Outsourcing Justice

Fifth Circuit Appeal Shows Unfairness of Employment Arbitration

A recent appeal before the Fifth Circuit sheds light on certain aspects of unfairness in compelling arbitration of employment disputes.

The case involves a former employee who is suing her former employer for age discrimination.  Brief of Appellant, Phillips v. Bestway Rental, No. 13-60227 (5th Cir. July 3, 2013).  Click HERE to see a copy of the appellant’s brief.  The appeal involves a very narrow issue: the enforceability of a delegation clause whereby an arbitrator determines issues of arbitrability.

The issue on appeal is rather straightforward, and although the plaintiff attempts to raise a good argument by attacking the delegation clause directly, I expect the Fifth Circuit will easily affirm the lower court’s decision, enforce the delegation clause, and compel arbitration under the Supreme Court’s Rent-A-Center decision from 2010.  This delegation clause at issue is generally enforceable under Rent-A-Center.  There is nothing unusual about the issue on appeal.  However, the evidence submitted before the district court and the language of the arbitration agreement caught my attention.

The attorney representing the plaintiff employee submitted affidavits from other attorneys.  The affidavits stated that the attorneys were not aware of any arbitrators ever ruling in favor of an employee in Mississippi.  Also, the plaintiff’s attorney candidly admitted in an affidavit that he would not undertake representation if the case were before an arbitrator.

I have interviewed attorneys who represent consumers and employees, and several have told me that they would not represent a plaintiff in arbitration.  The reality for many plaintiff consumers and employees is that once a court compels arbitration, it can be difficult for a plaintiff to obtain representation.  In other words, arbitration is not being used to resolve disputes in good faith; instead, arbitration is attractive to many employers because arbitration in effect silences an employee and prevents disputes from ever being heard.

Also, the arbitration clause at issue states that the arbitrator may entertain motions to dismiss, and the arbitrator shall apply the standards governing such motions under the Federal Rules of Civil Procedure.  I have seen this clause in other arbitration agreements, including the clause at issue in the Supreme Court’s Rent-A-Center case, and this type of clause is very attractive to employers and corporate interests.  This clause requires the arbitrator to apply the harsh Twombly and Iqbal plausibility pleading standard, and the “Twiqbal” standard can be particularly severe for plaintiff employees in disputes where the employer is in possession of most of the evidence.  Also, the arbitration clause limited the discovery that would be available in arbitration.

So, let’s get this straight: the employer designs a system where 1) it is difficult for employees to get representation; 2) even if an employee obtains a lawyer, the employee must satisfy a high threshold when pleading at the very beginning of the proceeding; and 3) if the employee passes the challenging pleading stage, the employee is left without many discovery tools to prove his or her case.  On top of all this, the Federal Arbitration Act was never intended to apply to employment disputes, as I explain in my new book based on previously-untapped archival sources from the drafters of the Federal Arbitration Act.  When you look at the history behind the FAA, the merchants who were the driving force behind its enactment genuinely used arbitration as a legitimate means to resolve simple contract disputes with other merchants.  However, today, stronger parties frequently use the FAA not to resolve disputes, but to silence weaker parties and prevent disputes from even being heard.

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