Ed. 2d 38, 119 S. Ct. 1028 (2/22/99); Hooters of America Inc. v. Phillips, 173 F.3d 933 (4th Cir., 4/8/99); Williams v. Cigna Financial Advisors, Inc., 56 F.3d 656 (5th Cir., 6/19/95), appeal after remand, 197 F.3d 752 (5th Cir., 12/6/99), cert. denied, 120 S. Ct 1833, 146 L. Ed. 2d 777 (5/1/00); Haskins v. Prudential Insurance Company of America, 230 F.3d 231, 83 Fair Empl. Prac. Cas. (BNA) 1329 (6th Cir., 8/28/00), cert. denied, 69 U.S.L.W. 3479 (1/16/01); Koveleski v. SBC Capital Markets, 167 F.3d 361 (7th Cir., 2/4/99), cert. denied, 1999 US LEXIS 4839 (10/4/99); Michalski v. Circuit City Stores, 177 F.3d 634 (7th Cir., 5/5/99), rehearing denied, 1999 US App. LEXIS 11992 (6/4/99); Patterson v Tenet Healthcare, Inc., 113 F.3d 832 (8th Cir., 5/12/97); Shankle v. B-G Maintenance Management of Colorado, 163 F.3d 1230 (10th Cir., 1/5/99); and Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054 (11th Cir., 2/4/98). 11.9 U.S.C. §1 states, “. . . . nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” It is the final clause, “any other class of workers engaged in foreign or interstate commerce,” that was at issue and now has been deemed to apply to “only contracts of employment of transportation workers.” Circuit City, slip opinion, page 11. 12. Among the cases cited by the Sixth Circuit which have addressed and rejected the heightened standard adopted by the Ninth Circuit was the Southern District of New York’s decision in Hart v. Canadian Imperial Bank of Commerce, 43 F. Supp. 2d 395 (S. D. NY, 3/26/99). 13. Compare this holding with the Sixth Circuit’s earlier ruling in Floss v. Ryan’s Family Steakhouses, Inc., 211 F.3d 306 (6th Cir., May 1, 2000), cert. denied, 121 S. Ct. 762 (January 8, 2001), in which a variety of inadequacies in the employer-imposed arbitration plan made it unenforceable. 14. See n. 4, above, regarding the Gilmer analysis. In this regard, the Second Circuit expressly rejected the analysis of the Ninth Circuit’s decision in Duffield. 15. The arbitration agreement limited the employee’s damages to back pay and precluded “any other remedy, at law or in equity,” including reinstatement. 16. Brisentine v. Stone & Webster Engineering Corp., 117 F.3d 519, 155 LRRM 2858 (11th Cir., 7/21/97); Bratten v. SSI Service, Inc., 161 LRRM 2985 (6th Cir., 7/23/99); Penny v. United Parcel Service, 128 F.3d 408, 156 LRRM 2618 (6th Cir., 10/22/97); Bell v. Conopco, Inc., 1999 US App. LEXIS 18894, pp 3-4 (8th Cir., 9/16/99); Pryner v. Tractor Supply Co., 109 F.3d 354 (7th Cir., 3/20/97), cert denied, 118 S. Ct. 295 (1997). See also Crespo v. 160 West End Avenue Owners Corp., 253 A.D. 2d 28, 687 N.Y.S.2d 79 (A.D. 1st Dep’t 1999) (regarding comparable analysis under New York law); and Thomas v. General Electric Co.,160 LRRM 2570 (Ohio Ct. App, 1st Appellate District, Hamilton County 2/5/99), appeal denied, 86 Ohio St. 3d 1442, 713 N.E.2d 1052 (8/4/99) (the court held that the union could not prospectively waive the individual right of an employee to select a judicial forum for the resolution of federal and state statutory claims). 17. The Second Circuit cited the similar holdings of a number of Courts of Appeals, including the Sixth Circuit’s decision in Bratten v. SSI Services, Inc., 185 F.3d 625 (6th Cir., 7/23/99), and Judge Posner’s decision in Pryner v. Tractor Supply Co., 109 F.3d 354 (7th Cir., 3/20/97), cert. denied, 522 U.S. 912, 118 S. Ct. 295 (1997). The court also relied upon its own pre-Wright decision in Tran v. Tran, 54 F.3d 115, 149 LRRM 2350 (2nd Cir., 5/5/95), cert. denied, 517 U.S. 1133, 134 L. Ed. 2d 532, 116 S. Ct. 1417 (1996), in which it held that an employee was not required to submit an FLSA claim to arbitration under the collective bargaining agreement. 18. Justice Scalia, in his concurrence, joined by Justice Thomas, criticized the majority for the foregoing agreement “in principle,” and concluded that the Court should assert a clean statement of the law that the award will not be vacated unless it actually conflicts with positive law. 19. Picher, Seeber, and Lipsky, The Arbitration Profession in Transition: A Survey of the National Academy of Arbitrators, Cornell Studies in Conflict and Dispute Resolution (2000). 20. The process by which an applicant for membership is evaluated includes the NAA Membership Committee’s examination of the nature, duration, and volume of the applicant’s arbitration practice, verification of the arbitrator’s body of work, review of references from party representatives, and consideration of input from NAA members. Membership is conferred by a two-thirds vote of the Board of Governors. Constitution of the National Academy of Arbitrators, Article V, Section 1 and Bylaws, Article VI, Section 4. 21. Picher, Seeber, and Lipsky, The Arbitration Profession in Transition: a Survey of the National Academy of Arbitrators, Cornell Studies in Conflict and Dispute Resolution, pages 11-13 (2000). 22. Bognanno and Coleman, Labor Arbitration in America: The Profession and Practice, 23, 45 (Praeger, 1992). 23. Id. 24. Id., 45. 25. Picher, Seeber, and Lipsky, The Arbitration Profession in Transition: a Survey of the National Academy of Arbitrators, Cornell Studies in Conflict and Dispute Resolution, pages 27 and 28 (2000). 26. Id. 27. Bognanno and Coleman, Labor Arbitration in America: The Profession and Practice, 47 (Praeger, 1992). 28. Id. at 16. 29. Fees generally are not tripled across the board because tasks such as handling pre-hearing discovery issues and preparing an initial draft of the award and opinion customarily are assigned to the chair of the three-person panel. 30. In fact, under the laws of most states, the arbitrator must complete a notarized oath and, at least with AAA labor and employment cases, the oath is accompanied by a statement by the arbitrator indicating whether the arbitrator has any matters to disclose. If so, the disclosure is stated in writing to the AAA, which conveys the information to the parties, thus sparing the arbitrator an awareness of the source of objection to continued service, should one arise and sparing the parties the awkwardness of having to respond to the arbitrator about reservations arising from disclosures. 31. AAA NRRED Rule 11(b). 32. A corollary question is, “And How Much Do They Pay?” In labor arbitration, billing customarily is done on the basis of per diem fees. A survey in which NAA members reported their lowest and their highest daily fees charged in 1998 indicates that the average in the Northeast of the highest rate was $905.00 and, of the lowest, $629.00. Picher, Seeber, and Lipsky, The Arbitration Profession in Transition: A Survey of the National Academy of Arbitrators, page 24 (Cornell Studies in Conflict and Dispute Resolution, 2000). In employment arbitration, per diem fees tend to be higher than labor rates, even among arbitrators who handle both types of cases. Current per diem rates for employment arbitration often are at or above $1500.00. In addition, in employment arbitration and unlike labor arbitration, most arbitrators have an hourly rate for matters which involve only a portion of a day. Employment arbitrations tend to require more of the arbitrator’s pre-hearing attention, in smaller blocks of time, than do labor cases, so the hourly rate is more readily applicable. 33. Cole v. Burns International Security Services, 105 F.3d 1465 (D.C. Cir., 2/11/97); Shankle v. B-G Maintenance Management of Colorado, 163 F.3d 1230 (10th Cir., 1/5/99); and Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054 (11th Cir., 2/4/98). 34. In Brown v. Wheat First Securities, Inc., 101 F. Supp. 2d 1 (D.C ., 6/13/00), the District Court for the District of Columbia distinguished the Cole rule, concluding that it applied only to statutory-claim cases whereas the matter before the court in Brown involved tort, contract, and wrongful termination claims. See also LaPrade v. Kidder, Peabody & Co., 2001 U.S. App. LEXIS 7381 (D.C. Cir., 4/24/001), addressed below. 35. Applying the principles set forth in Armendariz, a California state appellate court denied enforcement of an arbitration plan which, among a number of factors indicating unconscionability, provided that all costs of arbitration initially be borne by the employee. Pinedo v. Premium Tobacco, Inc., 85 Cal. App. 4th 774; 102 Cal. Rptr. 2d 435; 84 Fair Empl. Prac. Cas. 1090 (Calif. Ct. App., 2nd Dist., 12/19/00). 36. See, for example, the language quoted in Southwest Airlines, Dallas, Texas and Local 555, Transport Workers Union, 114 LA 648 (Allan, 2000), and Custom Cartage Services Division and International Brotherhood of Teamsters, Local 710, 111 LA 353 (A. Wolff, 1998). See also International Maintenance Corp., Baton Rouge, Louisiana and Millwrights Local 720, 114 LA 571 (Allan, 2000), in which the contract provided that the arbitrator’s fees “shall be borne by the unsuccessful party.” 37. Collection of fees, however, occasionally poses a challenge for the arbitrator and, in at least one relationship, attracted the attention of the parties. A collective bargaining agreement between a manufacturer and a labor union in the Northeast provides that, if the union “refuses to pay its half,” the employer’s obligation to check off dues will be suspended until payment is made, and if the employer refuses to pay, the union’s obligation to refrain from striking will be suspended until payment is made. 38. Alexander v. Gardner-Denver Co., 415 U.S. 36, 39 L. Ed. 2d 147, 94 S. Ct. 1011 (1974). See preceding discussion.. 39. Giles was decided before the Second Circuit’s decision in Rogers v. New York University, 220 F.3d 73, 164 LRRM 2854 (2nd Cir., 7/17/00), cert. denied, 148 L. Ed. 2d 535, 121 S. Ct. 626 (12/4/00), addressed above, although the analysis fully comports with that holding. 40. Specifically, AAA NRRED Rule 34 (c) provides in pertinent part as follows: “The award shall be in writing and shall be signed by a majority of the arbitrators and shall provide the written reasons for the award unless the parties agree otherwise.” 41. The author in 1999 and 2000 conducted AAA’s nationwide series of mandatory training programs for the arbitrators serving on the AAA employment panel. 42. Jenkins v. Prudential-Bache Securities, Inc., 847 F.2d 631 (10th Cir., 1988); Hawaii Teamsters & Allied Workers Union v. UPS, 165 LRRM 2655, 2000 U.S. App. LEXIS 26059 (9th Cir., 2000). 43. United Paperworkers International Union v. Misco, 484 U.S. 29; 108 S. Ct. 364, 98 L. Ed. 2d 286, 56 U.S.L.W. 4011 (1987); Eastern Associated Coal Corp. v. United Mine Workers of America, District 17, 121 S. Ct. 462, 148 L. Ed. 2d 354, 185 LRRM 2865 (2000). 44. 514 U.S. 938, 131 L. Ed. 2d 985, 115 S. Ct. 1920, 1923 (1995) (citing Wilko v. Swan, 346 U.S. 427, 436-37, 98 L. Ed. 168, 74 S. Ct. 182 (1953), overruled on other grounds in Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 104 L. Ed. 2d 526, 109 S. Ct. 1917 (1989). 45. Note, however, that in Cole, the Court of Appeals for the District of Columbia foresaw a possible need for heightened judicial review and observed that judicial review of arbitral determinations of statutory employment claims is adequate under the “manifest disregard of the law” standard only if it is “sufficiently rigorous to ensure that arbitrators have properly interpreted and applied statutory law.” This suggests movement toward an examination that does turn on whether there was error with respect to the legal standards. 46. “Where Are We Heading with Mandatory Arbitration of Statutory Claims in Employment?” 16 Ga. St. U. L. Rev. 293 (Winter 1999). 47. See Ahing v. Lehman Brothers, Inc., 2000 U. S. Dist. LEXIS 5175 (S. D. N. Y., 2000); Green v. Progressive Asset Management, 2000 U.S. Dist. LEXIS 12428 (S. D. N. Y., 2000), motion for relief from judgment denied, 2000 U.S. Dist. LEXIS 15079 (S. D. N. Y., 2000); and Greenberg v. Bear Stearns & Co., 1999 U.S. Dist. LEXIS 12991, Fed. Sec. L. Rep. (CCH) P 90696 (S. D..N. Y., 1999), aff’d 220 F.3d 220 (2nd Cir., 2000), cert. denied, 148 L. Ed.2d 669 (2001) (in affirming the lower court, however, the Second Circuit cited DiRussa, not Halligan, and referred only to manifest disregard of the law), all denying motions to vacate. But see Daily News LP v. Newspaper & Mail Deliverers’ Union of New York and Vicinity, 1999 U.S. Dist. LEXIS 19024; 162 L.R.R.M. 2968 (S. D. N. Y., 1999). 48. See also Acciardo v. Millennium Securities Corp., 83 F. Supp. 2d 413 (S. D. N. Y., 2000).

Executive Biography- Ira Jane Hurst-Romero Ira Jane Hurst-Romero, C-SAPA is President and Owner of Employee Screening Services, Incorporated (ESS, Inc.) and Ira Jane Hurst & Associates (IJH&A). Ira Jane has established her 100%, wholly woman-owned, Louisiana-based company as one of the premier provider of substance abuse program administration services. She is a pioneer in the field of third party drug and alcohol program administration, avidly promoting the involvment of woman-owned businesses within our industry. She frequently consults with her industry peers regarding prevalent industry issues, including Federal regulation implementation, industry-wide development and consolidation. A nationally recognized expert in the field, she is frequently called upon to testify as an expert witness for the promulgation and implementation of Federal and State regulations, in addition to several requests to comment on current industry issues. She has held several seminars throughout the country, in order to educate her peers about industry-wide Federal regulation implementation and pertinent industry issues. She was recently invited to participate in the 3rd Bi-National Demand Reduction Conference, sponsered by the Office of National Drug Control Policy, as well. Currently, Mrs. Hurst-Romero is serving as President of the Substance Abuse Program Administratorís Association (SAPAA). She is a founding member of the Association, having served as a member of the SAPAA Board of Directors, Standards and Ethics Committee, and the Governmental Affairs Committee. She has also acted as chairman of the Bylaws Committee, the Finance Committee and the Membership and Registration Committee. She has worked to establish a separate commision to construct and implment a certification program for Certified Substance Abuse Program Administrators-the C-SAPA. Her commitment to employee education has guided her belief that the key to compliant employee participation in any substance abuse program begins with a sound chain of custody. Her area of expertise lies in the real life applications of drug and alcohol policy and procedure implementation. She pioneered the development of the multi-level random selection program, and she is currently serving on the Department of Health and Human Services Substance Abuse and Mental Health Serviceís Administration Chain-of-Custody Review and Design committee. In addition, she has been nominated to the Department of Transportationís Advisory Council for Paperless Laboratories. Ira Jane Hurst-Romeroís commitment to industry education is ever evolving. She publishes a weekly e-newsletter, entitled The Advisor, which informs clients and industry professionals on current issues in drug and alcohol testing practices.

DAVID S. SHERWYN School of Hotel Administration 146 Ellis Hollow Creek. Cornell University, Ithaca, NY 14853 Ithaca, NY 14850 (607) 255-1711 (607) 277-8373 e-mail [email protected]


Cornell Law School, J.D. 1989 Cornell University, New York State School of Industrial and Labor Relations, B.S. 1986


Assistant Professor of Law School of Hotel Administration, Cornell University, 1997-present Courses Taught: Business and Hospitality Law, Employment Discrimination for Managers, and Union / Management Relations Research Fellow Center for Labor and Employment Law, New York University School of Law 2001-present Visiting Lecturer School of Hotel Administration, Cornell University, 1996-1997 Adjunct Professor of Law Cornell Law School, 1995-1997 Courses Taught: Employment Law and Legal Writing Visiting Lecturer New York State School of Industrial and Labor Relations, Cornell University, 1994-1997 Courses Taught: Employment Law, Employment Discrimination Law, and Sports Arbitration


Sherwyn, D., Heise, M., Eigen, Z., (2001)Don’t Train Your Employees and Cancel Your 1-800 Harassment Hotline: An Empirical Examination and Correction of the Flaws in the Affirmative Defense to Sexual Harassment. LXIX Fordham Law Review, Number 4 pgs. 1265-1304 Sherwyn, D., Kaufman, Z., Klausner, A., (2000) Same Sex Sexual Harassment and the Equal Opportunity Sexual Harasser Defense: What is it, and how is it important to you? Cornell Hotel and Restaurant Administration Quarterly 41, # 6 Sherwyn, D., Eigen, Z. & Klausner A. (2000) The ADA and punitive damages: Five Supreme Court rulings. Cornell Hotel and Restaurant Administration Quarterly 41. Sherwyn, D., Lankau, M. & Eigen, Z. (1999) The good the bad & the ugly: The peculiar discrimination case of Joe’s Stone Crabs. Cornell Hotel and Restaurant Administration Quarterly 40 (5), pages 10-17. Sherwyn, D. Tracey, J.B. & Eigen, Z. (1999) In defense of mandatory arbitration of employment disputes: Saving the baby, tossing out the bath water, and constructing a new sink in the process. University of Pennsylvania Journal of Labor and Employment Law. Volume 2, Number 1, pages 73-150. Sherwyn, D. & Tracey, J.B. (1998) Sexual harassment liability in 1998: Good news or bad news for employers and employees. Cornell Hotel and Restaurant Administration Quarterly, 39 (5), pages 14-21. Lynn, M., Le, Joseph-Mykal, & Sherwyn, D. (1998) Reach out and touch someone – your customer. Cornell Hotel and Restaurant Administration Quarterly, 39 (3), pp. 60-65. Sherwyn, D. & Tracey, J.B. (1997) Mandatory arbitration of employment disputes: Implications for policy and practice. Cornell Hotel and Restaurant Administration Quarterly, 38 (5), pages 58-66.


Sherwyn, D., Tracey, J.B., & Heise, M. (2000) Vicarious liability in sexual harassment cases: An analysis of the first 53 motions for summary judgment based on the new affirmative defense. Proceedings of the Annual Meeting of the Academy of Management, Toronto, ON, CANADA. Sherwyn, D. & Tracey, J.B. (1999) Changes in sexual harassment law: A strategic opportunity for defining the next step in the journey. Proceedings of the Annual Meeting of the Academy of Management, Chicago, IL. Sherwyn, D. & Tracey, J.B. (1998) The strategic implications of sexual and gender-based discrimination: The case of consensual affairs gone sour. Proceedings of the Annual Meeting of the Eastern Academy of Management, Springfield, MA.

Hospitality Law Comments:

Feb. 2000 — Comment on Schurr v. Resorts International (3rd Cir.), “Innkeepers must carefully consider reasons for affirmative action”, March 2000 — Comment on Hancock v. Cracker Barrel Old Country Store (S.D. Ala.), “Law protects ‘equal opportunity’ harassers”, June 2000 — Comment on Sinkler v. Midwest Property Management (7th Cir.), What is a disability and when is an employee unlawfully regarded as having a disability? Sept. 2000 — Comment on Hostetler v. Quality Dining (7th Cir.), Can an employer prevail in a case where an employee has alleged sexual harassment by a coworker? Yes, if the conduct was not severe or pervasive. Oct. 2000 — Comment on EEOC v. Joe’s Stone Crab (11th Cir.), ” Congratulations, we’re sorry: No justice for Joe’s in lengthy case”,. Nov. 2000 — Comment on Munoz v. Oceanside Resorts (11th Cir.), “Employers must be prepared to defend all terminations, even when there is no evidence of discrimination.” Dec. 2000 — Comment on Ryan’s Family Steakhouse v. Brooks-Shades (Ala.), “Good record keeping is key to mandatory arbitration policy.”

Professional Association Participation:

Co-Host and Moderator: Cornell University and Bickel & Brewer Fourth Annual Hospitality Industry Legal Strategy Conference. October 4-6, 2000 Speaker: 53rd Meeting of the NYU Annual Conference on Labor. Topic: Empirical Studies of Arbitration Systems for Employment Disputes: What Do We Know? May 18-19, 2000 Moderator: Cornell University Conference on Hospitality Industry Strategy. Topic: A Proactive Approach to Managing Employee Retention and Morale: Mandatory Arbitration Strategies, March 19-21, 2000. Editor: LRP Hospitality Law, Contributes to the monthly publication by commenting on recent cases involving the hospitality industry Speaker: University of Houston, Conrad N. Hilton College’s Symposium on Legal Issues in the Hospitality Industry at the University of Houston. Topic: Sexual Harassment After Ellerth & Faragher: The First Fifty Summary Judgment Motions October 28-29, 1999. Speaker: Academy of Hospitality Industry Attorneys, 1999 Conference; Denver, Colorado. Topic: Arbitration of Discrimination Claims. Date: May 28, 1999. Speaker: University of Houston, Conrad N. Hilton College’s Symposium on Legal Issues in the Hospitality & Gaming Industries at the University of Houston. Topics: (1) Labor and Employment Relations in 1998; and (2) Premises Liability for Hotel Owners Dates: October 28-30, 1998. Speaker: University of Houston, Conrad N. Hilton College’s Symposium on Legal Issues in the Hospitality & Gaming Industries at the University of Houston. Topics: (1) Creating an In-house Dispute Resolution Program for Employees. (2) Collective Bargaining & Issues of Unionization. Dates: October 22-24, 1997. Speaker: International Association of Hospitality Accountants: 44th Annual Convention, Calgary, Alberta, Canada. Topic: Workplace Torts and Courtroom Alternatives. Date: September 26, 1997. Speaker: International Association of Hospitality Accountants: Hospitality Industry Technology Exposition and Conference, Baltimore, Maryland. Topic: Guest Stay Information: Is It Confidential? Date: June 25, 1997.

Awards: 2000-2001 Cornell University School of Hotel Administration Teacher of the Year (selected by the students of the Hotel School) 1999-2000 Cornell University School of Hotel Administration Teacher of the Year (selected by the students of the Hotel School) 1998-1999 Cornell University School of Hotel Administration Teacher of the Year (selected by the students of the Hotel School) 1997-1998 Cornell University School of Hotel Administration Teacher of the Year (selected by the students of the Hotel School)

1998 Cornell University School of Hotel Administration Professor of the Year (selected by Cornell’s fraternities and sororities)


Brown, Pinnisi & Michaels, P.C., Ithaca, New York, 1997 – present. (formerly Pinnisi, Wagner, Sherwyn & Geldenhuys, P.C., 1994 — 1996) Laner, Muchin, et al., LTD., Chicago, IL, 1992-1994. Rudnick & Wolfe, Chicago, IL, 1990-1991. Verrill & Dana, Portland, ME, 1989-1990. Proskauer, Rose, Goetz & Mendelsohn, New York, NY, Summer 1988.

ADMITTED: Illinois

New York

EEO News provides employment law case headlines on EEO cases it believes are significant as well as an informative workplace law radio show. EEO News is not a substitute for legal research or an employment lawyer. does not provide legal advice. To learn more about employment and labor laws, please contact an employment lawyer to answer your EEO legal questions.

EEO News provides employment law case headlines on EEO cases it believes are significant as well as an informative workplace law radio show. EEO News is not a substitute for legal research or an employment lawyer. does not provide legal advice. To learn more about employment and labor laws, please contact an employment lawyer to answer your EEO legal questions.

Mrs. Cratchit, RN – Hired by NurseTemps, Inc. to advise customers pricked by wreaths or who suffer from allergic reactions to pine needles. Received W-2 from NurseTemps. Frequently, she sees customers who storm Ebenezer Scrooge Christmas Wreath Co.’s office with bloody fingers. She works 70+ hours a week and is paid $29,000 per year. Mrs. Cratchit believes she is entitled to overtime for working in excess of 8 hours in a day. She worked with Ebenezer Scrooge Christmas Wreath Co. for 8 years.

Ebenezer’s Nephew, Delivery Person – Delivers Christmas Wreaths to homes in the Tri-State Region around New York City. Works 100+ hours per week. He uses the Company’s minivan to make the deliveries. He is paid a weekly salary of $1,000. He receives a 1099.

Bob Cratchit, Bookkeeper – Paid annual salary of $20,000 for the past 15 years. December 25, 2000, Cratchit was promoted to Vice President of Marketing in order to develop and implement a new marketing scheme. As VP, he earns $35 per hour. He has been paid $78,000 to date in 2001. He has worked an average of 80 hours per week for the past 16 years.

Belle, Admin Ass’t – Scrooge’s former girlfriend has worked as his administrative assistant for the past 10 years. She earns $400 per week. She works about 60 hours a week. Belle receives an extra $1 per hour when she works after 10 p.m. She is paid a weekend bonus of $10 whenever she is required to work on the weekend.
Week ending 12/24/2000: Belle worked 60 hours and earned $350. ($300 in salary + $20 for working after 10 p.m. + $10 for working on the weekend + a $20 Christmas bonus).

Tiny Tim, Laborer – Made Christmas wreaths in his home until December 24, 2000. Tim worked approximately 95 hours a week. He was paid $6 per hour. On December 25, 2000, he was promoted to a sales position. He is now paid on a commission basis to visit hospitals and sell wreaths.

Big Tim, Web Developer – Tiny Tim’s cousin. Works 75 hours a week for the first 2 weeks of each month. He is paid $60/hour. He attends school the second half of each month. He handles the Company’s e-commerce. He is paid cash and receives no W-2 or 1099.

David Sherwyn believes that sexual harassment prevention training is not a good idea. Bob Lipman will cross examine David Sherwyn about his article “Don’t Train Your Employees and Cancel Your ‘1-800’ Harassment Hotline: An Empirical Examination and Correction of the Flaws in the Affirmative Defense to Sexual Harassment Charges.”

LXIX Fordham Law Review, Number 4 pgs. 1265 – 1304.

How serious is violence in the workplace? Here are the sobering facts: The National Institute for Occupational Safety and Health (NIOSH) reports that homicide, due to workplace violence, is the leading cause of death for women in the workplace and the second leading cause of death for men. Further, current data suggest that 2,500 workers per 100,000 have been physically attacked on the job. Whether it’s a bank, a shopping mall, a manufacturing facility, a computer firm, or a brokerage house, it seems that no workplace setting is completely immune from this potential threat to employee safety.

EEO News provides employment law case headlines on EEO cases it believes are significant as well as an informative workplace law radio show. EEO News is not a substitute for legal research or an employment lawyer. does not provide legal advice. To learn more about employment and labor laws, please contact an employment lawyer to answer your EEO legal questions.