Employment Arbitration i Agreements Crafting Enforceable Arbitration Clauses and Successfully Navigating the ADR Process

Transcription

1 Presenting a live 90 minute webinar with interactive Q&A Employment Arbitration i Agreements Crafting Enforceable Arbitration Clauses and Successfully Navigating the ADR Process WEDNESDAY, MARCH 2, pm Eastern 12pm Central 11am Mountain 10am Pacific Td Today s faculty features: Margaret L. Watson, Of Counsel, McElroy Deutsch Mulvaney & Carpenter, New York Allan Dinkoff, Litigation Counsel, Weil Gotshal & Manges, New York Alfred G. Feliu, Partner, Vandenberg & Feliu, New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 McElroy, Deutsch, Mulvaney & Carpenter, LLP ATTORNEYS AT LAW STRAFFORD Employment Arbitration Agreements: Crafting Enforceable Arbitration Clauses and Successfully Navigating the ADR Process CRAFTING ENFORCEABLE ARBITRATION CLAUSES MARGARET L. WATSON McElroy, Deutsch, Mulvaney & Carpenter LLP

6 Basics Arbitration Agreements are contracts. FAA governs and pre-empts conflicting state law. FAA designed to put arbitration agreements on same footing as other contracts no less and no more 9 U.S.C. 2 State law principles of contract interpretation and contract defenses still apply. Buckey Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) Due Process is the outer limit: procedural and substantive. 6

7 Contract Law Necessary Elements to Enforceability: - Meeting of the Minds - mutual assent - Consideration - Legislative/Statutory concerns - Due Process 7

8 Is it knowing and voluntary? Agreement to Arbitrate Is it clear and easily understandable? What is the scope of the agreement? - Who decides arbitrability? - Does it cover all claims? - Does it cover future claims? - Is it binding arbitration? FAA presumption favoring arbitration, such that ambiguities in the language of an agreement should be resolved in favor of arbitration - need to be explicit in terms of carving out any non-arbitrable claims. 8

9 Adequate Consideration Arbitration is voluntary; agreement to arbitrate must be supported by adequate consideration. Examples of adequate consideration: - Where there is mutuality of agreement to arbitrate - not required, but meets consideration requirement - Continued employment of at-will employee - except for California and arguably Idaho - Where the agreement is supported by a tangible employment benefit, such as participation in stock plan, severance offer, etc. Due Process Limit: no coercion; contracts of adhesion are void as against public policy. 9

10 Other Contract Defenses to Enforceability Arbitration agreement is unenforceable where: - It was procured by fraud, duress or the use of excessive economic power - It would be unconscionable to enforce - e.g. one-sided, denying less advantaged party meaningful choice - Also: mistake, forgery, void as against public policy, etc. 10

11 Statutory Claims Well settled: Statutory Employment Claims are subject to mandatory arbitration. The rationale is: giving up a forum, not a substantive right. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) Circuit City Stores v. Adams, 532 U.S. 105 (2001) Fletcher v. Kidder, Peabody & Co., 81 N.Y.2d 623 (1993) Including in collective bargaining agreement 14 Penn Plaza, LLC v. Pyett, 129 S. Ct (2009) Waiver of statutory right must be clear and unmistakable Wright v. Universal Mar. Serv. Corp., 525 U.S. 70 (1998) Key Concern: Whether forum provides full protection of statutory rights Legislature can limit ability to arbitrate any claim, e.g. NY and child custody issues Parties can t give up what is not theirs EEOC s ability to pursue victim-specific judicial relief, such as back pay, reinstatement and other money damages EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) 11

12 Special Considerations for Protection of Statutory Rights - By agreement to arbitrate statutory claims: Party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial forum. Gilmer, 500 U.S. at 26 - Distinction between pre-dispute and post-dispute agreements to arbitrate Cole v. Burns Int l Security, 105 F.3d 1465 (D.C. Cir. 1997) - Minimum Protections (for pre-dispute): - Agreement cannot affect employee s ability to seek relief from EEOC - Arbitrator is bound to apply Title VII and other applicable public laws both as to substance and remedies - Agreement provides for appointment of neutral arbitrator - The agreement provides for an award dh that is subject to adequate judicial jdiilreview - Arbitrator can grant any relief deemed just and equitable, including any relief that would have been available to the parties had the matter been heard in court (including fees to the prevailing plaintiff) - Expense of arbitration cannot be overly burdensome (as compared to court) to effectively deny enforcement of statutory right - Discovery is more than minimal, providing bona fide opportunity to present claims and defenses 12

13 Checklist for Drafting Form of Agreement No particular form required, so long as it evidences an intent to submit to arbitration If written, signature not required, but is a best practice Scope of Agreement Binding arbitration assumed Presumption of all claims but best practice of making clear including statutory discrimination i i claims Applicable Law Default: FAA and state choice of law analysis Parties can specify state substantive law Example of NY law and potential waiver of punitive damages Venue Venue Note: this can dictate where award can be enforced SeeUniform Arbitration Act 26(b) 13

14 Checklist for Drafting Arbitrator Selection Procedures Qualifications For statutory claims requirement of neutrality Class Action Waiver Default: No Waiver Confidentiality Discovery Due process requires more than minimal Discovery that favors one side may render agreement unconscionable Check Uniform Arbitration Act and relevant state arbitration procedures: may make unwaivable right to subpoena information from third parties or utilize depositions at hearings. 14

15 Checklist for Drafting Provision for costs/fees For statutory claims burden on claimant cannot exceed burden to bring action in court Remedies For pre-dispute agreement to arbitrate t statutory t t claims, must be same as available in court For all: can be greater than available in court if parties agreement memorializes ili the intent it t Provisions to insure Opinion/Award subject to adequate judicial review 15

16 Additional Resources For a good example of employment arbitration rules and a check list of due process concerns relating to employment arbitrations, see the American Arbitration Associations website at: / For additional resources helpful to drafting alternative dispute resolution programs, including arbitration clauses, see 16

17 STRAFFORD Employment Arbitration Agreements: Crafting Enforceable Arbitration Clauses and Successfully Navigating the ADR Process Current Legal Trends In Employment Arbitration ALLAN DINKOFF il Weil, Gotshal & Manges LLP

18 KEY ISSUES Class actions in arbitration Who decides arbitrability Third-party discovery Collective bargaining agreements Regulatory & legislative developments Weil, Gotshal & Manges LLP 18

19 CLASS ACTIONS Two issues: Are they arbitrable Class action waivers Weil, Gotshal & Manges LLP 19

20 ARE CLASS ACTIONS ARBITRABLE Yes, subject to contract terms and rules of the arbitral forum. Real question is, how is the issue decided. d Weil, Gotshal & Manges LLP 20

21 HOW IS CLASS ARBITRABILITY DECIDED The arbitrators decide whether the agreement covers class claims. Green Tree Financial i Corp. v. Bazzel, 539 U.S. 444 (2003) (whether class claims are arbitrable is a question of contract interpretation, which is for arbitrators, not courts, to decide). What is the proper interpretation when the contract is silent? Weil, Gotshal & Manges LLP 21

22 CLASS ARBITRABILITY WHEN CONTRACT IS SILENT Until last year, many arbitrators found that where the parties agreed to arbitrate all disputes and were silent on class claims, the arbitrator was authorized to entertain class actions. Supreme Court disagreed in Stolt-Nielsen SA v. AnimalFeed Int l Corp., 130 S. Ct (2010)( Implicit agreement to authorize class-action arbitration is not a term that the arbitrator may infer solely from the act of the parties agreement to arbitrate all disputes). Weil, Gotshal & Manges LLP 22

23 CLASS ACTION WAIVERS Can parties agree to waive their right to bring a class action In court In arbitration In both Weil, Gotshal & Manges LLP 23

24 CLASS ACTION WAIVERS Laster v. AT&T Mobility LLC pending in the U.S. Supreme Court. Contractual waiver of class actions in both court and arbitration, which 9 th Cir. held was void as against California public policy. Prediction: Court finds that this does not offend the FAA. Vilches v. Travelers Companies, Inc., 2011 U.S. App. LEXIS 2551 (3d Cir. Feb. 9, 2011). Agreement to arbitrate FLSA wage & hour claims while precluding class actions was: Not void as against public policy. The arbitrator, not the court, was to decide whether the agreement in fact precluded class arbitrations. Weil, Gotshal & Manges LLP 24

25 WHO DECIDES ARBITRABILITY It depends on the parties intent who did they agree should determine the question. Generally, if the parties are silent, the court decides. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995). But parties can easily agree that the arbitrators will decide. Weil, Gotshal & Manges LLP 25

26 PRESTON v. FERRER 552 U.S. 346 (2008) Where contract provides that any dispute relating to the validity, or legality of the agreement shall be submitted to arbitration, ti then the issue of whether the contract t was illegal should be heard by the arbitrator. Weil, Gotshal & Manges LLP 26

27 RENT-A-CENTER v. JACKSON 130 S. Ct (2010) Employee argued that the arbitration agreement was unconscionable under state law and thus unenforceable. Supreme Court held (5-4) that arbitrators decide enforceability where the contract provides that the arbitrator shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement including, but not limited to any claim that all or any part of this agreement is void or voidable. Weil, Gotshal & Manges LLP 27

28 RENT-A-CENTER v. JACKSON Court based its decision on the severability doctrine, which dates back over 40 years to Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395 (1967), which h held that the agreement to arbitrate was enforceable even though the party alleged that it had been fraudulently induced into signing the contract, because the party was alleging only that the contract as a whole was fraudulently induced; the party was not alleging that it was fraudulently induced into entering into the agreement to arbitrate. Weil, Gotshal & Manges LLP 28

29 RENT-A-CENTER v. JACKSON The Court in Rent-A-Center took the severability doctrine to a new level. Jackson was challenging the arbitration clause as unconscionable. However, Jackson was not alleging that the agreement to arbitrate the enforceability of the arbitration agreement was unconscionable. Instead, Jackson was arguing that the requirement that he arbitrate his race discrimination claims was unconscionable, because, among other things, the arbitration agreement limited discovery and required fee splitting, none of which were applicable to the agreement to have the arbitrator decide whether the agreement was enforceable. Therefore, since the agreement to arbitrate enforceability was separate from the agreement to arbitrate the underlying discrimination claims, the arbitrator, not the court, would decide whether the arbitration agreement was unconscionable. Weil, Gotshal & Manges LLP 29

30 THIRD-PARTY DISCOVERY Court are split on whether third-party discovery is permissible: Circuits prohibiting non-party, pre-hearing discovery of documents: 2d Cir.: Life Receivables Trust v. Lloyd s of London, 549 F.3d 210 (2d Cir. 2008). 3d Cir.: Hay Group, Inc. v. E.B.S. EBS Acquisition iti Corp., 360 F.3d 404 (3d Cir. 2004) (Alito, J.). Circuits permitting non-party, pre-hearing discovery: 4th Cir.: Comsat Corp. v. Nat l Sci. Found., 190 F.3d 269 (4th Cir. 1999); Deiulemar Compagnia di Navigazione S.P.A. v. M/V Allegra, 198 F.3d 473 (4th Cir. 1999). 8th Cir.: Sec. Life Ins. Co. of Am. v. Duncanson & Holt, 228 F.3d 865 (8th Cir. 2000). Weil, Gotshal & Manges LLP 30

31 COLLECTIVE BARGAINING AGREEMENTS Individuals can be bound to arbitrate their employment claims, including discrimination claims, if they are part of a bargaining i unit and the union has agreed in the CBA to arbitrate such claims. 14 Penn Plaza LLC v. Pyett, 129 S. Ct (2009) Weil, Gotshal & Manges LLP 31

32 REGULATORY & LEGISLATIVE DEVELOPMENTS S. Amend (Franken Amend.) to Department of Defense Appropriations Act for 2010, H.R Prohibits the award of Department of Defense funds to any federal contractor or subcontractor that requires employees or independent contractors to submit to predispute binding arbitration of Title VII and sexual-assault tort claims. Weil, Gotshal & Manges LLP 32

33 REGULATORY & LEGISLATIVE DEVELOPMENTS Considerable hostility to pre-dispute arbitration agreements: EEOC has long taken the position that pre-dispute agreements to arbitrate discrimination claims are contrary to the federal civil rights laws, although courts have regularly rejected this proposition. Arbitration Fairness Act of 2009, H.R & S. 931 would have prohibited pre-dispute arbitration agreements for employment, consumer, franchise, and civil rights disputes if it had passed. Weil, Gotshal & Manges LLP 33

34 Alfred G. Feliu Vandenberg & Feliu, LLP

35 Preparation for pre-arbitration conference 1. Confer with opposing counsel before conference Review discovery plan Determine open issues that need early attention from arbitrator 2. Determine discovery needs/requests 3. Estimate hearing days and review calendar for possible hearing dates 4. Prepare succinct overview of client s position 35

36 Pre-hearing conference with arbitrator 1. Follow arbitrator s lead 2. Provide overview of position/claims 3. Present discovery requests Documents Interrogatories Depositions 4. Need for expert testimony, if any 5. Pre-hearing motions 36

37 Hearing-related issues 1. Witness lists 2. Exhibit lists 3. Stipulations 4. Court reporter 5. Form of award - options No opinion Reasoned award Full opinion and award 37

38 Best practice tips - Exhibits 1. Attempt to stipulate to admissibility 2. Attempt to agree on joint exhibits 3. Pre-mark exhibits 4. Use three-ring binders 5. Avoid/purge duplicate exhibits 38

39 Best practice tips - Witnesses 1. Confer regarding line up and schedule of witnesses 2. Accommodate witness schedules 3. Provide realistic time estimates 4. Avoid duplicative testimony 5. Stipulate, where possible, to non-essential testimony 39

40 When considering discovery ask the following questions: Is it necessary for a full and fair exploration of the issues in the dispute? Is the information sought likely to lead to admissible or relevant evidence? Will the request for discovery help avoid surprise at the hearing? Will it help to expedite the hearing Is it necessary to protect due process rights and a fair hearing? 40

41 Best Practice Tips Seek only limited discovery essential to your case Be prepared p with case law and logic to demonstrate why the discovery you seek is essential Be aware that arbitrators are more receptive to granting discovery where a more efficient hearing may result 41

42 Rule 27 of the AAA Employment Arbitration Rules provides: The arbitrator may allow the filing of a dispositive motion if the arbitrator determines that the moving party has shown substantial cause that the motion is likely l to succeed and dispose of or narrow the issues in the case. No comparable rule under AAA Commercial Rules 42

43 Oral arguments on dispositive motions can be useful when: Nature of dispute does not lend itself to submission on bi briefs Facts are convoluted or the law is complex or uncertain and oral hearing will supplement written submissions Instances in which a party, perhaps unrepresented, is suspicious of the process and a brief oral hearing may enhance the credibility of the process 43

44 Advocates must keep motion practice from delaying and derailing the process by: Alerting the arbitrator early in the process of your intention i to seek leave to submit a motion Raising the issues subject to motion with the arbitrator before filing papers Submitting focused motions 44

45 Arbitrators serve as gatekeeper without the formality of Rules of Evidence Expert testimony admitted under pragmatic relevant and material standard Generally, arbitrators loosely follow procedures for qualifying experts 45

46 Formal rules of evidence do not apply. Therefore: De-emphasize issues of admissibility when seeking to introduce exhibits In responding to objections, emphasize probative value of evidence De-emphasize intricacies of hearsay rule when responding to hearsay objections; focus on reliability of out-of-court statement 46

47 Avoid leading witnesses on direct. Testimony usually is more useful, powerful, memorable, and persuasive when it comes from the witness rather than counsel. Even if overruled, a well articulated objection to admission i of evidence may be useful in alerting the arbitrator to shortcomings of the evidence. 47

48 Tips for helping the arbitrator do his/her job at the hearing: Cooperate with opposing counsel regarding preparation and admission of exhibits. Cooperate with opposing counsel regarding order of witness presentation Remember that theatrics are not useful; there is no jury In response to objections, be prepared to answer this question: How will this evidence or argument help the arbitrator decide the case? 48

49 Briefs can help the arbitration process by: Identifying and reviewing applicable legal standards and authority; Highlighting and providing citations for key points in the record; Providing citations to precedent on point; Rebutting the other side s factual and legal arguments; and Showing basis for calculation of damages. 49

50 Post-hearing motions 1. Confirm award 2. Vacate award 3. Modify award 50

51 Confirm Award 1. Article 9 of FAA 2. Generally a ministerial act 3. Motion must be made within one year of award 51

52 Modify Award 1. Article 12 of FAA 2. Limited grounds available Material miscalculation of figures Ruling on matter not submitted imperfect award not affecting merits 52

53 Vacating Award 1. Article 12 of FAA 2. Narrow grounds for vacatur: Award procured by corruption or fraud Evident partiality Misconduct, including refusing to postpone hearing or hear evidence Arbitrator exceeded powers or imperfectly executed them 53