Total Articles: 26
SEC Rule Proposes to Preclude Certain Collective Action Claims under FINRA Arbitration Rules
Executive Summary: The Securities and Exchange Commission (SEC) has published a proposed rule applicable to arbitrations conducted by the Financial Industry Regulatory Authority, Inc. (FINRA). See 77 Fed. Reg. 1773. The rule would preclude collective action claims by employees of FINRA members brought under the Fair Labor Standards Act, the Age Discrimination in Employment Act or the Equal Pay Act of 1963 from being arbitrated in a FINRA forum.
Two And A Half Lawsuits: Lessons Learned From The Charlie Sheen Litigation
The recent termination of Charlie Sheen from "Two and a Half Men," and the swirl of negative publicity around the incident, has shed light on the use of arbitration agreements. After he was fired, Sheen filed a $100 million lawsuit against Warner Bros. He wants the proceedings held in front of a jury rather than being privately adjudicated by an arbitrator as outlined in his Warner Bros. contract.
Ban on Mandatory Predispute Arbitration Again Proposed in Congress
The so-called Arbitration Fairness Act (S. 987, H.R. 2873) has been re-introduced in Congress. It would amend the Federal Arbitration Act by banning mandatory, predispute arbitration agreements in employment, consumer, and civil rights matters. Under the bills, workers and consumers may consent to arbitration only after a dispute arises.
EMPLOYMENT ARBITRATION MAKES A COMEBACK
Unless Congress acts to overturn the United States Supreme Court's decision in AT&T Mobility LLC v. Concepcion, ____ DJDAR ____ (Apr. 27, 2011), employers with properly drafted arbitration agreements can cross employment law class actions off their lists of things to worry about. The California Supreme Court largely prohibited employers (and anyone else) from excluding class-based claims from arbitration agreements. But Concepcion and the U.S. Supreme Court's decision last Term in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. ____ (2010), hold that the Federal Arbitration Act preempts California case law, and permits employers to require employees to forego the right to arbitrate on behalf of a class.
Legislative Override of Supreme Court
What a difference three years makes. Unlike the opening weeks of the prior Congress when it could not act fast enough to get the reversal of the Supreme Court's decision in the Lilly Ledbetter case to President Obama's desk, the offering of the Arbitration Fairness Act by Senator Franken, faces much more difficult sledding. Franken bill would block mandatory arbitration clauses in cell phone contracts.
Arbitration Can Save Time and Money
s American businesses slowly emerge from the worst downturn since the Great Depression, employers should steer clear of roadblocks that can undermine their progress.
Court of Appeal Moves the Arbitration Goal Posts Again
One of the frustrations with employment arbitration is that the courts continue to invent new ways of invalidating them. Employers who favor arbitration are stuck with re-issuing agreements with each new court decision.
Arbitration: The Trial with No Appeal?
Including an arbitration provision in your contract can be a big cost saver in certain situations where going to court and proceeding through an all-out trial would be more expensive. Arbitration is private and the case pleadings are not part of a public record, as litigation records are. Whether you win, lose or draw in arbitration, the decision of the arbitrator is final and there is no meaningful basis for appeal. Or is there a possibility that the losing party could attempt to have a court vacate the decision of the arbitrator?
The Potential Impact of Today's Supreme Court's 5-4 Decision on Arbitrability.
It is never too much a surprise when the Supreme Court reverses the 9th Circuit, nor in recent years is it a surprise when the Court hands down a decision favoring arbitration of disputes, even in employment law matters. In a narrow sense, that is the substance of today's 5-4 decision in Rent-A-Center, West, Inc. v. Jackson, (S.Ct. 6/21/10) [pdf].
Employers Handed Narrow Arbitration Decision Victory.
In a narrow 5-4 decision, the Supreme Court handed employers yet another victory in the area of employment arbitration agreements today by holding that, in many circumstances, the issue of whether the agreement is enforceable should be made by an arbitrator and not a court of law.
Supreme Court Holds that Arbitrator, not Court, Should Decide Issue of Unconscionability.
The U.S. Supreme Court has just issued a decision holding that under the Federal Arbitration Act (FAA) an arbitrator, not a court, should decide whether an arbitration agreement is unconscionable when the parties have delegated the determination of that issue to the arbitrator. See Rent-A-Center West v. Jackson (June 21, 2010). The Court's decision overturns that of the Ninth Circuit, which held that the court has exclusive jurisdiction to determine the issue of unconscionability, even though the parties' arbitration agreement gave the arbitrator that authority.
The Supreme Court Giveth and The Ninth Circuit Taketh Away: Recent Arbitration Rulings Incent Employers to Review Their Agreements.
On April 27, 2010, the United States Supreme Court decided Stolt-Nielsen S. A., et al. v. AnimalFeeds Int'l Corp., No. 08-1198 (2010), which delivers good news to employers that require their employees to sign arbitration agreements. While not an employment case, Stolt-Nielsen holds that the Federal Arbitration Act prohibits parties from being forced to arbitrate class claims against their will. Here, because the parties' arbitration agreement in their contract was silent as to whether they were agreeing to arbitrate class claims, the Court held that, as a matter of contract law, it was improper to infer that the parties' intent was otherwise. Notably, the dissent wanted the opinion to be limited to arbitration agreements negotiated between sophisticated parties, as was the case between the businesses in the case. Although this limitation was not adopted by the majority, employers should be aware that plaintiff's lawyers trying to arbitrate employment class or collective actions in a similar context may seek to distinguish this case as on the ground that employment disputes typically involve parties with unequal bargaining power. Accordingly, employers would be wise to plainly disallow class or collective claims in their arbitration agreements.
New Defense Appropriations Bill Invalidating Arbitration Agreements May Cause Defense Contractors Unexpected Litigation Costs.
Signed into law on December 19, 2009, the Department of Defense Appropriations Act (the "Act") has potentially broad and sweeping ramifications for defense contractors. Buried within this $636 billion spending measure is a clause prohibiting contractors and subcontractors that receive over $1 million in funds from the Department of Defense ("DOD") and certain subcontractors from requiring their employees and independent contractors to enter into arbitration agreements mandating the arbitration of claims arising under Title VII of the Civil Rights Act of 1964 ("Title VII") and common law tort claims relating to sexual assault or harassment.
Arbitration Restricted For Defense Contractors And Subcontractors.
On December 19, 2009, President Obama signed into law a new Defense Appropriations Act. The Act contains a provision, originally introduced by Senators Al Franken of Minnesota and Mary Landrieu of Louisiana, with important implications for federal defense contractors and subcontractors that have implemented arbitration agreements for their employees. Specifically, the Act prohibits the federal government from awarding funds appropriated by the Act for any federal contract in excess of $1,000,000 if a contractor requires its employees or the employees of an independent contractor to arbitrate certain claims.
Is It Time For You To Adopt An Arbitration Policy?
When you fire an employee, there is always the concern that your termination decision will end up under the microscope of litigation – the human resources equivalent of Monday-morning quarterbacking. But instead of having that employment dispute resolved in a courtroom, you may want to consider adopting an arbitration policy that substitutes an arbitration hearing for a courtroom trial.
WHEN ARE ARBITRATION AGREEMENTS ENFORCEABLE?: WHEN IN “ROMAN”.
Federal and state legislation establish a public policy encouraging the use of arbitration agreements to resolve disputes. However, many employers have seen their agreements invalidated since the California Supreme Court‘s 2000 decision in Armendariz v. Foundation Health Psychcare, Inc. In that case, the Court imposed several procedural requirements for employment arbitration agreements. Recent appellate decisions have relied on those requirements to refuse to enforce employer’s existing arbitration agreements.
Arbitration Decision Is Either No Big Deal, or a Great Employer Victory.
The Supreme Court recently held, 5-4, that employees with age discrimination claims could be compelled to arbitrate their claims pursuant to provisions in collective bargaining agreements. The decision, 14 Penn Plaza v. Pyett, may not have a dramatic effect on Unionized employers because on its face it applies only to agreements that give the arbitrator authority to adjudicate such claims.
Legislation Prohibiting Employment-Related Predispute Arbitration Agreements Introduced in Congress
Legislation has been introduced in Congress that would make predispute arbitration agreements in employment, consumer, and franchise disputes and disputes arising under civil rights statutes unenforceable. The legislation does not apply to arbitration provisions in collective bargaining agreements.
Mandatory Arbitration of Employment Disputes: Is It Right For Your Company? (pdf).
On March 25, 2008, the U.S. Supreme Court ruled in Hall Street Assocs. LLC v. Mattel, Inc. that courts “must” confirm an arbitration award unless that award is vacated, modified, or corrected on the basis of some very narrow and exclusive categories. The Court further held that the parties to an arbitration agreement could not contractually agree to modify a reviewing court’s authority to vacate or modify the arbitration award. While this case emphasized the limited grounds for reversal and review under the Federal Arbitration Act (FAA), it also underscored the potential advantages of arbitration of disputes – in
contrast to civil litigation – for employers.
Arbitration Agreements: Make Sure Your Employees Actually Sign Them.
Many employers utilize binding arbitration to resolve employment-related disputes with their employees. The advantages of binding arbitration include savings of time and cost, limited discovery, a more expedited process than court procedures, and, hopefully, smaller attorney's fees.
NLRB Finds Mandatory Arbitration Agreement Illegal.
The National Labor Relations Board (NLRB) has held that a union-free employer committed an unfair labor practice in violation of the National Labor Relations Act (NLRA) by maintaining a mandatory arbitration policy as a condition of employment because that policy could inhibit employees from filing charges with the Board. See U-Haul Co. of California, Case 32-CA-20665-1, 347 NLRB 34 (June 8, 2006).
Cost Provisions May Jeopardize the Enforceability of Agreements to Arbitrate Employment Disputes (pdf).
It is established law that an agreement between employer
and employee to arbitrate employment disputes, including
discrimination claims, is enforceable and precludes state
or federal court litigation of such disputes.
Use of AAA Rules for Selecting Arbitrator in Lieu of Unenforceable Selection Clause Upheld.
The Sixth U.S. Circuit Court of Appeals recently upheld a trial court's order to use the American Arbitration Association's (AAA) rules for selecting an arbitrator after severing an unenforceable arbitrator selection clause from an employment related arbitration agreement. See McMullen v. Meijer, Inc. (Jan. 13, 2006). In this case, the employee challenged the arbitrator selection clause because it permitted the employer to chose a panel of arbitrators from which the parties would select an individual to arbitrate the employee's termination. In 2004, the Sixth Circuit held that this clause was unenforceable and remanded the case to the trial court to determine whether the clause could be severed from the arbitration agreement.
A Marriage Made In Heaven, Modified On Earth, And Stuck In Purgatory.
Employment relationships, like marriages, don't always work out. At the beginning of any relationship, we always hope for the best, but often have to prepare for the worst. Like a prenuptial agreement for the betrothed, an arbitration agreement is one way an employer and applicant can plan for future disputes. Many employers consider arbitration an easy, cost-effective, private way to bring an end to what has become an unproductive employment union. However, if you don't cross your t's and dot your i's when putting the agreement in writing, a discharge can become just as ugly as a divorce.
The Scope of Judicial Review of Arbitration Awards [PDF File].
If recent reported decisions are any guide, parties to arbitration agreements do not always find appropriate the standards used by federal courts to review arbitral awards.
Requiring Workers to Arbitrate May Not Always Be Employers' Best Option.
Given the outcome of recent court decisions, there is ample reason for employers to question whether arbitration is in fact a preferable forum.
