An Argument Against the Arbitration Fairness Act

Even as one segment of the employment community, defense contractors and sub-contractors with large contracts, have lost the right to have arbitration agreements as a condition of employment, a summary of a recent law review article makes what it calls the "not so popular" argument in favor of such clauses. See, Jonathan Adler's of New York Law School's comment at The Obiter Dictum, A Not So Popular Argument Supporting the Use of Mandatory Arbitration Clauses.

The longer article is Determining if Mandatory Arbitration is “Fair:” Asymmetrically-Held Information and the Role of Mandatory Arbitration in Modulating Uninsurable Contract Risks, by Paul Bennett Marrow.

Here's the money quote from the Obiter Dicta article: 

Passage of the Arbitration Fairness Act of 2009 (which seems unlikely given its current status in both House and Senate committees) will cause more problems than it will solve. For instance, without the availability of mandatory arbitration, many parties will be more vulnerable to potential litigation and its associated uncertainties. As a result, overall transaction costs will increase. These costs will be directly passed to borrowers and franchisees. Employers will also pass these costs to business customers, albeit indirectly.

Two comments, first I am not as optimistic as the writer that the Arbitration Fairness Act will not pass; secondly, I think saying that being for mandatory arbitration is not a popular position, may be the understatement of the year.

So You Think Your Fantasy Football Team Is Doing Bad

Odds are that you have not been fired for it. Not the case for four employees at Fidelity Investments, whose office is apparently located in my neighborhood. Rob Radcliff at Smooth Transitions has the complete story, Fantasy Football Firing, complete with a poll of Fort Worth Star Telegram readers on whether they think the company over reacted. (No surprise how that one turned out.)

This is an interesting and timely story for me as I will be speaking at the Advanced Employment Law Seminar sponsored by the Texas State Bar in early January. My topic: "You're Not the Boss of Me: When and How Much Can an Employer Regulate Employee Conduct On and Off the Job."

Rob correctly points out that the key is likely to be that Texas is an employment at will state. I think the most interesting long term question is whether or not somewhere down the road, the expectations of the general public on what employers should do, as opposed to what they can legally do, becomes so at odds with employment at will, that the venerable doctrine is abandoned.

Of course that could never happen. And Lehman Brothers could never go bankrupt, Arthur Andersen could never fail, and Tiger Woods could never .... You get the point.

A Pre-Cursor to the Arbitration Fairness Act Takes Another Step

The Arbitration Fairness Act, which would ban the practice of making agreement to arbitration a condition of employment, is not likely to be voted on until sometime in the spring of 2010. However, those in favor of arbitration in the workplace can not be pleased by the survival of the Franken amendment to the Defense Appropriations Bill which bans such agreements by defense contractors.

After passing the Senate in October (the day before I was testifying in a Senate Judiciary Committee hearing involving arbitration where Senator Franken took the lead) it has now passed not only the House, but survived a conference committee. Franken Rape Amendment Included In Defense Spending Bill.

The amendment extends not only to first tier contractors, but also to sub-contractors, if either of them exceed $1,000,000. Although much of the publicity surrounding the Amendment has been focused on a rape that occurred against an employee who had an arbitration agreement, by extending its coverage to any claim under Title VII it is much broader than cases involving sexual assault.

Here is the language of the Franken Amendment that survived conference :

SEC. 8116. (a) None of the funds appropriated or otherwise made available by this Act may be expended for any Federal contract for an amount in excess of $1,000,000 that is awarded more than 60 days after the effective date of this Act, unless the contractor agrees not to:

(1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention; or

(2) take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that the employee or independent contractor resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress,false imprisonment, or negligent hiring, supervision, or retention.

(b) None of the funds appropriated or otherwise made available by this Act may be expended or any Federal contract awarded more than 180 days after the effective date of this Act unless the contractor certifies that t requires each covered subcontractor to agree not to enter into, and not to take any action to enforce any provision of, any agreement as described in paragraphs (1) and (2) of subsection (a), with respect to any employee or independent contractor performing work related to such subcontract. For purposes of this subsection, a ‘‘covered subcontractor’’ is an entity that has a subcontract in excess of $1,000,000 on a contract subject to subsection (a).

(c) The prohibitions in this section do not apply with respect to a contractor’s or subcontractor’s agreements with employees or independent contractors that may not be enforced in a court of the United States.

(d) The Secretary of Defense may waive the application of subsection (a) or (b) to a particular contractor or subcontractor for the purposes of a particular contract or subcontract if the Secretary or the Deputy Secretary personally determines that the waiver is necessary to avoid harm to national security interests of the United States, and that the term of the contract or subcontract is not longer than necessary to avoid such harm. The determination shall set forth with specificity the grounds for the waiver and for the contract or subcontract term selected, and shall state any alternatives considered in lieu of a waiver and the reasons each such alternative would not avoid harm to national security interests of the United States. The Secretary of Defense shall transmit to Congress, and simultaneously make public, any determination under this subsection not less than 15 business days before the contract or subcontract addressed in the determination may be awarded.

The bill now goes back to the Senate where passage is expected before Christmas.

Hat tip to the Washington Labor & Employment Wire for their post on the appropriations bill.

Update (12/21/09): President Obama signed the law over the week end. Obama Signs Into Law Restriction on Arbitration Clauses.

Update (12/30/09):  If you check the comments below, a reader has pointed out that I may have read the Franken Amendment too broadly when I suggested it may cover any Title VII claim. I certainly can see the point, and actually think hope he or she is correct.

However, I am apparently not the only one to read it broadly (or at least write about it that way). The
Alaska Employment Law blog's post, The Breadth of the Franken Amendment, quotes from the Legislative & Public Policy Direct of NELA:

Importantly, it bars contractors and subcontractors that are funded by 2010 appropriations not only from entering into pre-dispute “agreements” with their employees that require arbitration of Title VII claims, but also from ENFORCING any such agreements that already exist. It also appears to apply to such “agreements” with ANY of the contractors’ employees, anywhere, not just those whose jobs are funded by defense appropriations.

My guess is that defense contractors will put the wording from the Franken amendment "as is" into their agreements, and then when someone seeks to enforce arbitration of a Title VII claim with no relationship to "sexual assault or harassment" and we will get our first determination that matters. Even if the commentator below is correct about Title VII being limited, it seems a little harder to apply that reasoning to "negligent hiring, supervision or retention."  ]

Legislative drafting is obviously not an easy task. Not that they need it, but it definitely provides job security to judges.

Joint Commission and Bullying

If you have ever worked in or around hospitals, you know that two words that get everyone's attention are, Joint Commission. That's a shorthand description of an accreditation review that is a top to bottom scrubbing of every facet of an institution, with serious consequences if you don't meet the standards.

So when Professor David Yamada, the leading proponent of anti-bullying legislation notes that the Joint Commission has enacted standards that can be read as requiring anti-bullying procedures and training, I take note. See Workplace bullying in healthcare I: The Joint Commission standards.

Labor and Employment Comes (Slowly?) Into the Electronic World

In looking at commentary on yesterday's granting of cert in City of Ontario v. Quon (more about that follows), I found a reference to an interesting law review article by William A. Herbert, Deputy Chair and Counsel for the New York State Public Employment Relations Board, provocatively titled, The Electronic Workplace: To Live Outside the Law You Must Be Honest.

While I haven't read the whole article, I was struck by one of his introductory comments:

In many ways, United States labor and employment law sleepwalked into cyberspace. Although there is wide societal recognition that new technologies are leading to the diminishment of personal privacy, there has not been an equal demand for changes in the legal paradigm.

There's probably a lot of truth to that, but I think that it is changing.

Besides not being able to open your email without the announcement of yet another seminar on social media, there's other evidence that we are actually moving beyond the platform to actual developments. One is a report from Richard Negri at today's workplace, Some Things I Took Away From The Organizing Conference Last Week. That's organizing as in bringing a union to your workplace, not as in straightening your closets. If you don't think it's a different world, just check out the power point presentation, Organizing & New Media in the Obama Era at the conference's web site.

And yesterday, the Supreme Court granted certiorari in the Quon case where the 9th Circuit held that notwithstanding the city's policy that it could review electronic messages on equipment furnished to its employees, the employee nevertheless had an expectation of privacy because of the way the policy was implemented. Although the case is likely to turn on 4th Amendment law that is not directly relevant to private sector employers, any action by the Court that seems to expand the privacy rights of employees is likely to have a ripple effect on related areas such as common law privacy claims.

It may be too early to say that labor and employment law is up to date on all forms of communication and interaction that we now live with on a daily basis, but there's no question that willingly or not, it is clear that we will soon be dealing with them.

MDV the Malicious Prosecution Way

There are a myriad of ways that employers end up in front of a jury. One of the less frequent, but as seen by the result, no less dangerous, is a case for malicious prosecution. They usually arise like the facts in a federal court in Virginia last week. Clyde Bennett, a night shift foreman was fired and charged with grand larceny in connection with the embezzlement of computer equipment.

When that charge was later dropped, he filed a lawsuit against his former employer for malicious prosecution. According to the report from the Richmond Times Dispatch, the jury took less than half an hour to deliver its message. Jury awards $3.2 million to local trucking company employee.

Because the legal standards are relatively high, this verdict is likely to have a long way to go before it becomes a judgment that has to be paid. But it is a good reminder that any time one of the actions that an employer is considering is filing a criminal charge against an employee, that there is at least the potential for what at the time would seem preposterous -- that it could be the employer that ends up the defendant.

Google and Legal Research

Someone else may have caught this before him, but my hat tip on Google's entry into legal research goes to Eugene Lee at California Labor Law, Google Offers Caselaw ... for FREE. Google comes out with tons of new offerings and not all of them last, so who knows about this project, but given what they have accomplished in other areas, probably worth keeping an eye on.

I went over to check it out and since I have been interested in the "mixed motive" issue as a follow up to my testimony before the Senate Judiciary Committee on the bill to overturn Gross v. FBL Services, thought I would try out "mixed motive." Here are the first five entries with that search on the Google scholar page, with the radio button for "Legal opinions and journals" checked:

Price Waterhouse v. Hopkins

Desert Palace, Inc. v. Costa

Mt. Healthy City School District Board of Education v. Doyle

NLRB v. Transportation Management Corp. and

Rachid v. Jack in the Box, Inc.

Although that's not a very sophisticated search term, the first four cases are the key Supreme Cases in determining the history of "mixed motive." I would have thought Gross would have shown up high but it doesn't appear until the 8th page. Interestingly, the Rachid case is a 5th Circuit case which extended mixed motive to the ADEA without a lot of discussion, and has been sub silentio overruled on that point by Gross.

I doubt that many are canceling their Westlaw or Lexis accounts today, but it is an interesting development.