Arbitration Agreement Should Be Explicit and Clear
By Scott A. Weiss, Esq., and Pamela H.L. Weiss, Esq.
Principals in Weiss & Weiss LLC in Fairfield
Whether you deal with individual employees or with a union and its members through collective-bargaining agreements, employment disputes are inevitable. Clearly written and understandable employment policies serve as your first-line defense against being embroiled in a lawsuit with an employee. The second line of defense is having an agreement to arbitrate employment disputes.
Arbitration, also called alternative dispute resolution (ADR), is becoming the preferred way to resolve employment disputes. Typically arbitration takes less time and is more informal than litigation and, as a result, is less costly.
The courts, however, have had difficulty grappling with some issues related to arbitration of employment disputes, particularly in regard to an employee’s waiver of the right to sue in an arbitration agreement. Some arbitration agreements have been ruled unenforceable, and the employees in these cases have been allowed to sue their employer.
Support for Arbitration
Federal and state courts have subscribed to the wisdom of arbitration and provide for alternative dispute resolution in their practice rules. Indeed, both Congress, in at least one federal statute relating to discrimination of disabled employees (the Americans with Disabilities Act, or ADA) and the U.S. Equal Employment Opportunity Commission encourage alternative dispute resolution of employment discrimination claims.
Labor unions and employers for some time now have negotiated and included in their collective-bargaining agreements arbitration clauses to deal with employment disputes arising out of those agreements. Generally, collectively bargained arbitration clauses are very broad and apply to any dispute. Consequently there is a recognized federal policy favoring arbitration. Courts presume all disputes under a general arbitration clause are to be arbitrated, and generally defer to binding arbitration as long as there exists an enforceable agreement to arbitrate.
What Constitutes Effective Waiver of Right to Sue?
In one case, Alexander vs. Gardner-Denver Co., the U.S. Supreme Court decided for the first time that a union could not waive an employee’s statutory right to sue under Title VII of the Civil Rights Act. The court therefore said the employee could pursue his employment discrimination claims in federal court, despite the prior arbitration of his wrongful-discharge claim.
In a later case, Gilmer vs. Interstate/Johnson Lane Corp., the Supreme Court narrowed the application of its decision in the Alexander case. The court decided an employee in a nonunion setting who had individually agreed to waive his right to sue could be compelled to arbitrate his age-discrimination claim.
What constituted an effective waiver of an employee’s statutory right to sue for employment discrimination had not been determined until the Supreme Court decided another case, Wright vs. Universal Maritime Service Corp. In this case, the Supreme Court permitted a union employee to pursue his ADA claims in federal court, despite the existence of a broad collectively bargained arbitration clause.
The Supreme Court recognized the seeming contradiction between the Alexander decision, which did not permit a broad and general waiver of the statutory right to sue by a union on the employee’s behalf, and the Gilmer decision, which recognized an individual employee’s right to waive the statutory right. In the Wright case, the Supreme Court refused to permit waiver of a right to sue in a collectively bargained arbitration clause unless the waiver was explicitly stated and was clear and unmistakable. Unfortunately, the court did not deal with the question of whether such a waiver is enforceable.
However, lower federal appellate courts, including the one for the Second Circuit (which covers Connecticut), have held that a waiver is sufficiently explicit and clear and unmistakable if: (1) the employee specifically agrees to submit to an arbitrator all federal claims arising out of his or her employment; and (2) the collective-bargaining agreement lists the statutes by name and citation, and the arbitration clause specifically states that the employer will comply with those statutes and with the terms of the arbitration clause.
What You Should Do
In light of the above cases, the importance of careful drafting of arbitration agreements cannot be emphasized enough. Review with your counsel the type of disputes to be arbitrated and the type of agreement to be provided.
An arbitration agreement, whether contained in a collective-bargaining agreement or provided as part of an individual initial employment offer, should be clear and written in plain language.
Some courts believe that a mutual promise to arbitrate certain claims provides enough consideration to support an agreement to arbitrate. But at least one Connecticut state court has said an arbitration policy that was offered as a modification of the employment agreement, but was optional and not agreed to by the employee, was unenforceable. In Connecticut, a personnel policy manual may be considered an implied employment agreement. The mere distribution of an arbitration policy will not modify an existing employment agreement. Some consideration must be provided that was not part of the initial employment agreement.
An arbitration agreement should clearly specify the claims, statutes (with legal references) and individuals covered. Under Connecticut General Statutes, Section 31-51bb, an employee may sue even though an arbitration agreement exists. Seek a clear and unmistakable waiver of this section.
In a nonunion setting, make the arbitration agreement a separate document. In a union setting, make it a separate section in the collective-bargaining agreement. This will help show that the parties have an intent to arbitrate.
Also include a commitment to abide by applicable federal and state employment discrimination laws, and incorporate not only in the arbitration clause the arbitration of disputes arising out of the employment relationship (particularly the statutes listed in the arbitration agreement) but also the arbitration of the interpretation of the agreement itself.
This is, of course, not an all-inclusive list.
However, the cost savings and benefits of a carefully drafted agreement to arbitrate employment disputes should outweigh the high cost of litigating these disputes. For an employer seeking to protect the company’s profit margin as well as the company itself, arbitration is a clear winner.