Arbitration|Employment

Man Bites Dog: Employment Arbitration Takes a Bashing

 In previous posts, I expressed concern that mandatory employment arbitration is having a bad effect on the practice of arbitration generally.  As my older brother used to say, “Duh.”  And here’s some more troublesome evidence of this regrettable trend.

 On Saturday December 19, President Obama signed into law an Act authorizing defense spending.  Included in the bill was a provision authored by Senator Al Frankin (D-Minn.), prohibiting defense contractors receiving more than one million dollars from entering into any arbitration agreements with employees purporting to require private arbitration of claims arising from Title VII of the Civil Rights Act of 1964.

Senator Franken had previously held hearings on this issue, featuring (among others) Jamie Leigh Jones, the former Halliburton employee who was forced to arbitrate a claim of sexual assault, and attorney Mark A. deBernardo.

Not a great ad for the process. 

Here is the text of Section 8116 of the Act:

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.

It’s been said before in many other contexts:  We are a fluid society in which institutions are accountable, either in the near term or the long term.  If employers keep doing stupid stuff, and if lawyers keep helping them do it, then one day when the bath water is drained there are going to be a lot of fresh-faced, valued babies in there.

3 Comments
  1. My theory is that the US Supreme Court went too far in upholding the enforceability of mandatory pre-dispute arbitration clauses. (In contrast to the approach of the state courts in California for example) And as a result of the inevitable backlash against the perceived harshness of this approach, Congress is on its way to eliminating pre-dispute arbitration clauses in most consumer and employment situations. Take that, Supreme Court! As you say, perhaps this is throwing the baby out with the bathwater. To my mind, though, we are not eliminating arbitration, only the non-knowing waiver of the consumer’s right to jury trial. People can always agree to arbitrate after a dispute arises if they really feel that arbitration is in both parties’ best interest. And in the new era, maybe companies should be encouraging mediation prior to litigation or arbitration, which does not require anyone to waive anything.

    http://www.jcmarkowitz.com/2009/10/hard-cases-create-hard-times-for.html

  2. Thanks for your comment. As I read the statute, it does not permit arbitration of the covered claims, whether pre-dispute or post-dispute. They must “agree not to enter into” arbitration agreements. Period.

  3. If it went that far, I would agree it would be going too far. I think the language only forbids contractors from entering into employment contracts that mandate “as a condition of employment,” arbitration of discrimination or assault claims, etc. I’m not sure that would prevent a party who has already filed a discrimination charge or lawsuit from agreeing to arbitrate that claim, just as a party who files a lawsuit can always enter into a settlement agreement, or enter into a mediation agreement, or even agree to a roll of the dice to resolve a litigated dispute.

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