Protecting Public Rights in Private Arbitration
Lanni, Adriaan, The Yale Law Journal
Since the Supreme Court held in Gilmer v. Interstate/Johnson Lane Corp.(1) that a claim under the Age Discrimination in Employment Act(2) can be subjected to compulsory arbitration, the use of mandatory arbitration clauses in individual employment contracts has been the subject of vigorous debate. Though mandatory arbitration clauses have been widely criticized in both the scholarly literature(3) and the popular press,(4) lower courts have generally upheld these agreements and extended Gilmer's holding to a variety of statutory claims.(5) In Cole v. Bums International Security Services,(6) Judge Edwards offered a reading of Gilmer that would allow courts to ensure that employer-imposed alternative dispute resolution programs meet minimum standards of fairness and due process.
This Case Note argues that, although the Cole decision introduces a promising framework for addressing potential inequities and inadequacies in mandatory arbitration of individual employment disputes, it does not go far enough. The court should have followed its own logic and required public disclosure of arbitration awards to protect the integrity of public law. The matter is one of great urgency because statutes protecting the rights of individual employees are being increasingly interpreted and applied in private judicial fora.
When Burns Security hired Clinton Cole, it required him to sign an agreement to submit at the employer's request any employment disputes, including statutory discrimination claims, to binding arbitration in accordance with the rules of the American Arbitration Association (AAA). Fired two years later, Cole filed a complaint with the Equal Employment Opportunity Commission (EEOC) and brought charges in federal district court alleging racial discrimination under Title VII.(7) The District Court dismissed Cole's complaint pursuant to the employer's motion to compel arbitration.
In affirming the validity of the disputed arbitration agreement on appeal, Judge Edwards (a well-known scholar of labor law)(8) provided a new and thoughtful approach to the enforceability of mandatory arbitration clauses in individual employment contracts. The court first held that the employment contract at issue was covered by the Federal Arbitration Act (FAA) and therefore enforceable by a federal court.(9) Mindful of the differences between labor and individual employment arbitration,(10) the court held that agreements to arbitrate statutory claims are enforceable only if they do not undermine the relevant statutory scheme by preventing prospective litigants from effectively vindicating their claims.(11)
The Cole decision is the first time a court has interpreted Gilmer, traditionally cited for the proposition that civil rights claims can be subjected to compulsory arbitration, to limit the enforcement of arbitration clauses.(12) It did so by requiring, at a minimum, the due process standards provided for by the New York Stock Exchange (NYSE) arbitration rules. While the agreement between Bums Security and Clinton Cole was deemed valid, the court held that agreements requiring the employee to pay the arbitrators' fees are not enforceable(13) and that arbitrators' rulings on individual employees' statutory discrimination claims would be subject to meaningful judicial review.(14)
Cole is a distinguished opinion amid a multitude of post-Gilmer decisions that have mechanically enforced mandatory arbitration clauses without considering the fairness of the arbitration system at issue.(15) While respecting Congress's and the Supreme Court's recent strong endorsements of alternative dispute resolution (ADR),(16) the Cole framework protects against the most insidious dangers of compulsory arbitration of discrimination claims by requiring that private resolution programs provide for neutral arbitrators, more than minimal discovery, a written award, and full legal relief.(17) Although the rules of the major employment arbitration providers would survive the Cole analysis, those of most private arbitration systems would not. …