Are pre-dispute jury trial waivers a bargain for employers over arbitration? It depends on the employee.

• Author: Elloie, Christian N.

INTRODUCTION

IN 1991, the Supreme Court issued an opinion that greatly impacted employment law and the resolution of employment disputes. The case of Gilmer v. Interstate/Johnson Lane Corp. became the groundbreaking decision in the movement favoring the enforcement of mandatory arbitration provisions in employment agreements. (l) In the years following Gilmer, many employees were required to agree to arbitrate any future employment disputes as a condition of their employment. However, the movement appears to be changing directions. As employers realize that arbitration may not provide the benefits it once boasted, some are turning to another alternative--a predispute jury trial waiver as a provision of the employment agreement. (2) The waiver requires the parties to agree that potential employment disputes will be heard only by bench trial, as opposed to by an arbitrator or jury.

Legal advisors are beginning to advocate for the increased use of predispute jury trial waivers, to both their clients and the legal community. (3) However, it is important to note that the courts which have decided employee challenges to jury trial waivers do not support broad use of such waivers. (4)

This article examines the emphasis courts have placed on the relative bargaining power between the employer and employee, the education and business sophistication of the employee, and the employee's occupation. Case law supports my opinion that careful consideration should be given to the education, occupation, and business sophistication of the employee, as pre-dispute jury trial waivers are more likely to be upheld where the employee is a professional or executive.

Part I provides background information of the issue at hand. It begins by examining the contractual waiver of the fundamental right to a jury trial in the commercial context and concludes with an examination in the employment context. Part II examines the benefits of a mandatory bench trial compared to jury trials and arbitration. In addition, Part II discusses several benefits in favor of the employer versus the employee. Part III examines the court decisions where employees sought to challenge the validity of the jury trial waiver in their employment agreement. Particular attention is paid to the courts' emphasis on bargaining power, as well as the education and occupation of the employee, despite whether the jury waiver was upheld. Included is a table summary of the cases which provides a snapshot comparison of the employee's position with that of the employer, and the court's bargaining power analysis in each opinion. Part IV notes the influence state law and state court decisions may have on the enforcement of pre-dispute jury waivers in the employment context.

Part V presents my contention that careful consideration should be given to the education, occupation, and business sophistication of the employee, before deciding whether to implement jury trial waivers, The degree of disparity in bargaining power between the parties receives significant weight in the employment context. Employees categorized as professionals or executives have been found to have bargaining power sufficient to uphold pre-dispute jury trial waivers. (5)

1. BACKGROUND

   1. Waiver of the Right to a Jury Trial

      The right to a jury trial in the civil context is a fundamental constitutional right provided by the Seventh Amendment. (6) However, the right to a jury trial is not a requirement and thus can be waived. (7) Furthermore, prior to a dispute parties to a contract may waive the right to a jury trial in a written agreement, but the waiver must be entered into knowingly and voluntarily. (8) Almost all states agree that the right may be contractually waived prior to litigation. (9) However, once it is determined that the right applies in a given case, there arises a presumption against its waiver. (10) Contractual jury trial waivers are widely enforced in the commercial context, in both federal and state courts. A contractual jury trial waiver in the commercial context is upheld if the waiver was entered into knowingly, voluntarily, and intentionally. (11) Courts generally consider the following factors in determining whether the contractual waiver of the right to a jury trial was entered into knowingly, voluntarily, and intentionally: (1) the negotiability of the terms of the contract and the negotiations between the parties concerning the waiver provision; (2) the conspicuousness of the waiver provision within the contract; (3) the relative bargaining power of the parties; (4) the business acumen of the party opposing the enforcement of the waiver; and (5) whether the party opposing the enforcement of the waiver had an opportunity to have the provision reviewed by an attorney. (12)

      Recalling that the right to a jury trial is a fundamental right so that a presumption against the waiver of the right exists, the factors are strictly applied. (13) Where the waiver has been challenged, most often the party challenging the enforcement of the waiver carries the burden of proving whether the waiver was entered into knowingly, intentionally, and voluntarily. However, the various federal circuits are divided, with some district courts placing the burden of proof on the party seeking to enforce the waiver. (14)

   2. Waiver of the Right to a Jury Trial in the Employment Context

      As of 2002, employment litigation had increased 23% from the previous year and increased by 2,166% during the previous twenty years. (15) During the past decade or so, many employers have sought to manage employment litigation risk and avoid the great and inherent risk of having employment disputes decided by jury trials. This is most often accomplished by asking, as a condition of employment, that employees enter into a pre-dispute agreement to use alternative dispute resolutions, such as arbitration. (16)

      Arbitration agreements in the employment context are favored by the courts as well as by federal policy. (17) In fact, an extensive number of employers have been and are using arbitration agreements. (18) Arbitration agreements mandate that the dispute be resolved by a neutral third party, who is neither judge, jury, nor administrative agency. Therefore arbitration is inherently a waiver of the right to a jury trial.

      Under a contractual pre-dispute jury trial waiver, in the event an employment dispute arises, the employer requires the employee to agree to have the dispute heard by bench trial, as a condition to employment. (19) While the right to a jury is waived, the employer and employee do retain all other substantive and procedural rights to sue. (20) Further, the employee retains all potential statutory remedies. (21) While the Supreme Court expressly upholds arbitration agreements that waive the employer or employee's entire access to the court system, in determining the validity of a jury trial waiver in an employment agreement, courts put great emphasis on bargaining power.

      As discussed in Part I.A., pre-dispute jury trial waivers are common in the commercial context, such as in business contracts and landlord-tenant agreements. However, discussion of such waivers in the employment context has begun. In the employment context, pre-dispute jury trial waivers have been subject to the aforementioned commercial test of knowingly, intentionally, and voluntarily. (22) The authority provides that jury trial waivers in the employment context that meet the factors of the commercial test are enforceable.

      Outside of the court system, attorneys have begun to issue advice statements to employers recommending they implement agreements that require solely bench trials over arbitration. (23) In the past few years, several periodical opinions have been written on the matter, encouraging employers to consider implementing jury trial waiver provisions instead of mandatory arbitration provisions. (24) However, requiring that employment disputes be decided only by a judge is not by any means novel or new. Under Title VII of the Civil Rights Act of 1964, Congress originally allowed only bench trials for employment discrimination cases. (25) Moreover, the legislative history of the Federal Arbitration Act (FAA) intended to exempt employment agreements from contractual arbitration mandates. (26)

2. THE BENEFITS OF A PREDISPUTE JURY TRIAL WAIVER

   1. Benefits of a Pre-dispute Jury Trial Waiver over a Jury Trial

      To employers faced with employment disputes and employee claims, juries are infamously unpredictable. Some employees' counsel will rely on the unpredictability of jury trials as leverage for settlement of claims. (27) In one study, 52 of the 53 largest awards (those over $100 million) between 1985 and 2002 were given by juries. (28)

      The Bureau of Justice Statistics of the U.S. Department of Justice published a report in September of 1999, providing employers with a statistical basis to prefer bench trials over juries. (29) The report, Civil Trial Cases and Verdicts in Large Counties, 1996, surveyed state civil trials in 75 of the nation's largest counties during 1996. (30) Notably, the report included employment discrimination as a separate category for the first time. (31) The report also had an "other employment disputes" category, which consisted of wrongful termination and breach of contract claims. (32)

      In the "other employment disputes" category, plaintiffs won their cases at about the same rate, in both jury trials (53.4%) and bench trials (52.3%). (33) However, in the employment discrimination category, plaintiffs won almost twice as often before a jury (47.6% of trials) than before a judge (only 26% of trials). (34) Further, the average judgment award in employment discrimination cases was $250,000 by juries, compared to only $75,000 by judges. (35)

      The report was updated by a survey released in 2004, again covering civil trial cases held in 2001, in 75 of our country's largest counties. (36) This subsequent report...