Arbitration - A Sign Of The Times?
2005-10-02
I. Introduction
What do the following employers have in common \endash USAA, Zachry Construction Company, Valero Energy Corporation, and H.E.B? Each of these aompanies, among San Antonio's largest employers, has instituted a program of alternative dispute resolution which utilizes, as its centerpiece, arbitration.
II. Benefits of Arbitration
In the last ten years, EEOC charges have more than doubled. Charges increased in 2002 to
their highest levels in seven years. Employment litigation has increased significantly to now represent forty percent of the federal civil docket.
Employment dispute resolution programs /arbitration have become recognized as a growing trend in the employment arena. Why?
- Resolution of disputes more equitably, expeditiously and economically;
- Reduction of legal and settlement costs/decreased expenditure of management time;
- Greater privacy and confidentiality;
- Reduction of claims/legal exposure to large jury awards/class actions;
- Maintenance of working relationships and decreased turnover;
- Retention of employees;
- Employee relations/public relations benefits, and;
- Possible insurance premiums discounts.
III. Pitfalls of Arbitration
To be sure, arbitration does have its draw backs.
1. Cost;
2. Perceived arbitrator tendencies;
3. Limited review and;
4. Trial by ambush.
IV. Successful Employee Dispute Resolution Programs
A. Elements
Each organization is faced with the task of determining what type of employee dispute resolution program it wishes to implement. For example, there can be several steps which can occur prior to or in place of arbitration such as:
1. Informal resolution \endash an informal internal process involving human resources and/or management for facilitating early resolution of problems with an employee.
2. Internal or external mediation \endash a program whereby a mutually selected mediator from outside the organization acts as a facilitator to assist the parties in reaching a quick and mutually acceptable solution.
3. Arbitration \endash the more formal proceeding similar to a trial or hearing where witnesses can be called and evidence submitted to an external neutral arbitrator who renders a binding, final written decision. Some companies, however, use non-binding arbitration.
4. Mandatory jury-trial waivers \endash as an alterative to mandatory arbitration, some employers use mandatory jury trial waivers in an effort to avoid the downside of both arbitration and jury trials yet preserving the protection of a court of law.
Once the steps have been selected for an employee dispute resolution program, an employer must next determine the scope of that program. In this regard, employers need to determine what types of claims are to be included within the confines of the program. Typically, companies will exclude claims such as worker's compensation, unemployment claims, benefit claims and unfair competition claims from an arbitration process. This is because either the claim cannot be resolved through arbitration by virtue of law or an injunction may be needed which cannot be obtained through the arbitration process.
Another item which must be discussed by management is that of cost sharing. For example, in the event an employer chooses mediation as part of its employee dispute resolution program, will the costs of mediation be split between the parties? With respect to arbitration, court decisions as well as rules of the American Arbitration Association ("AAA") typically require the employer to pay the lion's share of the filing fee as well as the arbitrator's fees and expenses associated with conducting the hearing and pre\endash arbitration matters.
B. Succesesful Arbitration Agreement/Programs
In the case of In re Halliburton, the Texas Supreme Court decided in 2002 that a program put in place by an employer, which altered the at\endash will employment contract between employer and employee was not unconscionable and was otherwise enforceable under general contract principles. Halliburton had sent notice to all of its employees by mail enclosing the Employee Dispute Resolution program and advising them that arbitration had been designated as exclusive method for resolving all disputes between the company and its employees. The notice informed the employees that by continuing to work after January 1, 1998, they would be accepting the new program.
The legal principle Halliburton relied upon was succinctly outlined in 1986, when the Texas Supreme Court set forth the manner in which an employer may change the terms of an at-will employment contract. The employer must establish, the court advised, that employees received (1) notice of the change, and (2) accepted the change. To prove notice, an employer asserting a modification must prove that it unequivocally notified the employee of definite changes of employment terms. When an employee continues to work with knowledge of the changes, the Texas Supreme Court recognized that the "[employee] has accepted the changes as a matter of law."
In connection with its program, Halliburton promised to arbitrate its employment claims against the employee which made it equally bound to the employee's promise to arbitrate employment claims. Significantly, under the Halliburton program, no amendment or change to the program was to apply to a dispute until after ten days notice to employees. Moreover, the amendments could never apply retroactively, only prospectively, upon effectuation of the ten day notice period.
V. Conclusion
All and all, arbitration is the wave of the future. More and more employers are turning to the private, confidential and customized format that arbitration provides in the event of disputes with their employees. The benefits to having programs of this nature are significant. Likewise, there are some drawbacks and each employer is left with the sole decision that it must make when determining if this is their appropriate dispute mechanism.