ADR is on the Rise in Employment Cases

While there is a long history of utilizing arbitration in the labor union context, the majority of employment disputes have historically been litigated in federal court. Federal courts tend to be more formal than state courts, requiring full legal briefing on all motions and involving judges appointed by the President of the United States with tenure for life and extraordinarily bright law clerks to assist them. As a general rule, it is more expensive to litigate cases in federal court than state court, and the most expensive cases to litigate are class actions. The employment law area has long been fertile ground for class actions. Also, in recent years, collective Fair Labor Standards Act overtime cases have been quite active in federal courts throughout the country.

Large employers apparently have tired of the expense and perhaps the dissatisfying results arising from court actions. Accordingly, many have started including binding arbitration clauses as well as class action waivers in their employment agreements. In fact, the percentage of companies using arbitration clauses to preclude class action claims soared to 43 percent in 2014 from 16 percent in 2012, according to a survey of nearly 350 companies conducted by management-side law firm Carlton Fields Jorden Burt LLP. That same survey found that the percentage of class action lawsuits that address employment issues slipped to 23 percent in 2014 from 28 percent in 2011 and that class action suits from workers cost employers $462.8 million in 2014, down from $598.9 million in 2011.

Courts historically have been supportive of binding arbitration clauses. Legal claims in certain industries, such as securities claims by investors against broker dealers, have been resolved through binding arbitration for decades. It now appears that employment disputes are moving in that direction. In 2011, in the case of AT&T Mobility LLC v. Concepcion, the U.S. Supreme Court upheld class action waivers entered by customers of AT&T. The U.S. Supreme Court has not yet agreed to hear cases applying the logic of the Concepcion case to class action waivers in the employment context. Nevertheless, while the National Labor Relations Board has ruled that class action waivers violate the National Labor Relations Act, the trend among the lower courts is to uphold class-action waivers and to uphold traditional arbitration clauses. (See, e.g., Jasso v. Money Mart Express Inc. (N.D. Cal. 2012) and Morvant v. P.F. Chang’s China Bistro, Inc. (N.D. Cal. 2012).)

For more on Mr. Grubman's discussion, please read the full article, "ADR is on the Rise in Employment Cases," from Law.com.