Arbitration|Employment|United States

Arbitrating Employment Disputes: Misusing a Valuable Tool? Part I

One hot, lonely summer day in 1958, at our rural home near Crozet, Virginia, I was working on an 8-year old’s project: dislodging a big quartz rock that was buried in the gravel driveway.  After a few hours I realized the trowel just wouldn’t do the job.  So I found a wood chisel in my Dad’s tool chest.  “Ah-ha!” I thought, “This is just the thing!  I’ll reduce it to bits and dislodge it a chunk at a time!”  By the time Dad got back from work at 5:30 or so the quartz had not been reduced by much, but the wood chisel had lost about all of its utility.

Dad’s objections included the necessity of the objective (“You wanted to put a hole in the driveway?”), the soundness of the strategic analysis (“You were going to pound it to bits?”), and (particularly) the skill of the execution of this project ([eyes raised to heaven] “Son….”).  And ever thereafter, when he cautioned me about using “the right tool for the right job,” his words had particular piquancy.

Which (obviously) gets us to the Arbitration Fairness Act.

Some people date commercial arbitration from the time of the Greeks and even before.  In Arbitration and Mediation in International Business (Kluwer 2006), Christian Buhring-Uhle says that “[c]ommercial arbitration is probably as old as commerce itself.”  (p. 31) Certainly by the time of the Renaissance, it was an established attribute of international trade.  Its attractions to the contemporary international merchant are all the more pronounced as commercial litigation becomes more enmired in discovery rules, burdensome cost, commercially unacceptable delay, unwelcome publicity and uncertainties of enforcement. 

The heart of commercial arbitration, to me, is captured in an apocryphal anecdote I urge on my students: In 1350, on a wharf in Venice, a purchaser questions whether the bale of cotton he is offered is of the same quality as the bale he had ordered.  He thinks it’s Grade B and the seller inists it’s Grade A.  He needs to buy and the seller needs to sell, so rather than the deal’s collapsing they agree to call over a cotton merchant of many years’ experience who sticks his hand into the bale, fingers it, and declares it’s Grade B.  The price is adjusted and the matter is resolved by means of a process whose authority no one doubts, whose alacrity everyone extols, and whose commercial reasonableness no one questions. 

What happens when this tool is used for disputes that don’t involve the grade of goods sold, and don’t even involve quarreling merchants?  No one would seriously suggest that criminal acts are susceptible to arbitration, for example.  The elderly and experienced cotton merchant was not called upon to opine on the fate of the young urchin who was caught stealing someone’s purse on the wharf.  The process by which the state deprives a citizen of liberty is fraught with procedural rights; the party injured is not just the purse-owner but rather the community at large; and the object of the exercise is not to arrive at a commercially rational outcome, but rather to comport with certain standards and expectations set by the state. Which gets us to the unease many feel about arbitration of employment-related claims. 

In this context, “Labor” is different from “Employment”: Arbitrating grievances –that is, violations of a collective bargaining agreement — seems entirely reasonable.  By both law and practice, union and management are parties to an enforceable contract, the breach of which is subject to arbitration by mutual bargained consent.  

Claims raised by an individual employee, however, have at least three attributes that make their “fit” with commercial arbitration more problematic:

First, the individual employee seldom has bargained for arbitration as the method of resolving workplace-related disputes.  The justification of employment arbitration is almost never that the employee asks for it — it is that the employer requires it and the employee accedes.

Second, the imbalance of resources and sophistication between employers and employees is usually far more pronounced and more systemic than the imbalance between two merchants.  A small buyer enters into a deal with a large seller with eyes open to the risks of imbalanced resources.  An employee, by contrast, seldom assesses whether to accept a job upon a deliberate assessment of such an assumption of risk.

Third, merchants arbitrate allegations of breach of their private commercial agreements, and have their own financial “interests” in resolving their differences on commercial terms.  By contrast, employee claims very frequently involve the alleged violation of a “right” that was established by public act, and persists independently of any contract.  Indeed, there is seldom a contract governing the employment relationship — instead, employee claims arise from a bundle of “rights” that are not easily susceptible to negotiation or compromise.

What are the implications of these distinctions?  And what are the risks to the parties — and to arbitration itself — when employment claims are subject to arbitration?  The discussion continues in Part II.  (And, to be clear — my concern is not for the quartz — it’s for the chisel.)

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