What the Courts Say about Mandatory Arbitration

Article excerpt

The author is an associate professor of business law at the Zarb School of Business at Hofstra University. He is a member of the panel of arbitrators of the American Arbitration Association, and serves on various municipal arbitration panel. He is a mediator for the New York State Public Employment Relations Board and an arbitrator for the New York State Employment Relations Board.

With claims rooted in employment discrimination soaring in recent years, coupled with expanded legislation covering discrimination in the workplace, many employers are seeking alternative avenues for resolving conflict and disputes in the workplace, particularly Title Vil and other federal statutory claims. Arbitration has become one such alternative which is supported in the courts as well as within certain legislative framework. However, despite growing support for employer-employee agreements covering mandatory arbitration agreements, there have been concerns raised by the courts as to the circumstances and applicability surrounding these agreements. As a result, greater scrutiny and analysis of -the Gardner-Denver and Gilmer rulings have come into focus with the recent Supreme Court decision in Wright v, Universal Maritime Services Corp. This article attempts to clarify the issues involved in these leading cases and looks at the implications of the Wright decision.

One of the most controversial issues affecting employment law today is the use of mandatory arbitration to resolve workplace disputes. In recent years, employers have required as a condition of employment that employees must agree to arbitrate claims or disputes arising from their jobs, including claims based on statutory rights against discrimination, rather than having their day in court.

In more recent years, as the number of employment discrimination claims brought under federal statutes has increased significantly, employers have had to deal with the enormous time consumption and expense in litigating these claims, which further translates into disruption in the workplace, lowering of employee morale, and injury to the employer's reputation.' An ever-increasing frustration and dissatisfaction with juries and the court system itself in commercial and business litigation have brought on new attitudes within the business community toward alternatives to the traditional judicial forum. In an effort to avoid or at least minimize, the expense and burden of litigation, an increasing number of employers are implementing alternative dispute resolution mechanisms in the workplace.' These programs require as a term and condition of employment that all disputes stemming from employment or termination of employment, including statutory claims, be resolved through mandatory arbitration. Inasmuch as Congress has enacted new employment statutes including the Americans with Disabilities Act (ADA), the Age Discrimination in Employment Act (ADEA), and the 1991 Civil Rights Act, these and other related state and administrative regulations have increased employer initiation of arbitration and conciliation because of the effectiveness and practicality of the procedures. There has been, however, a growing concern as to what extent the employer may hold an employee to arbitration or indeed the obligation to submit to arbitration, avoiding the judicial forum particularly on claims rooted in statutory discrimination issues.

Legislative Intent

A key issue of more recent concern by the courts is: what role did Congress intend for the arbitral process to play in statutory claims based on employment discrimination?

The Federal Arbitration Act (FAA) was enacted in 1925 and was codified in 1947 as Title 9 of the United States Code. One of its objectives was to change a historical hostility by the courts to arbitration agreements. A key provision of the FAA provides that a written provision for arbitration "in any maritime transaction or contract evidencing a transaction involving commerce" to be "valid, irrevocable, and enforceable. …