ElEmployment Abi iArbitration Agreementsmedia.straffordpub.com/products/employment... · 02-03-2011...

Presenting a live 90‐minute webinar with interactive Q&A

E l A bi i A Employment Arbitration Agreements Crafting Enforceable Arbitration Clauses and Successfully Navigating the ADR Process

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1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, MARCH 2, 2011

Today’s faculty features:

Margaret L. Watson, Of Counsel, McElroy Deutsch Mulvaney & Carpenter, New York

Allan Dinkoff, Litigation Counsel, Weil Gotshal & Manges, New York

Alfred G. Feliu, Partner, Vandenberg & Feliu, New York

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McElroy, Deutsch, Mulvaney

& C t LLP& Carpenter, LLPATTORNEYS AT LAW

STRAFFORDSTRAFFORDEmployment Arbitration Agreements: Crafting Enforceable Arbitration

Clauses and Successfully Navigating the ADR Process

CRAFTING ENFORCEABLE ARBITRATION CLAUSES

MARGARET L. WATSONMcElroy, Deutsch, Mulvaney & Carpenter LLPy, , y p

[email protected]

• Arbitration Agreements are contracts.Basics

g• FAA governs and pre-empts conflicting state law.

FAA designed to put arbitration agreements on same footing as other contracts – no less and no more – 9 U.S.C. §2

• State law principles of contract interpretation and contract defenses still applydefenses still apply.

Buckey Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006)

• Due Process is the outer limit: procedural and substantive.

6

Contract LawNecessary Elements to Enforceability:- Meeting of the Minds - mutual assentg- Consideration- Legislative/Statutory concerns- Legislative/Statutory concerns- “Due Process”

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Is it knowing and voluntary?

Agreement to ArbitrateIs it knowing and voluntary?

Is it clear and easily understandable?

What is the scope of the agreement?- Who decides arbitrability?- Does it cover “all claims”?

D it f t l i ?- Does it cover future claims?- Is it binding arbitration?

FAA presumption favoring arbitration such that ambiguities in theFAA presumption favoring arbitration, such that ambiguities in the language of an agreement should be resolved in favor of arbitration

- need to be explicit in terms of carving out any non-arbitrable claims.claims.

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Arbitration is voluntary; agreement to arbitrate must be supported by adequateAdequate Consideration

Arbitration is voluntary; agreement to arbitrate must be supported by adequate consideration.

Examples of adequate consideration:

- Where there is mutuality of agreement to arbitrate- not required, but meets consideration requirement

- Continued employment of “at-will” employee- except for California and arguably Idaho

- Where the agreement is supported by a tangible employment benefit, such asWhere the agreement is supported by a tangible employment benefit, such as participation in stock plan, severance offer, etc.

Due Process Limit: no “coercion;” contracts of adhesion are void as against public lipolicy.

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Other Contract Defenses to Enforceability

Arbitration agreement is unenforceable where:Enforceability

- It was procured by fraud, duress or the use of excessive economic power

- It would be “unconscionable” to enforce- e.g. one-sided, denying less advantaged party meaningful

choice

- Also: mistake, forgery, void as against public policy, etc. 10

• Well settled: Statutory Employment Claims are subject to mandatory arbitration. The rationale

Statutory ClaimsW S y p y C j yis: giving up a forum, not a substantive right.

• Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)• Circuit City Stores v. Adams, 532 U.S. 105 (2001)• Fletcher v. Kidder, Peabody & Co., 81 N.Y.2d 623 (1993)Fletcher v. Kidder, Peabody & Co., 81 N.Y.2d 623 (1993)

– Including in collective bargaining agreement • 14 Penn Plaza, LLC v. Pyett, 129 S. Ct. 1456 (2009)

• Waiver of statutory right must be clear and unmistakable• Waiver of statutory right must be clear and unmistakable– Wright v. Universal Mar. Serv. Corp., 525 U.S. 70 (1998)

• Key Concern: Whether forum provides full protection of statutory rights

• Legislature can limit ability to arbitrate any claim, e.g. NY and child custody issues

• Parties can’t give up what is not theirs…– EEOC’s ability to pursue victim-specific judicial relief, such as back pay, reinstatement

and other money damages • EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) 11

Special Considerations for Protection of Statutory Rights

- By agreement to arbitrate statutory claims: “Party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial forum.” Gilmer, 500 U.S. at 26

Statutory Rights

- Distinction between pre-dispute and post-dispute agreements to arbitrateCole v. Burns Int’l Security, 105 F.3d 1465 (D.C. Cir. 1997)

- Minimum Protections (for pre-dispute):- Agreement cannot affect employee’s ability to seek relief from EEOC- Arbitrator is bound to apply Title VII and other applicable public laws – both as to substance

and remedies- Agreement provides for appointment of neutral arbitrator

h id f d h i bj d j di i l i- The agreement provides for an award that is subject to adequate judicial review- Arbitrator can grant any relief deemed just and equitable, including any relief that would

have been available to the parties had the matter been heard in court (including fees to the prevailing plaintiff)

- Expense of arbitration cannot be overly burdensome (as compared to court) to effectivelyExpense of arbitration cannot be overly burdensome (as compared to court) to effectively deny enforcement of statutory right

- Discovery is “more than minimal”, providing bona fide opportunity to present claims and defenses 12

• Form of Agreement

Checklist for DraftingForm of Agreement– No particular form required, so long as it evidences an intent to submit to

arbitration– If written, signature not required, but is a best practice

• Scope of Agreement– Binding arbitration assumed– Presumption of all claims but best practice of making clear including statutory

di i i ti l idiscrimination claims

• Applicable Law– Default: FAA and state choice of law analysisy– Parties can specify state substantive law– Example of NY law and potential waiver of punitive damages

• Venue• Venue– Note: this can dictate where award can be enforced

• See Uniform Arbitration Act 26(b) 13

• Arbitrator Selection

Checklist for DraftingArbitrator Selection

– Procedures– Qualifications– For statutory claims requirement of neutrality y q y

• Class Action Waiver– Default: No Waiver

• Confidentiality

Di• Discovery– Due process requires more than minimal– Discovery that favors one side may render agreement unconscionable– Check Uniform Arbitration Act and relevant state arbitration procedures: may makeCheck Uniform Arbitration Act and relevant state arbitration procedures: may make

unwaivable right to subpoena information from third parties or utilize depositions at hearings. 14

Checklist for Drafting• Provision for costs/fees

– For statutory claims burden on claimant cannot exceed burden to bring action in courtaction in court

• RemediesF di t t t bit t t t t l i t b– For pre-dispute agreement to arbitrate statutory claims, must be same as available in court

– For all: can be greater than available in court – if parties’ agreement i li th i t tmemorializes the intent

• Provisions to insure Opinion/Award subject to adequate judicial review

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For a good example of employment arbitration rules and a check listAdditional Resources

For a good example of employment arbitration rules and a check list of due process concerns relating to employment arbitrations, see the American Arbitration Associations website at:

htt // d / ?id 32904http://www.adr.org/sp.asp?id=32904http://www.adr.org/sp.asp?id=28535&printable=true

For additional resources helpful to drafting alternative dispute resolution programs, including arbitration clauses, see

http://www.ilr.cornell.edu/alliance/resources/Guide/drafting_dispres_clauses.html

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STRAFFORDEmployment Arbitration Agreements: Crafting Enforceable ArbitrationEmployment Arbitration Agreements: Crafting Enforceable Arbitration Clauses and Successfully Navigating the ADR Process

Current Legal Trends InCurrent Legal Trends In Employment ArbitrationALLAN DINKOFF212.310.6771ll di k ff@ [email protected]

Weil, Gotshal & Manges LLP

KEY ISSUESKEY ISSUES

￭ Class actions in arbitration￭ Who decides arbitrabilityy￭ Third-party discovery￭ Collective bargaining agreementsCollective bargaining agreements￭ Regulatory & legislative developments

Weil, Gotshal & Manges LLP 18

CLASS ACTIONSCLASS ACTIONS

￭ Two issues:￭ Are they arbitrabley

￭ Class action waivers


ARE CLASS ACTIONS ARBITRABLEARE CLASS ACTIONS ARBITRABLE

￭ Yes, subject to contract terms and rules of the arbitral forum.

R l ti i h i th i d id d￭ Real question is, how is the issue decided.


HOW IS CLASS ARBITRABILITY DECIDEDHOW IS CLASS ARBITRABILITY DECIDED

￭ The arbitrators decide whether the agreement covers class claims.

G T Fi i l C B l 539 U S 444 (2003)￭ Green Tree Financial Corp. v. Bazzel, 539 U.S. 444 (2003) (whether class claims are arbitrable is a question of contract interpretation, which is for arbitrators, not courts, to decide).

￭ What is the proper interpretation when the contract is silent?


CLASS ARBITRABILITY WHEN CONTRACT ISCLASS ARBITRABILITY WHEN CONTRACT IS SILENT

￭ Until last year, many arbitrators found that where the parties agreed to arbitrate all disputes and were silent on class claims the arbitrator was authorized to entertain classclass claims, the arbitrator was authorized to entertain class actions.

￭ Supreme Court disagreed in Stolt Nielsen SA v￭ Supreme Court disagreed in Stolt-Nielsen SA v. AnimalFeed Int’l Corp., 130 S. Ct. 1758 (2010)(“Implicit agreement to authorize class-action arbitration … is not a term that the arbitrator may infer solely from the act of the parties’ agreement to arbitrate” all disputes).


CLASS ACTION WAIVERSCLASS ACTION WAIVERS

￭ Can parties agree to waive their right to bring a class action

￭ In court￭ In court

￭ In arbitration

￭ In both


CLASS ACTION WAIVERSCLASS ACTION WAIVERS

￭ Laster v. AT&T Mobility LLC pending in the U.S. Supreme Court.￭ Contractual waiver of class actions in both court and

arbitration which 9th Cir held was void as against Californiaarbitration, which 9th Cir. held was void as against California public policy.

￭ Prediction: Court finds that this does not offend the FAA. ￭ Vilches v. Travelers Companies, Inc., 2011 U.S. App. LEXIS

2551 (3d Cir. Feb. 9, 2011). Agreement to arbitrate FLSA wage & hour claims while precluding class actions was:p g￭ Not void as against public policy.￭ The arbitrator, not the court, was to decide whether the

agreement in fact precluded class arbitrations


agreement in fact precluded class arbitrations.

WHO DECIDES ARBITRABILITYWHO DECIDES ARBITRABILITY

￭ It depends on the parties’ intent – who did they agree should determine the question.

￭ Generally, if the parties are silent, the court decides. First Options of Chicago Inc v Kaplan 514 U S 938 (1995)Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995).

￭ But parties can easily agree that the arbitrators will decide.p y g


PRESTON FERRERPRESTON v. FERRER552 U.S. 346 (2008)

￭ Where contract provides that “any dispute … relating to the … validity, or legality” of the agreement “shall be submitted t bit ti ” th th i f h th th t tto arbitration,” then the issue of whether the contract was illegal should be heard by the arbitrator.


RENT A CENTER JACKSONRENT-A-CENTER v. JACKSON130 S. Ct. 2772 (2010)

￭ Employee argued that the arbitration agreement was unconscionable under state law and thus unenforceable.

￭ Supreme Court held (5-4) that arbitrators decide enforceability where the contract provides that the arbitrator “shall have exclusive authority to resolve anyarbitrator shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement including, but not limited to any claim that all or any part of this agreement is void or voidable.”


RENT A CENTER JACKSONRENT-A-CENTER v. JACKSON

￭ Court based its decision on the severability doctrine, which dates back over 40 years to Prima Paint Corp. v. Flood & C kli M f t i C 388 U S 395 (1967) hi hConklin Manufacturing Co., 388 U.S. 395 (1967), which held that the agreement to arbitrate was enforceable even though the party alleged that it had been fraudulentlythough the party alleged that it had been fraudulently induced into signing the contract, because the party was alleging only that the contract as a whole was fraudulently induced; the party was not alleging that it was fraudulently induced into entering into the agreement to arbitrate.


RENT A CENTER JACKSONRENT-A-CENTER v. JACKSON

￭ The Court in Rent-A-Center took the severability doctrine to a new level.

￭ Jackson was challenging the arbitration clause as unconscionable. ￭ However,However,

￭ Jackson was not alleging that the agreement to arbitrate the “enforceability” of the arbitration agreement was unconscionable.

￭ Instead Jackson was arguing that the requirement that he arbitrate his￭ Instead, Jackson was arguing that the requirement that he arbitrate his race discrimination claims was unconscionable, because, among other things, the arbitration agreement limited discovery and required fee splitting, none of which were applicable to the agreement to have the arbitrator decide whether the agreement was enforceable.

￭ Therefore, since the agreement to arbitrate enforceability was separate from the agreement to arbitrate the underlying discrimination claims, the


arbitrator, not the court, would decide whether the arbitration agreement was unconscionable.

THIRD PARTY DISCOVERYTHIRD-PARTY DISCOVERY

￭ Court are split on whether third-party discovery is permissible: ￭ Circuits prohibiting non-party, pre-hearing discovery of

documents:documents: ￭ 2d Cir.: Life Receivables Trust v. Lloyd’s of London, 549 F.3d

210 (2d Cir. 2008). 3d Ci H G I E B S A i iti C 360 F 3d￭ 3d Cir.: Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404 (3d Cir. 2004) (Alito, J.).

￭ Circuits permitting non-party, pre-hearing discovery:￭ 4th Cir.: Comsat Corp. v. Nat’l Sci. Found., 190 F.3d 269 (4th

Cir. 1999); Deiulemar Compagnia di Navigazione S.P.A. v. M/V Allegra, 198 F.3d 473 (4th Cir. 1999).


￭ 8th Cir.: Sec. Life Ins. Co. of Am. v. Duncanson & Holt, 228 F.3d 865 (8th Cir. 2000).

COLLECTIVE BARGAINING AGREEMENTSCOLLECTIVE BARGAINING AGREEMENTS

￭ Individuals can be bound to arbitrate their employment claims, including discrimination claims, if they are part of a b i i it d th i h d i th CBA tbargaining unit and the union has agreed in the CBA to arbitrate such claims.

14 P Pl LLC P tt 129 S Ct 1456 (2009)￭ 14 Penn Plaza LLC v. Pyett, 129 S. Ct. 1456 (2009)


REGULATORY & LEGISLATIVE DEVELOPMENTSREGULATORY & LEGISLATIVE DEVELOPMENTS

￭ S. Amend. 2588 (Franken Amend.) to Department of Defense Appropriations Act for 2010, H.R. 3326.

￭ Prohibits the award of Department of Defense funds to any federal contractor or subcontractor that requires employees or independent contractors to submit to preemployees or independent contractors to submit to pre-dispute binding arbitration of Title VII and sexual-assault tort claims.


REGULATORY & LEGISLATIVE DEVELOPMENTSREGULATORY & LEGISLATIVE DEVELOPMENTS

￭ Considerable hostility to pre-dispute arbitration agreements:

￭ EEOC has long taken the position that pre-dispute agreements to arbitrate discrimination claims are contrary to the federal civil rights laws, although courts have regularly rejected this proposition.

￭ Arbitration Fairness Act of 2009, H.R. 1020 & S. 931would have prohibited pre-dispute arbitration agreements for employment consumer franchise and civil rights disputes ifemployment, consumer, franchise, and civil rights disputes if it had passed.


Alfred G. FeliuVandenberg & Feliu, LLP

[email protected]

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Preparation for pre-arbitration conference1. Confer with opposing counsel before conference

Review discovery plan Determine open issues that need early attention from p y

arbitrator2. Determine discovery needs/requests3 Estimate hearing days and review calendar for3. Estimate hearing days and review calendar for

possible hearing dates4. Prepare succinct overview of client’s position

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Pre-hearing conference with arbitrator1. Follow arbitrator’s lead2. Provide overview of position/claims3 Present discovery requests3. Present discovery requests

Documents Interrogatories

Depositions Depositions4. Need for expert testimony, if any5. Pre-hearing motions

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Hearing-related issues1. Witness lists2. Exhibit lists3 Stipulations3. Stipulations4. Court reporter5. Form of award - options

No opinion Reasoned award Full opinion and awardFull opinion and award

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Best practice tips - Exhibits1. Attempt to stipulate to admissibility2. Attempt to agree on joint exhibits3 Pre-mark exhibits3. Pre mark exhibits4. Use three-ring binders5. Avoid/purge duplicate exhibits

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Best practice tips - Witnesses1. Confer regarding line up and schedule of

witnesses2. Accommodate witness schedules2. Accommodate witness schedules3. Provide realistic time estimates4. Avoid duplicative testimony

S l h bl l5. Stipulate, where possible, to non-essential testimony

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When considering discovery ask the following questions:• Is it necessary for a full and fair exploration of the

i i h di ?issues in the dispute?• Is the information sought likely to lead to

admissible or relevant evidence?• Will the request for discovery help avoid surprise at

the hearing?• Will it help to expedite the hearing• Will it help to expedite the hearing• Is it necessary to protect due process rights and a

fair hearing?

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Best Practice Tips• Seek only limited discovery “essential” to your case

• Be prepared with case law and logic to demonstrate p p gwhy the discovery you seek is “essential”

• Be aware that arbitrators are more receptive to granting discovery where a more efficient hearing may result

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Rule 27 of the AAA Employment Arbitration Rules provides:

“The arbitrator may allow the filing of a dispositiveThe arbitrator may allow the filing of a dispositive motion if the arbitrator determines that the moving party has shown substantial cause that the motion is lik l t d d di f th ilikely to succeed and dispose of or narrow the issues in the case.”

No comparable rule under AAA Commercial Rules

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Oral arguments on dispositive motions can be useful when:• Nature of dispute does not lend itself to submission

b i fon briefs

• Facts are convoluted or the law is complex or uncertain and oral hearing will supplement writtenuncertain and oral hearing will supplement written submissions

• Instances in which a party, perhaps unrepresented,Instances in which a party, perhaps unrepresented, is suspicious of the process and a brief oral hearing may enhance the credibility of the process

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Advocates must keep motion practice from delaying and derailing the process by:• Alerting the arbitrator early in the process of your

i i k l b i iintention to seek leave to submit a motion

• Raising the issues subject to motion with the arbitrator before filing papersarbitrator before filing papers

• Submitting focused motions

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Arbitrators serve as gatekeeper – without the formality of Rules of Evidence

Expert testimony admitted under pragmatic p y p g“relevant and material” standard

Generally arbitrators loosely follow Generally, arbitrators loosely follow procedures for qualifying experts

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Formal rules of evidence do not apply. Therefore:• De-emphasize issues of admissibility when seeking

to introduce exhibits

• In responding to objections, emphasize probative l f idvalue of evidence

• De-emphasize intricacies of hearsay rule when responding to hearsay objections; focus onresponding to hearsay objections; focus on reliability of out-of-court statement

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Avoid leading witnesses on direct. Testimony usually is more useful, powerful, memorable, and persuasive when it comes from the witness rather than counselwitness rather than counsel.

Even if overruled, a well articulated objection t d i i f id b f l ito admission of evidence may be useful in alerting the arbitrator to shortcomings of the evidence.evidence.

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Tips for helping the arbitrator do his/her job at h h ithe hearing:

• Cooperate with opposing counsel regarding preparation and admission of exhibitsand admission of exhibits.

• Cooperate with opposing counsel regarding order of witness presentationwitness presentation

• Remember that theatrics are not useful; there is no jury

In response to objections be prepared to answer this• In response to objections, be prepared to answer this question: “How will this evidence or argument help the arbitrator decide the case?”

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Briefs can help the arbitration process by:• Identifying and reviewing applicable legal standards

and authority;

• Highlighting and providing citations for key points in the record;

• Providing citations to precedent on point;

• Rebutting the other side’s factual and legal arg ments andarguments; and

• Showing basis for calculation of damages.

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Post-hearing motionsPost hearing motions1. Confirm award

2. Vacate award

3 Modify award3. Modify award

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Confirm AwardConfirm Award1. Article 9 of FAA

2. Generally a ministerial act

3 Motion must be made within one year of3. Motion must be made within one year of award

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Modify AwardModify Award1. Article 12 of FAA

2. Limited grounds available Material miscalculation of figures Material miscalculation of figures

Ruling on matter not submitted

“imperfect” award not affecting merits

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Vacating Award1. Article 12 of FAA2. Narrow grounds for vacatur:2. Narrow grounds for vacatur:

Award procured by corruption or fraud Evident partiality Evident partiality Misconduct, including refusing to postpone

hearing or hear evidence Arbitrator exceeded powers or imperfectly

executed them

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