IMPROVING EMPLOYER ACCOUNTABILITY IN A WORLD OF PRIVATE DISPUTE RESOLUTION.

Author:Brinn, Hope
 
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Private litigation is the primary enforcement mechanism for employment discrimination laws like Title VII, the Americans with Disabilities Act, and many related state statutes. But the expansion of extrajudicial dispute resolution--including both arbitration and prelitigation settlement agreements--has compromised this means of enforcement. This Note argues that state-enacted qui tam laws can revitalize the enforcement capacity of private litigation and provides a roadmap for enacting such legislation.

INTRODUCTION I. HOW PRIVATE DISPUTE RESOLUTION UNDERMINES EMPLOYMENT DISCRIMINATION ENFORCEMENT A. Private Litigation as Public Regulation B. The Widespread Use of Employee Arbitration and Prelitigation Settlement Agreements C. Labor and Employment Law Enforcement Challenges Associated with Extrajudicial Dispute Resolution II. EXPLORING THE USE OF QUI TAM ACTIONS TO ENFORCE EMPLOYMENT DISCRIMINATION LAWS A. The Historical Development of Modern Qui Tam Actions B. Waivability of Qui Tam Claims 1. Class Action Waiver Jurisprudence 2. Validity of Representative Action Waivers Under PAG A C. Arbitrability of Qui Tam Claims 1. Arbitrability of PAG A Claims 2. Arbitrability of FCA Claims 3. Arbitrability of Employment Disputes Involving the EEOC III. EFFECTIVE USE OF STATE QUI TAM LEGISLATION TO ENFORCE EMPLOYMENT DISCRIMINATION LAWS A. Crafting State Qui Tam Laws to Avoid Waivability B. Crafting State Qui Tam Laws to Avoid Collateral Damage Associated with Arbitration and Prelitigation Settlement C. Tackling both Arbitration and Prelitigation Settlements CONCLUSION INTRODUCTION

Private litigation is the primary enforcement mechanism of Title VII of the Civil Rights Act of 1964, the nation's landmark employment discrimination law. (1) Many other federal statutes designed to protect workers--such as the Americans with Disabilities Act (ADA), (2) the Fair Labor Standards Act (FLSA), (3) and the Family Medical Leave Act (FMLA) (4)--also share this enforcement scheme. (5) But based in part on a changing litigation landscape over the last several decades, private litigation has become increasingly ineffective at holding employers accountable for violations of these types of laws.

Rather than resolving legal disputes through litigation, parties have increasingly relied on predispute arbitration agreements and prelitigation settlement agreements, two forms of extrajudicial dispute resolution. (6) Most employees are now required to sign arbitration agreements as a condition of employment, (7) a practice upheld by the Supreme Court. (8) In these agreements, employees promise to resolve all future disputes with their employers in private arbitration instead of in court. (9) These agreements hinder the effectiveness of the mechanism Congress created to enforce these protective laws. But even employees free from arbitration agreements are unlikely to ever file employment discrimination claims. (10) Instead, aggrieved employees typically settle before ever filing a lawsuit, usually with both parties bound to confidentiality. (11) Both arbitration and prelitigation settlement agreements shield facts surrounding the alleged misconduct from public view.

The Supreme Court's recent jurisprudence suggests that it does not view this pattern of increased out-of-court dispute resolution as problematic, particularly with respect to arbitration. (12) In the Court's view, employees bound by arbitration agreements are still capable of vindicating all their statutory rights as employees; claim resolution simply takes place in a different, speedier forum. (13) Empirical research, however, indicates the opposite. Employees who sign such agreements are less likely to make a claim against their employer in any forum. (14)

The confidential nature of extrajudicial dispute resolution makes public enforcement through private litigation difficult, frustrating the overall purpose of employment discrimination laws. Arbitration is a largely confidential process. (15) Similarly, pre-suit settlement agreements resolve disputes outside formal court structures and nearly always include confidentiality provisions. (16) Such confidentiality is not possible in the vast majority of lawsuits, in which complaints are public records. Although confidentiality may encourage settlement and thus reduce the economic strain on the courts, (17) the secrecy makes it difficult to raise awareness of corporate misconduct or alert other aggrieved employees who might not know that they could make similar claims. (18)

In qui tam actions, private individuals sue for a penalty, part of which the individual receives as an incentive and part of which the government receives as the enforcement agency. (19) In essence, the government "hires" private individuals (called relators) to enforce its own laws. (20) This Note examines how states can use qui tam laws to address the enforcement challenges that extrajudicial dispute resolution creates for employment discrimination laws. (21) Part I describes the interaction between employment discrimination laws and private dispute resolution mechanisms. Part II examines how states can potentially use qui tam laws to enforce employment discrimination laws against the backdrop of widespread private dispute resolution. In particular, it examines case law surrounding two existing qui tam statutes, the federal False Claims Act (FCA) and the California Private Attorneys General Act (PAGA). Part III outlines a proposal for states that preserves enforcement of employment laws via private litigation while respecting the limits placed on states by the FAA and the right to make contracts.

  1. HOW PRIVATE DISPUTE RESOLUTION UNDERMINES EMPLOYMENT DISCRIMINATION ENFORCEMENT

    Recognizing the limitations of federal agencies, Congress sought to empower private litigants to enforce employment discrimination laws. (22) But as mandatory extrajudicial dispute resolution expands, private litigants are less able to serve the public regulatory function that Congress created for them. (23) The confidentiality norms and claim-suppression effects associated with extrajudicial dispute resolution undermine the private enforcement model that Congress envisioned for employment discrimination laws.

    1. Private Litigation as Public Regulation

      The United States relies primarily on private litigants to enforce a number of laws, including those that govern employment discrimination. (24) This approach has been part of the American political structure since the country's founding and differs from the public regulatory approach favored in most European countries, which centralizes enforcement in regulatory agencies. (25) Both the private and public regulatory approaches have tradeoffs.

      Although the public regulatory approach avoids the challenges associated with extrajudicial resolution, it is rife with inefficiency and unpredictability. (26) Federal agencies, for example, are subject to political will. Accordingly, resources and agendas can ebb and flow depending on the political party in power. (27) Further, information gaps make it difficult for agencies to effectively learn about employer misconduct. (28) Private parties, however, do not face these same concerns. An aggrieved employee, for instance, has to expend fewer resources to obtain information about wrongdoing. (29) After all, that employee himself was the one to experience the misconduct.

      But the private regulatory approach also has downsides. Critics of private enforcement regimes argue that they empower judges to create public policy, discourage voluntary cooperation with law enforcement, and lead to inconsistent and confusing doctrine. (30) Because enforcement through private litigation is "fragmented and uncoordinated," such a regime may reduce the impact of the underlying legislation. (31) And compared to public regulatory bodies, private litigants often have inferior access to the comprehensive data needed to successfully litigate employment discrimination cases. (32) Finally, as this Note argues, a private enforcement regime allows parties to contract around regulatory laws, preventing enforcement altogether.

    2. The Widespread Use of Employee Arbitration and Prelitigation Settlement Agreements

      Mandatory arbitration agreements and prelitigation settlements are popular among employers for anticipating and resolving disputes with employees. Although these devices differ in a few key ways, particularly with respect to where bargaining power lies, they frequently share several common features, including deregulation and confidentiality.

      Mandatory arbitration policies require employees, as a condition of their employment, to agree to resolve legal disputes with their employer through arbitration instead of going to court. (33) In arbitration, the parties choose an individual to adjudicate the case in accordance with their predetermined agreement. Because arbitration is generally deregulated, private, and deliberately secret, it can be difficult to generalize about what the employee arbitration process actually looks like. (34)

      Most arbitration agreements contain a contractual guarantee of confidentiality. (35) This guarantee is not imposed by federal statute. (36) Instead, the parties agree to it. (37) Employers, often repeat players in arbitral proceedings, may benefit from such confidentiality agreements. (38) When employment arbitrations are confidential, the employer is effectively shielded from embarrassing allegations, whether true or unfounded. (39) This protection from public scrutiny can save employers significant costs associated with negative publicity. (40) Given this potential benefit, a majority of predispute arbitration agreements include confidentiality provisions. (41)

      Over the last twenty-five years, the use of employee arbitration agreements has grown substantially. In 2018, 56 percent of private-sector, nonunion employees were subject to mandatory arbitration agreements, amounting to over...

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