By Robert Gross
ALR Senior Editor, 2018-2019

 

In 2018, some members of Congress re-initiated the fight over employment agreements and arbitration clauses.[1]  On May 21, 2018, the United States Supreme Court, in Epic System Corp. v. Lewis, 138 S. Ct 1612 (2018), sought to determine whether employment contracts should be allowed to contain class action arbitration waivers.[2]  The plaintiffs challenged the applicability of the class action waivers through the interaction of the Federal Arbitration Act (“FAA”) Section two and the National Labor Relations Act (“NLRA”).[3]  Under Section Two of the FAA, “the saving clause allows courts to refuse to enforce arbitration agreements ‘upon such grounds as exist at law or in equity for the revocation of any contract.’”[4]  In furtherance of the purpose of the FAA, in addressing judicial hostility toward arbitration, the majority held the savings clause was of no avail to the plaintiffs because the claims did not apply to all contracts, as required by the FAA.[5]  The majority also noted that when two statutes are in conflict, the Court should “strive ‘to give effect to both’” statutes.[6]  The Court also noted for a statute to replace another, there must be a finding of clear intention on the part of Congress.[7]  The plainiffs relied on section seven of the NLRA which specifically states “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”[8]  The majority stated that there was not enough intent in the NLRA section seven in order to find a rejection of the FAA in the employment context.[9]  In its reasoning the Court noted that Congress clearly knows how to override sections of the FAA and if they intended to remove the availability of class action waivers in the employment context, Congress could pass a statute to accomplish that goal.[10]

As if in response to this charge, on October 30, 2018, Representative Nadler of New York, proposed H.R. 7109 on the floor of the House of Representatives.[11]  While the FAA is based on the theory of freedom of contract, the Bill states that employees often have little say in the contracts they sign and whether or not those contracts have arbitration or class action waivers.[12]  The proposed statute specifically cites Lewis as going against congressional intent of the NLRA.[13]  The proposed statute states that the purposes of this new legislation would be to “prohibit predispute arbitration agreements,” “prohibit retaliation,” provide protection for post dispute arbitration agreements, and finally, to amend the NLRB to prohibit the interference with employees’ rights to class actions.[14]

As noted by Justice Gorsuch, there are debatable policy questions related to restricting the FAA in the context of employment contracts but the law, as currently formulated, does not allow for those policy reasons to win the day.[15]  It will certainly be interesting to see if a new Democratic House of Representatives will take this issue up in 2019 or if this proposed legislation will die in committee as

[1] See Restoring Justice for Workers Act, H.R. 7109, 115^th Congress (2018).

 

[2] Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).

 

[3] Id. at 1622.

 

[4] Ibid. (quoting 9 U.S.C. § 2).

 

[5] Ibid. (Citing Kindred Nursing Centers L.P. v. Clark, 137 S. Ct. 1421 (2017)).

 

[6] Id. at 1624 (quoting Morton v. Mancari, 417 U.S. 535, 551 (1974)).

 

[7] Ibid.

 

[8] Ibid. (quoting 29 U.S.C. § 157).

 

[9] Ibid.

 

[10] Id. at 1626.

 

[11] Congress.gov, https://www.congress.gov/bill/115th-congress/house-bill/7109/all-actions-without-amendments.

 

[12] Restoring Justice for Workers Act, H.R. 7109, 115^th Congress § 2 (2018).

 

[13] Restoring Justice for Workers Act, H.R. 7109, 115^th Congress § 2 (2018).

 

[14] Restoring Justice for Workers Act, H.R. 7109, 115^th Congress § 3 (2018).

 

[15] See Lewis, 138 S. Ct. at 1619.

By Kathryn Meyer
ALR Senior Editor, 2018-2019

On October 30, 2018, Congressman Jerrold Nadler of New York introduced House Resolution 7109, entitled Restoring Justice for Workers Act (H.R. 7109).[1] The purpose of H.R. 7109 is “[t]o prohibit forced arbitration in employment disputes.” [2] Forced arbitration, in the employment context, requires that an employee forgo her rights to sue her employer individually or as part of a class and must instead resolve any employment disputes through arbitration.[3] The requirement to arbitrate is often included in a mandatory arbitration clause embedded in the employment contract, which must be signed as a condition to employment.[4] If passed, employers could no longer force employees to arbitrate employment disputes, whether through forced arbitration agreements or through threatened retaliation or termination.

Beginning in the 1990s, the Supreme Court began its trend of ruling in favor of mandatory arbitration when it found that an employee who was bound to arbitration through his professional registration as a securities representative could be forced to arbitrate by his employer as a result of the registration.[5] Since then, the Supreme Court has a repeatedly ruled in favor of mandatory arbitration clauses in employment contracts,[6] including those that prevent class actions.[7] Thus, if Congress passes H.R. 7109, it will undue almost 30 years of Supreme Court decisions.

H.R. 7109 states four purposes that it hopes to accomplish. First, it would “prohibit predispute arbitration agreements that require arbitration of employment disputes.”[8] If passed, employers would no longer be able to include mandatory arbitration clauses in their employment contracts, meaning agreeing to the mandatory arbitration of employer disputes would no longer be a condition to employment. This would have a major impact, as it would likely affect over half of the “nonunion private-sector” workforce in the United States.[9] Next, H.R. 7109 would “prohibit retaliation against employees for refusing to arbitrate employment disputes.”[10] Previously, the U.S. Court of Appeals for the Second Circuit upheld as lawful an employer’s termination of an employee for refusing to submit to mandatory arbitration.[11] If passed, H.R. 7109 would protect employees from such termination or other forms of retaliation. Additionally, H.R. 7109 would also require employers “provide protections to ensure that postdispute arbitration agreements are truly voluntary and with the informed consent of employees.”[12]  Lastly, it would “amend the National Labor Relations Act to prohibit agreements and practices that interfere with employees’ rights to collectively litigate employment disputes,” likely in response to the Epic Systems decision.[13] The Court decided in Epic Systems that the ability to take part in a class action lawsuit is not a “concerted activity” under the National Labor Relations Act (NLRA).[14] Had it been a concerted activity, it would have been protected by the NLRA.[15] The Court concluded that the NLRA focused on employees’ rights to collective bargaining and forming unions but said nothing about class litigation.[16] Thus, if Congress passes H.R. 7109, the NLRA would likely have to be amended to include language that would protect an employee’s right to sue or take part in a class action suit.

If this Bill were to pass, it would have a resounding impact on both arbitration and litigation. It would greatly diminish an employer’s ability to force its employees into arbitration, while increasing employee rights. This Bill would likely result in higher accountability for employers by taking away an employer’s ability to force their employees to arbitrate according to the employer’s rules. It would also make class action litigation more accessible for employees, which means it would be more likely that employees would have to issue bigger payouts to employees for the employer’s misdeeds.

 

[1]  Restoring Justice for Workers Act, H.R. 7109, 115th Cong. (2018).

 

[2] Id.

 

[3] Arbitration, Nat’l Ass’n of Consumer Advocates, https://www.consumeradvocates.org/for-consumers/arbitration (last visited Dec. 14, 2018) (stating that forced arbitration, in the employment context, requires that an employee forgo her rights to sue her employer individually or forgo her rights to participate in a class action lawsuit).

 

[4] See also Alexander J.S. Colvin, Economic Policy Institute, The growing use of mandatory arbitration: Access to the courts is now barred for more than 60 million American workers 2 (2017); supra note 1, § 2(1) (explaining that forced arbitration agreements are often included in the employment contracts, which must be signed as a condition to employment).

 

[5] See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 23, 35 (1991) (holding that by registering as a securities representative through the New York Stock Exchange, a requirement for the employee’s job, the employee was subject to the mandatory arbitration clause located within the registration application, and the employer had the authority to subject the employee to mandatory arbitration as a result); Thomas E. Carbonneau, Arbitration Law: In a Nutshell 250, 4th ed. (2017) (stating that the Court in Gilmer found that “the obligation to arbitrate claims against the employer . . . arose as a result of professional registration and was implied and direct”).

 

[6] See Circuit City v. Adams, 532 U.S. 105, 119 (2001) (holding that, under the Federal Arbitration Act (FAA), a mandatory arbitration clause in an employment contract allows for employment issues to be arbitrated and stating that the only employment contracts that cannot mandate arbitration are those of transportation workers); see also Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) (holding that a provision in an employment contract that only allowed for employment-related disputes to be arbitrated was legal).

 

[7] Epic Systems, Corp. v. Lewis, 138 S.Ct. 1612 (2018).

 

[8] Supra note 1, § 4.

 

^[9] Alexander J.S. Colvin, Economic Policy Institute, The growing use of mandatory arbitration: Access to the courts is now barred for more than 60 million American workers 1 (2017).

 

[10] Supra note 1, § 4.

 

[11] Williams v. Parkell Products, Inc., 91 Fed.Appx. 707 (2nd Cir. 2003).

 

[12] Supra note 1, § 4.

 

[13] Supra note 1, § 4.; Epic Systems, 1617 S.Ct.

 

[14] Epic Systems, 1617 S.Ct.

 

[15] Id.

 

[16] Id.

By Ryan Boonstra
ALR Senior Editor, 2018-2019

Electronic arbitration, or “e-arbitration” as it is more commonly known was once defined as classic arbitration which is “‘conducted wholly or substantially online . . . includ[ing] filings, submissions, hearings, and awards being made or rendered online’.”[1]  However, the more modern definition is broad and includes any arbitration that utilizes electronic submissions, or uses teleconferencing or video conferencing to conduct the hearing process.[2]  From either definition it is clear that e-arbitration is the same as traditional arbitration in procedure and process, but it involves some form of electronic medium in part or in whole.

When this type of arbitration first arose, there were questions surrounding its enforceability from two different angles.  The first, more concerning argument, was that electronic arbitration clauses were most commonly seen in digital contracts, such as licensing agreements, and due to their solely digital nature, they violated the “written provision” requirement of the FAA.[3]  However, these concerns were quickly dealt with by courts who concluded that under the Federal Electronic Signatures in Global and National Commerce Act, electronic signatures were just as sound as formal signatures and would give legal effect to electronically signed arbitration agreements.[4]  The second challenge to enforceability was similar in that plaintiffs argued the clauses were buried too deep within agreements for the signee to even know that they were there.[5]  This was also quickly dealt with by those drafting the agreements, they simply bolded the arbitration clauses, included them on the first page, or required a separate additional signature for the clause so that the consumer was put on notice to its existence.[6]

So why choose e-arbitration?  In his article, Paul Breaux[7] summarizes e-arbitration’s advantages perfectly by stating, “[t]he numerous advantages to e-arbitration versus traditional arbitration include the speed within which the entire process can be conducted, its cost-effectiveness, its accessibility and availability, and its case management efficiency.”[8]  These benefits are being embraced by arbitration services and creating arbitration service companies with a focus solely on e-arbitration such as Unum.[9]  Unum more thoroughly explains the electronic benefits by outlining how clients receive real-time updates about filings and decisions.[10]  These notifications are received by all clients involved, simultaneously, no matter where they are in the world, and are password protected.[11] Security is perhaps one of the only drawbacks to e-arbitration since the databases that conduct and maintain the documents can be compromised by malicious third parties.[12]  Another possible drawback is that not all attorneys are ‘tech-savy’ for lack of a better term and it is important to understand the digital platform being utilized in order to best represent a client.[13]

Outside of those drawbacks, both of which will be fixed with time, e-arbitration is a highly efficient model for clients interested in resolving matters quickly and it will continue to grow as technology does.

[1] Paul W. Breaux, Feature: Online Dispute Resolution: A Modern ADR Approach, 62 LA Bar Jnl. 178, 180 (2014) (quoting Mohamed S. Abdel Wahab, “ODR and E-Arbitration,” Online Dispute Resolution Theory and Practice, Chapter 18 (May 2013), www.mediate.com/pdf/ebnerl.pdf).

 

[2] Id.

 

[3] Jason E. Bring & W. Jerad Rissler, Are Electronic Arbitration Agreements Enforceable?, LAW360 (June 01, 2012).

 

[4] Id.; Campbell v. General Dynamics Gov’t Sys. Corp., 407 F.3d 546 (1st Cir. 2005)

 

[5] See Paul W. Breaux, supra note 1, at 181.

 

[6] Id.

 

[7] Paul W. Breaux is the chair of the Louisiana State Bar Association’s Alternative Dispute Resolution Section, an adjunct professor at Louisiana State University Paul M. Hebert Law Center teaching the Civil Mediation Clinic, and the owner of Peacemakers Mediation Service, L.L.C., in Baton Rouge. See Id.

 

[8] Id.

 

[9] Unum is an Alternative Dispute Resolution company that has a completely electronic platform for arbitration and mediation allowing its clients to resolve their disputes completely electronically.  See UNUM, About Unum, https://unum.world/about-unum/ (last visited Dec. 19, 2018).

 

[10] See UNUM, Arbitration, E-Arbitration, https://unum.world/arbitration/e-arbitration/ (last visited Dec. 19, 2018).

 

[11] Id.

 

[12] See Paul W. Breaux, supra note 1, at 181.

 

[13] Id.