Arbitrating Employment Disputes; Greener Pastures for Employers
| Publication year | 1993 |
| Pages | 32 |
62 J. Kan. Bar Assn. April, 32 (1993). ARBITRATING EMPLOYMENT DISPUTES; GREENER PASTURES FOR EMPLOYERS
April, 1993
Adam P. Sachs
Copyright (c) 1993 by the Kansas Bar Association; W. Terrence Kilroy and Adam P. Sachs
W. TERRENCE KILROY is a shareholder in Shughart, Thomson & Kilroy, P.C., Kansas City, Mo. He received his B.S. in 1972 from the University of Kansas and his J.D. in 1977 from Washburn University School of Law. He is a frequent speaker on numerous labor law subjects and has had several articles published concerning labor law.
ADAM P. SACHS is an associate with Shughart, Thomson & Kilroy, P.C., Kansas City, Mo. He received his B.A. from the University of Virginia in 1986 and his J.D. in 1992 from Washington University in St. Louis.
Background
Until recently most disputes between employees and employers were resolved pursuant to arbitration clauses in collective bargaining agreements. But with the passage of numerous federal and state statutes creating individual causes of action for certain employment disputes, and with the decline in the number of employees represented by unions, the battleground for resolution of these disputes moved to the courts. Employment litigation now makes up a significant portion of our court dockets. Recent cases and changes in the law, however, indicate that arbitration of employment disputes may again be put to greater use.
One impetus for arbitration is the greater exposure employers now face in employment litigation claims. Traditionally, employment disputes over statutory claims primarily involved back pay, reinstatement, and attorneys' fees. Two recent developments, however, have significantly increased an employers' exposure to large verdicts in employment cases, and have sparked increased interest in alternative dispute resolution.
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One development was passage of the Civil Rights Act of 1991, Pub.L. 102-166, 105 Stat. 1071, which allows for recovery of compensatory and punitive damages, and jury trials. [FN1] Previously, Title VII cases involved only equitable relief (back pay and reinstatement) and were thus judge-tried. While the 1991 Act did provide some capping of potential compensatory and punitive awards, [FN2] this provides only modest comfort to employers worried about exposure and expenses associated with jury-tried cases.
A second development is the expansion of common-law rights to sue for wrongful discharge and other employment acts. Over the past few years, Kansas courts have been willing to find implied contracts and public policy violations in employment discharge cases, and have allowed recovery of punitive damages for public policy-based claims. [FN3] Other states have allowed use of even more expansive remedies for alleged employment wrongs.
These wrongful discharge cases have brought large verdicts in recent years. A 1990 case in California brought a 43 million dollar verdict, and a case in Texas the same year brought a 32 million dollar award. [FN4] In May 1992, a Texas state court jury awarded 124 million to an employee who claimed he was fired for refusing to sign an allegedly misleading annual report. [FN5]
Verdicts in Kansas have not reached those levels but are increasing in size. In January 1991, a Wyandotte County jury awarded $230,000 to an employee wrongfully discharged in connection with a work-related injury. [FN6] In November 1991, a Kansas federal court awarded $250,000 to an employee retaliated against for filing EEOC charges. [FN7] In April 1992, another Wyandotte County jury assessed $800,000 in damages against an employer who terminated two employees for allegedly criticizing management to the press and county officials. [FN8] A month later, another Kansas federal court jury awarded $505,000 to a former high-level executive discharged for opposing company practices. [FN9]
These trends understandably concern employers who feel that juries are awarding excessive damages. Both the U.S. Supreme Court and Congress may be signaling relief for employers concerned about large jury verdicts and expenses often associated with jury trials. The possible relief: the option of arbitrating employment disputes. While most arbitration clauses give arbitrators the ability to issue damage awards consistent with the relevant statutes or common law, some believe that arbitrators are less likely than juries to grant especially high damage awards.
In a 1991 decision, Gilmer v. Interstate/Johnson Lane Corporation, 500 U.S. ----, 114 L.Ed.2d 26 (1991), the Supreme Court enjoined further court proceedings and upheld an agreement to arbitrate an age discrimination complaint. This case may well be one of the most significant civil rights cases in recent years. This article first discusses the Gilmer decision and its implications. It then provides some practical advice to employers wishing to insert arbitration clauses into employment contracts.
GILMER, GARDNER-DENVER, AND THE GROWING FEDERAL ARBITRATION ACT
In Gilmer v. Interstate/Johnson Lane Corporation, the Supreme Court affirmed a decision of the Fourth Circuit, holding that a statutory claim based on the Age Discrimination in Employment Act of 1967 (ADEA) [FN10] may be subject to mandatory arbitration. Because the plaintiff had entered into an agreement to arbitrate "any controversy arising out of ... his employment or termination of employment," the Court ruled that the employee was bound to arbitrate his claim under the ADEA rather than proceed with a federal court action.
Prior to Gilmer, it had been widely assumed that arbitration clauses would not bar actions brought under federal discrimination laws. These assumptions were based largely on Alexander v. Gardner-Denver Co., 415 U.S. 36, the Supreme Court's 1974 decision refusing to bar a race discrimination claim brought pursuant to Title VII of the Civil Rights Act of 1964.
In Gardner-Denver, an arbitrator, selected pursuant to a collective bargaining agreement, had ruled that a discharged black employee was not the victim of race discrimination. The employee later brought a Title VII race
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discrimination action in federal court. The Supreme Court unanimously rejected the employer's argument that the former employee's Title VII claim was barred on the basis of the adverse arbitration decision.
According to the Gardner-Denver court, "Title VII was...
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