Alternative Dispute Resolution: Recent Trends and Developments - Part One of a Two-Part Series
July 1, 2000
Michael J. "Mike" Ranallo- Chicago
Robert W. Vyverberg- Chicago
Employers who have implemented or are
considering mandatory alternative dispute resolution (ADR) plans as a means
for resolving employment-related claims should be aware of the increasing
legal challenges to these plans from a variety of sources. Federal and
state courts across the country are closely scrutinizing these plans when
employers seek to enforce them. In 1997, the Equal Employment
Opportunity Commission issued a policy statement taking aim at mandatory ADR
plans, opposing compulsory arbitration of employment discrimination claims.
Even members of Congress have joined in the attack against certain types of
mandatory ADR plans in the form of proposed legislation, the merits of which
were debated in subcommittee hearings earlier this year. In light of
these developments, this article discusses the evolution of mandatory ADR
plans and the benefits of implementing such plans. The second article in
this series identifies ways in which these plans should be designed, or
modified if already in existence, in order to withstand challenges to their
enforceability.
Before delving into the nuts and bolts of
mandatory ADR plans, some background information is in order.
What exactly are mandatory ADR plans?
In the most common application, these are
written plans implemented by the employer under which employees must agree as
a condition of employment to waive their right to pursue certain
employment-related claims in a court of law. Instead, the sole means for
resolving such claims is through private mediation and/or arbitration before a
neutral third party.
Mandatory ADR plans, which invariably cover
nonunion employees, started gaining widespread approval in 1991 with the
United States Supreme Court’s decision in Gilmer v. Interstate/Johnson Lane
Corp. In Gilmer, the Court upheld a mandatory arbitration agreement
barring the plaintiff, a securities representative with the New York Stock
Exchange, from pursuing an age discrimination claim in federal court.
From that point forward, more and more employers have adopted mandatory ADR
plans covering a wide range of employment-related claims, most significantly
discrimination and harassment claims under federal and state statutes.
Why are mandatory ADR plans desirable?
Generally speaking, when compared with
employment-related lawsuits in the courts, private mediation and arbitration
proceedings are much quicker and less costly. Discovery, while allowed,
is usually more limited than under the liberal rules followed in federal
and state courts. As a rule, mediation and arbitration is also less
adversarial than the all too common knockdown, drag-out lawsuit.
Resolution of employee disputes through the use of ADR plans is generally
accomplished confidentially, without adverse publicity. Finally, claims
are not resolved by unpredictable juries, but instead by experienced mediators
and arbitrators. While this certainly does not negate an employee’s
right to recover damages, employers are more likely to receive evenhanded
treatment before trained neutrals, and when an employee prevails, the damages
awarded tend to be more reasonable.
Since the Supreme Court’s decision in
Gilmer, the vast majority of federal and state courts have endorsed and
enforced mandatory ADR plans, with a few noteworthy exceptions. The
Ninth Circuit Court of Appeals (Alaska, Arizona, California, Hawaii, Idaho,
Montana, Nevada, Oregon, Washington, Guam, and N. Mariana Islands), for
example, has refused to enforce such plans to the extent they prevent
employees from bringing statutory discrimination claims in the courts.
So far, the Ninth Circuit stands alone among the federal courts of appeals in
holding that employers cannot force employees to mediate or arbitrate
statutory claims, no matter how the plan is designed. Recently, however,
other courts have begun closely scrutinizing mandatory ADR plans to ensure
that they contain adequate due process protections and that the substantive
rights and remedies of employees are not compromised. This heightened
analysis has spawned a number of court decisions that identify which types of
plans are more likely to survive judicial scrutiny.
In the September edition of the Employment Law
Letter we will list and discuss a number of factors that employers should
consider before drafting or implementing a mandatory ADR plan, as well as a
number of provisions that should be included in such plans.
For more information, please contact Michael
J. Ranallo at 1-800-837-5606 or mranallo@hklaw.com,
or Robert W. Vyverberg at 1-800-837-5606 or rvyverbe@hklaw.com.