Amicus Curiae Brief — Gilmer v. Interstate/Johnson Lane Corp.
Supreme Court brief1991
Ask Donna
What actually matters in this document.
Text
No. 90-18
IN THE
Supreme Court of the United States
OCTOBER TERM, 1990
ROBERT D. GILMER,
Petitioner,
INTERSTATE/JOHNSON LANE CORPORATION,
Respondent.
On Writ of Certiorari to the United States
Court of Appeals for the Fourth Circuit
BRIEF AMICUS CURIAE OF
CENTER FOR PUBLIC RESOURCES, INC.
IN SUPPORT OF RESPONDENT
JAY W. WAKS
(Counsel of Re2ord)
LOUIS GINSBERG
Kaye, Scholer, Fierman,
Hays & Handler
425 Park Avenue
New York, NY 10022
(212) 836-8000
Attorneys for Amicus Curiae
Center for Public Resources, Inc
TABLE OF CONTENTS
Page
STATEMENT OF INTEREST ......-..----+--++:> 1
ISSUE PRESENTED ........--- ec ccccccccececes 8
STATEMENT OF THE CASE.........---+-:+-+:> 8
SUMMARY OF ARGUMENT .........----- -+++)
Pp re ee ee are eo eo ee 10
I. CLOGGED COURT DOCKETS
AND SKYROCKETING LEGAL COSTS
SIGNAL THAT AGREEMENTS TO
ARBITRATE SHOULD BE ENFORCED... 10
ll. GARDNER-DENVER DOES NOT PRE-
CLUDE ENFORCEMENT OF AN INDIVI-
DUAL EMPLOYEE'S AGREEMENT TO
Bs co dios 244846 dw SAR OR BOO OS 14
A. THE JUDICIAL CLIMATE HAS
0 Saree 16
B. FACTUAL DISTINCTIONS
BETWEEN COLLECTIVELY
BARGAINED AND
INDIVIDUAL ARBITRATION
AGREEMENTS ARE
©) ») « |) - re 19
III. PREDISPUTE ARBITRATION AGREE-
MENTS SHOULD BE ENFORCED AS TO
ADEA DISPUTES ........-----:: sae
il
Page
A. THE FOURTH CIRCUIT'S TABLE OF AUTHORITIES
REASONING IS CORRECT .... 21 _ —
" =a: on th rv r—-Denver Co
ACT" Alexander _v. Gardner~Der .
a NOT PRECLUDE CS i agaseseccescvenss passim
RCEMENT OF
rm nthe de ARBITRATION Besrentine v. Atkanase—Eest treignt =. Armoaae Best Freight
See System, Inc., S.
». xa _« =o alr 14, 16, 19
ENT GARDNER-DENVER 20
rhe ay ye -- ITS FOOTNOTE | |
OF PRED R THE ENFORCEMENT Bird v. Shearson Lehman/American
GREENE RATION EET cnehanh oneated
a eS re 2 ere % ir.), vacat femance?,
d 110 S. Ct. 225 (1989), remanded
EE a 9 mem. op. No. 88-7704 (2d Cir
i ee en aeee neces ccencees 16
Dean Wittes Reynolds, Inc. v. Byrd,
ER 17
EEOC vy. Cosmair, 821 F.2d 1085
Eee ee 22
Gilmer _v. Interstate/Johnson Lane Corp.,
5 F.2d 195 (4th Cir. 1990)............... 21
McDonald v. City of West Branch,
§ ) @& YR, gue -.. 14, 16, 19,
20
Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc..
473 US. 614 (1985)... ..... Sh 7, 15, 16,
17, 18, 19
iv v
PAGES PAGES
_v. LL ical
Union, 915 F.2d 840 (2d Cir. 1990) .......... 5 STATUTES
i v. i Age Discrimination in Employ-
Inc., 877 F.2d 221 (3d Cir. 1989), ment Act (ADEA),
affg 46 Fair Empl. Prac. Cas. cco ccseseccceseee §
rs i os 0 6 6 6.6 W's 0.0.8:0:0:0 21, 22 ect echesess esses uees 22
ch ot seceueccevevicees 23
v. ES ee 24
GE 10, 15, 16
Federal Arbitration Act,
Rodriguez de Quijas v. Shearson/ re ns 6 SU bes Od vee e eee ne 10
Inc., 109 S. Ct. 0 ee i 5, 28
SS ee eee eee 15, 16, 18
Labor Management Relations Act,
Roe v. Kidder Peabody and Co., Inc., ES ee rae 10
52 Fair Empl. Prac. Cas. (BNA)
GE 5,7 "Older Workers Benefit Protection Act,”
Pub. L. 101-433 (1990),
Shearson/American Express, Inc. v. a cg coy Ub ws 6k oles -0 et 9, 22, 23
McMahon, 482 U.S. 220 (1987)............. 15, 16, IED ns woh cs 6 cheese eeseee 25
17, 19
ee ee tee eee bese ose wed 14
Tenne ineering, Inc. v.
United Electrical, Radio and RULES
Machine Workers, 207 F.2d 450
ee 10 eS hehe e sb kane Siem e 22
ee eee 22
Vaca v. Sipes,
LL re ee 20
Wilko v. Swan,
cc cen wnnceveees Wx 32 18
Yellow Freight System, Inc. v.
Donnelly, 110 S. Ct. 1566 (1990)... ... | 3
vi
OTHER AUTHORITIES
R. Coulson, "Employment Contracts:
The Misunderstood Labor Cases,”
N.Y.LJ. at 3, col. 3
i 8
J. Dertouzos, E. Holland & P. Ebener,
"The Legal and Econoric Consequences
of Wrongful Termination"
(Rand Corp. 1988) .....................
Federal Courts Study Committee,
Working Papers and Subcommittee
Reports July 1,1990......... a
M.M. Hoyman and L.E. Stallworth,
"Arbitrating Discrimination Grievances
in the Wake of Gardner-Denver"
BLS Monthly Labor Review at 3
Tee kawueks
Model Agreement to Submit Termination
Disputes to the Model Employment
Termination Dispute Resolution
gl ER OS er
Model Employment Termination Dispute
Resolution Procedure...................
Report on the Federal Courts Study
Committee April 2, 1990... _.
11
vii
PAGES
AF. Westin & AG. Feliu, "Resolving
Employment Disputes Without
Litigation” (Bureau of National
[ >) errr rere err rr 12, 24
. ll
STATEMENT OF INTEREST
The Center for Public Resources, Inc. (CPR)
submits this brief as amicus curiae urging affirmance of the
decision by the Court of Appeals for the Fourth Circuit.’
CPR is a non-profit corporation founded in 1979
and located at 366 Madison Avenue, New York, New York 10017.
CPR's sole activity is the CPR Legal Program, a national coalition
of 200 major corporations, generally represented by their chief
legal officer; 100 law firms, represented by a senior partner, and
legal scholars.
The CPR Legal Program is devoted to the ficld of
alternative dispute resolution, or "ADR," as it is popularly called.
Recognizing that courts, administrative agencies, and litigants alike
are ill-served by costly, time-consuming, resource-wasteful ‘and
divisive litigation, the mission of the CPR Legal Program is to
develop, promote and implement alternatives to litigation. CPR
committees of eminent practitioners have developed ADR
approaches in a number of legal areas, including employment,
hazardous waste, product liability, technology and toxic tort.
Written consent of the parties to the submission by CPR of this brief
amicus curiae are on file with the Cletk of this Court,
2
Pertinent to the issue sub judice is the CPR's Model
Employment Termination Dispute Resolution Procedure (Model
Procedure), a project of the CPR Employment Disputes Committee,
which is composed of leading lawyers from the management and
plaintiffs bars as well as from academia and neutrals. The Model
Procedure and the CPR's Model Agreement to Submit Termination
Disputes to the Model _ Employment Termination Dispute
Resolution Procedure (Model Agreement) are contained in
Appendix A to this Brief.
The Model Procedure is incorporated into a model
predispute agreement and sets out the rules by which any
controversy over the termination of employment (or any other
designated employment dispute) would be resolved in arbitration.
An employee who signs the Model Agreement would be agrecing
to have arbitration of these disputes governed by the Model
Procedure. The Model Procedure could be used when hiring
particular executives or could be made applicable generally to all
employees or selectively to some, as a matter of corporate policy.
The Model Procedure is designed to relate only to
employment terminations, though it may casily be adapted to
3
include other types of employment claims. Initially, the term
"dispute" is defined broadly so it encompasses al] manner of claims
arising out of an employment termination. This is to place all such
‘claims into arbitration, before a single "adjudicator",’ and ensure
their resolution efficaciously in a single proceeding.’ Furthermore,
by employee-employer agreement, resolution of any dispute
pursuant to the Model Procedure, including disputes involving
statutory, common law or contractual protections, is to be final and
binding, or if not, to be accorded the fullest weight permitted by
law.* As to discovery, the employee is expressly granted the right
to depose one employer representative on the assumption that the
employer has greater access to the reasons for termination.” The
employee is also entitled to review his or her personnel record
unless, upon a showing of good cause, the adjudicator excludes
Model Procedure, Article Eight at App. A-27-28.
: Model Procedure, Article One at App. A-21 and Commentary at
App. A-42-44.
: Model Procedure, Article Two at App. A-22-23 and Commentary at
App. A-44-48.
Model Procedure, Article Ten at App. A-29 and Commentary on
4
certain confidential matters. Other discovery is permissible but is
confined to that which is relevant and for which each party has a
"substantial, demonstrable need.”’ This limited discovery is aimed
at ensuring a fair but cost-efficient proceeding and at curbing
abuses encountered in certain court litigation.
The employee bears the burden of persuasion to
demonstrate that the termination was not based on any legitimate
business reason, considering the nature of the employee's position
and responsibilities and the employer's stated policies." Such a
burden distinguishes the Model Procedure from an arbitration
pursuant to a collective bargaining agreement's grievance procedure
where an employer usually must prove "just cause." It instead
places the burden on the employee in a manner roughly comparable
to what it would be in civil rights litigation, and the commentary
to the Model Procedure makes this eminently clear.” Hence, the
adjudicator is expected to apply relevant statutory law, both
-——
ld
Model Procedure, Arucle Ten at App. A-29.
Model Procedure, Asucle Thistecn at App. A-30-3]
1) pP Five, rrirrycrt ar ' . , ‘ c cE
Model Procedure, Commentary on Article Thincen at App. A-53-5:!
5
substantive and procedural. Indeed, under the Federal Arbitration
Act (FAA), a court may vacate an award issued pursuant to the
Model Procedure on the ground that an adjudicator who failed to
apply prevailing law as required by the Model Procedure exceeded
his authority.”
As far as the reasonable expenses of the
adjudication are concerned, the employee is only required to pu y
the lesser of one-half of those costs or two days gross
compensation. These expenses (fully recoverable if the employce
prevails) include the costs of the adjudicator and filing fees." This
makes the Model Procedure even more accessible to all
employces.”*
3 See Federal Arbitration Act, 9 U.S.C. § 10(d), see also Model
Procedure, Article Twenty-One at App. A-37-38,; cf. Newsday, Inc.
v. LL. Typographical Union, 915 F.2d 840 (2d Cir. 1990) (labor
arbitration award vacated as being against public policy embodicd in
Tithe VII of the Civil Rights Act of 1964). In enforcing predispute
agrcements to arbitrate statutory Claims, a judge may retain
jurisdiction of the case for subsequent review of the arbitral award.
Sce Roe v. Kidder Peabody and Co. Inc., 52 Fair Empl. Prac. Cas.
(BNA) 1865 (S.D.N.Y. 1990) (Haight, D.J.).
Model Procedure, Article Sixteen at App. A-32-33.
Model Procedure, Commentary on Asticle Sixteen at App. A-57-58
6
Significantly, unlike most commercial arbitrations,
the Model Procedure requires the adjudicator to render his or her
decision in writing with express findings of fact on each issue of
fact raised, the rationale for the decision and, if necessary,
conclusions of law and discussion of legal autnoritics.’’ This
requirement ensures that, even if the arbitral award is not final and
binding as to its disposition of statutory claims, it would serve a
therapeutic and deterrent function in not simply informing a party
that it lost in whole or part, but in explaining in a reasoned manner
the bases for the decision."* Moreover, a reasoned decision could
serve persuasively in another proceeding, allowing a reviewing
court to decide whether the arbitral award is dispositive of statutory
claims.**
” Model Procedure, Article Seventeen at App. A-33-34.
See M.M. Hoyman and L.E. Stallworth, "Arbitrating Discrimination
Grievances in the Wake of Gardner—Denver,” BLS Monthly Labor
Review, at 3-10 (Oct. 1983), reporting on a study which found that,
after Gardner—Denver, rclitigation of arbitration decisions had not
occurred in a majority of cases and, where it had occurred, the
arbitrator was rarely contradicted.
Model Procedure, Commentary on Asticle Seventeen at App.
A-57-58
7
The adjudicator has broad remedial powers and
may award reinstatement, back pay and attorney's fces."* If
reinstatement is warranted but not appropriate, up to two years’
front pay may be awarded." An employee has a duty to mitigate,”
but the adjudicator may award liquidated damages.”
In sum, the protections of the Model Procedure
bolster the conclusions of this Court in Mitsubishi Motors Corp. v.
Soler Chrysler-—Plymouth, Inc., 473 U.S. 614, 628 (1985), that
arbitration need not involve the loss of any substantive rights, but
rather is purely a forum selection device.”
= Model Procedure, Articles Nineteen and Twenty at App. A-35-37
. Model Procedure, Article Ninetcen at App. A-35.
“ Id at App. A-36.
v Id.
In many procedural respects, CPR's Model Procedure is similar to the
American Arbitration Association's (AAA) "Commercial Arbitration
Rules,” and its "Model Employment Asbitration Procedures,” one or
the other of which have been incorporated by reference into certain
executive employment agreements. In one key respect, for the
purpose of selecting an arbitrator, the CPR model incorporates the
AAA's "Commercial Arbitration Rules.” Model Procedure,
Article Eight at App. A-27
8
ISSUE PRESENTED
Whether claims brought pursuant to the Age
Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621 et
seq., are subject to compulsory arbitration.
STATEMENT OF THE CASE
CPR adopts the Respondent's statement.
SUMMARY OF ARGUMENT
With the courts remaining congested and
backlogged, it is important to promote mutually beneficial
alternative means of dispute resolution such as the arbitration of
employment disputes. To promote arbitration as a term of
employment is to offer employees a quick, inexpensive method of
resolving individual disputes. In this regard, Alexander v.
Gardner-Denver Co., 415 U.S. 36 (1974), is not controlling.
Gardner-Denver, a case involving the assertion of Title VII rights,
arose in the context of arbitration under a collective bargaining
agreement, and this strongly distinguishes it, since its holding was
premised on the Court's concerns that, in the collective bargaining
context, an employee's rights could be sacrificed for the union's
9
collective good, and that a labor arbitrator, bound only to interpret
the parties’ agreement, would not be obligated to apply applicable
statutory law. Gardner-Denver was also based on the now-
outdated view that arbitrators were less capable of resolving
statutory disputes.
Recently, in cases involving individual agreements
to arbitrate, such as that found here, this Court has consistently
compelled the arbitration of claims arising under federal antitrust,
securitics and RICO laws. In fact, the presumption is in favor of
arbitration, and the party opposing it bears the burden of showing
that Congress intended to preclude its use as to a particular statute.
And there is nothing in the ADEA or its legislative history which
expresses any such Congressional intent.
The “Older Workers Benefit Protection Act” scts
forth detailed requirements which must be met in order effectively
to waive ADEA rights.” A predispute agreement to arbitrate may
still be enforced, however, since an employee, by agrecing first to
= "Older Workers Benefit Protection Act,” Pub. L. 101-433, Tide I,
Secon 201 (1990)
10
arbitrate a dispute, would not be relinquishing his right later to
proceed in court.”
ARGUMENT
1.
CLOGGED COURT DOCKETS
AND SKYROCKETING LEGAL COSTS
SIGNAL THAT AGREEMENTS TO
ARBITRATE SHOULD BE ENFORCED.
Two thousand, one hundred and sixty-six is the
percentage increase from 1970 through 1989 in the number of
- Although we agree with Respondent that not before this Court is the
issue of whether the FAA § 1 exempts all employment contracts from
its Coverage, we wish to point out that long ago this issue was
resolved in the seminal case of Tenney Enginceri nc, v. United
Liectrical, Radio and Machine Workers, 207 F.2d 450 (3d Cir. 1953),
and, although the Court did not mention this point in Perry v.
Thomas, 482 U.S. 483 (1987), it there enforced, unde: wwe FAA, an
agreement to arbitrate an employment disput Moreover, if this
Court were .o construe FAA § 1 to exclude all contracts of
employment from its coverage, it would create an unfortunate void in
that the only employment arbitration contracts which would be
enforceable in federal court would be those in collective bargaining
agreements and then only in a suit under Section 301 of the Labor
Management Relations Act, 29 U.S.C. § 185. There is no basis for
believing that such an anomalous result was intended by Congress
11
employment discrimination cases filed in federal court, as reported
by the Federal Courts Study Committee. By comparison, during
that same period, all other federal civil litigation increased by only
125 percent.”
| Although, in 1966, cases contesting hiring practices
outnumbered employment termination cases by 50%, by 1985,
termination cases reversed this ratio by more than six to one.” In
1986-1987, a total of 115,536 charges of unlawful discrimination
were filed either with state and local human rights agencies or the
Equal Employment Opportunity Commission (EEOC).* In that
same period, over 10,000 cases of employment discrimination were
” Daily Labor Report No. 5, at A-3 (Jan. 8, 1990) citing Federal Courts
Study Committee Working Papers and Subcommitice Reports July 1,
1990 - Volume Il ai 49. (The Study Commutice also pointed out that
“in most nations, and in most arcas of employment law in this nation,
disputes are resolved by arbitrators” and recommended that
employment discrimination claims be resolved in binding arbitration
Report of the Federal Courts Study Commitice April 2, 1990, Part 1,
at 19).
lederal Courts Study Committee Working Papers and Subcommitice
Reports July 1, 1990 - Volume II at SO.
U.S. Equal Employment Opportunity Commission, Office of Program
Operations, Enforcement Statistics FY 1980 - FY 1989 (1/90)
12
filed in federal and state courts, and 20,000 cases of unjust
discharge were pending in state courts as well.”
In addition to the fact that the courts and
administrative agencies are literally overrun with these claims, the
costs to both sides in litigating them in a judicial forum are high.
A Rand report has concluded that, during 1980-1986, defense fees
in the wrongful discharge cases it studied averaged $83,862 and
were rising 15-24 percent annually.” Assuming a typical
40 percent contingency fee and based on an average plaintiff final
payment of $208,212, plaintiff attorney's fees come to $83,285.
The $167,147 total of average legal fees is about 33 percent higher
than the amount plaintiffs actually receive.* The Rand report
demonstrated that, in the end, after cxpenditures for costs and fees,
the median plaintiff received only $30,000." Significantly, the
average case waited three years and two months from its filing to
A.F. Westin & A.G. Feliu, "Resolving Employment Disputes Without
Litigation” at 1 (Bureau of National Affairs 1988).
J. Dertouzos, E. Holiand & P. Ebener, "The Legal and Economic
Consequences Of Wrongful Termination” at 40-45 (Rand Corp. 198s)
x Id. at 37, 40, 47
Id. at 39
13
get to trial; moreover, those cases still pending at the time of the
study's publication had already consumed, on average, another two
years and four months in post-trial and appellate processes.”
Allowing an employer and employee to settle their
disputes in a previousty agreed upon arbitral forum would not only
expedite their resolution and reduce a source of mounting pressures
on our courts, but would reduce transactional costs to plaintiff and
defendant alike. Indeed, if this Court refuses to allow enforcement
of predispute arbitration agreements as to statutory employment
claims, the Court would create an anomalous aad inefficient
situation whereby certain of an employee's claims against his
employer would be heard in arbitration, while others, quite possibly
involving the same facts, would be resolved some time later in
court.
kd. at 24-25.
14
Il.
DOES NOT PRECLUDE
ENFORCEMENT OF AN INDIVIDUAL EMPLOYEE'S
AGREEMENT TO ARBITRATE.
The holding in a that a union
employee could have his Title VII claims heard de novo in court
despite a prior arbitration award resolving them, was extended to
alleged violations of the Fair Labor Standards Act in Barrentine v.
Arkansas-Best Freight System, Inc., 450 U.S. 728 (1981), and to
a claim under 42 U.S.C. §1983 in McDonald v. City of West
Branch, 466 U.S. 284 (1984). These 1974-84 "First Decade" cases
have stood as the major impediment to the enforcement in federal
court of predispute arbitration agreements in employment contracts.
In more recent decisions, the 1985-to-present
"Second Decade” cases, however, this Court, in embracing
arbitration of key statutory rights, has al] but expressly limited the
reach of Gardner-D ver, a task which we respectfully request it
to conclude in this case.
15
In Mitsubishi Motors Corp., 473 U.S. 614, 628
(1985), this Court compelled arbitration of antitrust claims and
announced the controlling rule -- parties should be held to an
agreement to arbitrate “unless Congress ... has evinced an
intention to preclude a waiver of judicial remedies for the statutory
rights at issue." Two years later, in Shearson/American_ Express,
Inc. vy. McMahon, 482 U.S. 220 (1987), this Court compelled
arbitration of claims under the 1934 Securities and Exchange Act
and SEC rule 10b-5 and under the Racketeer Influenced and
Corrupt Organizations Act (RICO); and in Perry v. Thomas, 482
U.S. 483 (1987), held that the Federal Arbitration Act preempted
a provision of California labor law which permitted wage collection
actions to be heard in court regardless of a private agreement to
arbitrate. Thereafter, in Rodriguez de Quijas v. Shearson/American
Express, Inc., 109 S. Ct. 1917 (1989), the Court extended its
enforcement of arbitration agreements to a claim under the 1933
Securities Exchange Act. Finally, in its latest pronouncement, the
Court, without opinion, vacated and remanded a decision of the
Court of Appeals for the Second Circuit which had denied
16
enforcement to a predispute agreement to arbitrate a claim under
the Employee Retirement Income Security Act.”
A. THE JUDICIAL CLIMATE HAS CHANGED.
First, Gardner-Denver, Barrentine and McDonald,
all cases arising in the context of arbitration under collective
bargaining agreements, did not mention, much less analyze, the
Federal Arbitration Act. Though Gardner-Denver and its First-
Decade progeny did not arise by virtue of a motion to compel
arbitration and thus are procedurally distinguishable from the
Second-Decade cases, Mitsubishi Motors Corp., McMahon, Perry
and Rodriguez_de Quijas, the First-Decade cases unnecessarily
limited the effectiveness of private agreements to arbitrate and the
policies underlying the FAA by allowing de novo judicial
redeterminations of the same matters. In the context of the First-
Decade cases, this Court was not concerned with enforcing what it
has since repeatedly stated to be the “federal policy favoring
yn
Bird v. Shearson Lehman/American Express, Inc., 871 F.2d 292 (2d
Cir.), vacated and remanded, 110 S$. Ct. 225 (1989), remanded mem.
op., No. 88-7704 (2d Cir. Jan. 19, 1990).
17
arbitration," which requires that the courts "rigorously enforce
agreements to arbitrate." In this Second Decade, the Court has
consistently emphasized that the Federal Arbitration Act “is at
bottom a policy guaranteeing the enforcement of private contractual
arrangements,"™ and that "[t]he preeminent concern of Congress in
passing the Act was to enforce private agreements into which
parties had entered."*
Second, the judicial hostility openly displayed in
Gardner-Denver and its progeny towards arbitration as an inferior
means of resolving statutory claims is no longer permissible.
Arbitrators are no longer deemed incapable of resolving such
disputes. "[WlJe are well peat the time when judicial suspicion of
the desirability of arbitration and of the competence of arbitral
tribunals inhibited the development of arbitration as an alternative
means of dispute resolution." Indeed, in recently overruling
x McMahon, 482 U.S. 220, 226 (1987).
” Id. at 226 (1987).
1“ Mitsubishi Motors Corp., 473 U.S., 614, 625 (1985).
- Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985)
- Mitsubishi Motors Corp., 473 U.S. at 626-27 (1985).
18
Wilko v. Swan, 346 U.S. 427 (1953),” a decision cited favorably
in Gardner-Denver,” this Court wiped away its initial and longest
standing deprecation of arbitration.
Third, the Court now views an agreement to
arbitrate as a forum selection device. Unlike the tack it took in
Gardner-Denver, this Court no longer views an agreement to
arbitrate as a relinquishment of substantive rights:
"[A]_ concern for _ statutorily
protected classes provides no
reason to color the lens through
which the arbitration clause is read.
By agrecing to arbitrate a statutory
claim, a 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. It trades the
procedures and opportunity for
review of the courtroom for the
Rodriguez de Quijas, 109 S. CX. 1917, 1922 (1989)
- Gardner-Denver, 415 U.S. at 52 (1974)
19
simplicity, informality, and
expedition of arbitration.””
Fourth, in Gardner—-Denver, the Court took the
view that claims relating to statutory rights must be resolved in the
courts. Now, instead, the presumption is in favor of enforcing
agreements to arbitrate these claims. In fact, the burden is on the
party opposing arbitration to demonstrate that Congress expressed
an intent to preclude waiver of the judicial forum.“
B. FACTUAL DISTINCTIONS BETWEEN
COLLECTIVELY BARGAINED AND INDIVIDUAL
ARBITRATION AGREEMENTS ARE
CONTROLLING.
Gardner-—Denver, Barrentine and McDonald all
involved arbitration under collective bargaining agreements. In
those cases, this Court was concerned that fundamental employcte
rights may not receive adequate protection since individual rights
could be subordinated to the overall interests of the bargaining
unit.” In the collective bargaining context, all the union owed was
7 Mitsubishi Motors Corp., 473 U.S. at 628 (1985).
. McMahon, 482 U.S. 220, 227 (1987).
Gardner-Denver, 415 U.S. 36, 58 n.19 (1974); Barrentine, 450 U.S.
728, 742 (1981), McDonald, 466 U.S. 284, 291 (1954).
20
a duty of fair representation,” not fairest representation. In the
context of individually bargained agreements to arbitrate, the
employee is not represented by a union and instead controls his
own representation; thus, this problem of potentially competing
interests is resolved.
In addition, under Gardner—Denver's rationale, the
Court was concerned that an arbitrator acting under the authority
of a collective bargaining agreement had the duty to interpret that
contract only and was not able to apply general or statutory law to
the contrary.” Yet again, where an individual employce's
agreement to arbitrate, as in the instant case, does not restrict
consideration of statuiery law or, as in CPR's Model Procedure,
affirmatively compels its consideration, the arbitrator is entirely
free to apply relevant statutory law, thus fully protecting employce
rights.~
‘“ See Vaca v. Sipes, 386 U.S. 171 (1967).
” Gardner—Denver, 415 U.S. 36, 56-57 (1974); Barrentine, 450 U.S.
728, 744 (1981); McDonald, 466 U.S. 284, 290-291 (1984).
See R. Coulson, "Employment Contracts: The Misunderstood Labor
Cases,” N.Y.L.J. at 3, col. 3 Van. 12, 1990), in which Mr. Coulson,
(continucd...)
21
Ill.
PREDISPUTE ARBITRATION AGREEMENTS
SHOULD BE ENFORCED AS TO ADEA DISPUTES.
A. THE FOURTH CIRCUIT'S REASONING _IS
CORRECT.
It is clear that, despite the many opportunities
which Congress has had to express itself in enacting and amending
the ADEA, no Congressional intent relating to arbitration may be
discerned from either the text or legislative history of that statute.“
Nevertheless, despite the strong federal policy favoring arbitration
as expressed in the FAA, the Third Circuit disregarded this
“(...continucd)
President of the American Arbitration Association, explained that
Gardner-Denver and progeny should be limited to the collective
bargaining context.
as
On this point, there is no dispute. Nicholson v. CPC International,
Inc., 877 F.2d 221, 225 (3d Cir. 1989); Gilmer v. Interst>te/Johnson
Lane Corp., 895 F.2d 195, 197 (4th Cir. 1990). The absence of
Congressional intent is confirmed by an independent in-depth study
of the ADEA's legislative history performed by CPR counsel's office.
Congress's silence in the “Older Workers Benefit Protection Act,”
Pub. L. 101-433 (1990), in the face of the well-publicized arbitration
issuc in this case, however, is evidence that it has no aversion to the
arbitration of ADEA claims.
22
mandate on the basis of shaky inferences.“ Citing to the role of
the EEOC in ADEA enforcement, it simply presumed that
Congress did not want ADEA claims in arbitration because that
could eliminate EEOC enforcement, since no charge of
discrimination would be filed.*” An individual, however, may
settle his ADEA claim without EEOC involvement,“ and there is
- Nicholson v. CPC International, Inc., 877 F.2d 221 (3d Cir. 1989),
affg 46 Fair Empl. Prac. Cas. (BNA) 1019 (D.N.J. 1988) (Sarokin,
J.).
The EEOC always retains the power to conduct investigations on its
own initiative, 29 C.F.R. § 1626.4, and this holds regardless of any
agreement an individual may sign. Likewise, the EEOC retains the
independent authority to bring suit to remedy instances of alleged age
discrimination. See 29 U.S.C. § 626(b); 29 C.F.R. §§ 1626.4,
1626.13; see also EEOC v. Cosmair, Inc., 821 F.2d 1085 (Sth Cir.
1987) (employee who signed waiver of claims under ADEA could not
waive right to file charge of discrimination with EEOC which retained
power to seek injunction against company for unlawful conduct in
violation of ADEA). This principle is reconfirmed in the "Older
Workers Benefit Protection Act,” Pub. L. 101-433, Title Il,
Section 201(f)(4) (1990) ("[nJo waiver may be used to justify
interfering with the protected right of an employee to file a charge or
participate in an investigation or proceeding conducted bv the
Commussion.").
Indeed, under the “Older Workers Benefit Protection Act,” Pub. L.
101-433, Title Il (1990), an individual may validly waive a right or
(continued...)
23
no reason why a private agreement to settle a matter using agreed
upon procedures should be viewed as being deficient, so long as
the individual employee is not precluded from filing a complaint of
discrimination with the EEOC.
The very fact that the EEOC, an administrative
agency, plays a role in the enforcement of the ADEA coupled with
the grant of concurrent jurisdiction to both federal and state
courts” demonstrates that Congress felt the resolution of ADEA
claims need not be confined to any one place. The emphasis is on
the vindication of ADEA rights, not on the forum to be used.”
Indeed the ADEA itself directs the EEOC, in the first instance, to
“(...continued)
claim under the ADEA without any involvement by the EEOC. The
EEOC itself, in its fiscal year 1989, only directly participated or
intervened in 133 lawsuits under the ADEA, although it received to
process 14,789 charges of age discrimination. U.S. Equal
Employment Opportunity Commission, Office of General Counsel,
Litigation Statistics FY 1980 - FY 1989 (1/90).
” 2 USC. § 626(c).
By analogy, this concept was reinforced in Yellow Freight Sys.
Inc. v. Donnelly, 110 S. Ct. 1566 (1990), where this Court
unanimously held that Title VII plaintiffs could proceed in either
federal of state court, in the absence of any eNpress Statutory mandate
precluding such
24
seck to resolve disputes through informal methods of conciliation,
conference and persuasion.”
In the appropriate case, not present here, the
question of whether the predispute arbitration agreement was
entered into by the plaintiff voluntarily and knowingly may have to
be resolved before the agreement to arbitrate may be enforced.
Whatever the level of sophistication or actual bargaining power of
the employee, however, there must be no blanket presumption
against enforcement, since arbitration would have been an openly
and specifically stated and known condition of employment.”
29 U.S.C. § 626d)(2).
See, ¢.g., Model Agreement at App. A-16-41. Also, market forces
will ensure that employers adopt basically sound and fair systems,
such as the Model Procedure, since employees can be expected wo
view such a procedure as an important term of employment and the
more equitable a company's procedure, the more numerous and
qualificd its applicants and the more satisfied and productive its
employees. See AF. Westin & A.G. Feliu, “Resolving Employment
Disputes Without Litigation” 49-S& (Bureau of National Affairs
19S)
25
B. THE “OLDER WORKERS BENEFIT PROTECTION
ACT” DOES NOT PRECLUDE ENFORCEMENT OF
PREDISPUTE ARBITRATION AGREEMENTS.
On October 17, 1990, President Bush signed into
law the "Older Workers Benefit Protection Act,” Pub. L. 101-
433, which amends the ADEA and, under Title II, Section 201,
sets forth detailed requirements which must be met in order
effectively to waive ADEA rights. Certainly, a predispute
agreement to arbitrate akin to CPR's Model Agreement and Model
Procedure is still enforceable since an employee, by agrecing first
to arbitrate a dispute, would not be relinquishing his right later to
proceed in court on the ADEA claim, with jury trial if desired.”
Notwithstanding this point, the resolution of the
instant case is unaffected by the "Older Workers Benefit Protection
Act” since Title I], Section 201 does not apply to waivers which
occurred before that statute's date of enactment.“ Accordingly, if
- Model Procedure, Asticles Two at App. A-23 and Twenty-Three at
App. A-39, and their Commentary at App. A-44-48, App. A-62-
63. There is no prospective “waiver” of the right to a jury tial under
the ADEA where the employee defers that nght.
. "Older Workers Benefit Protection Act,” Pub. L. 101-433, lide I
Section 202(a) (1990)
- 27
Mr. Gilmer waived any rights, he did so validly insofar as the ular arbitrators. Where an arbitral
"Older Workers Benefit Protection Act" is concerned. determination gives full con-
sideration to an employee's Title
IV. VII rights, a court may properly
TO THE EXTENT GARDNER-DENVER STILL CONTROLS -- accord it great weight. This is
ITS FOOTNOTE 21 ALLOWS FOR THE ENFORCEMENT especially true where the issue is
OF PREDISPUTE ARBITRATION AGREEMENTS. solely one of fact, specifically
In an often overlooked footnote, the Gardner- addressed by the parties and
decided by the arbitrator on the
Denver Court expressed its views as to the weight to be given
basis of an adequate record. But
bitratio
arbitration awards courts should ever be mindful that
"We adopt no standards as
to the weight to be accorded an
arbitral decision, since this must
be determined in the court's
discretion with regard to the facts
and circumstances of each case.
Relevant factors include the
existence of provisions in the
collective bargaining agreement
that conform substantially with
Title VII, the degree of procedural
fairness in the arbitral forum,
adequacy of the record with respect
to the issue of discrimination, and
the special competence of partic-
Congress, in enacting Title VII,
thought it necessary to provide a
judicial forum for the ultimate
resolution of discriminatory
employment claims. It is the duty
of courts to assure the full avail-
ability of this forum.””
Hence, even under that now outdated view of
arbitration as an inferior dispute resolution mechanism, there was
an opportunity to enforce arbitration awards rendered pursuant to
predispute arbitration procedures which afforded the employee
ample substantive and procedural protections. Under the CPR
Gardner-Denver, 415 U.S. at 60 n.21 (1974)
28
Model Procedure, in particular, the prerequisites of Footnote 21
should be fully met and, at the very least, "great weight" may be
given to the arbitrator's resolution of a statutory claim. The
arbitrator must issue a written decision, and there are provisions
for discovery and full opportunity to present evidence and
argument at hearing. In addition, the burden of persuasion as to
claimed violations of the anti-discrimination laws would be that
utilized in court. Finally, the arbitrator possesses broad remedial
powers to award = reinstatement and virtually complete
compensation in addition to punitive or liquidated damages and
attorney's fees.
Ata minimum, the possibility that, in a particular
case, the arbitrator may improvidently disregard the individual's
ADEA protections is not sufficient reason, in the first instance, to
deny enforcement of an otherwise valid agreement to arbitrate
There is ample opportunity, if necessary, to correct any arbitral
error in this regard, either in a proceeding to vacate an award
under the FAA, 9 USC. § 10(d), or in a proceeding under the
ADEA in which the court will determine the weight to be accorded
the arbitr ‘tors decision and award
29
CONCLUSION
This Court has now repeatedly endorsed it, the
Federal Arbitration Act commands it, practicality compels it, and
the two parties agreed to it. Accordingly, there is every reason to
enforce a predispute agreement to arbitrate statutory claims,
including a claim under the ADEA. For the reasons stated herein,
the judgment below should be affirmed.
Respectfully submitied,
JAY W. WAKS
(Counsel of Record)
LOUIS GINSBERG
Kaye, Scholer, Fierman,
Hays & Handler
425 Park Avenue
New York, New York 10022
(212) 836-8000
Attorneys for Amicus Curiae
Center for Public Resources, Inc
Dated: December 19, 1990
APPENDIX A
MODEL ADR PROCEDURES
EMPLOYMENT TERMINATION
DISPUTE RESOLUTION AGREEMENT AND PROCEDURE
Copyright © 1990 by Center for Public
Resources, New York, NY. Permission is
granted to copy this document for any
purpose other than for-profit publication,
provided it is clearly identified as a Center
for Public Resources product.
$25
CPR EMPLOYMENT DISPUTES COMMITTEE
Joseph Barbash -
CHAIRMAN
Debevoise & Plimpton
James N. Adler, Esq.
Irell & Manella
Charles G. Bakaly, Jr.
O'Melveny & Myers
Phillip Borowsky
Cartwright, Slobodin,
Bokelman, Borowsky,
Wartnick, Moore
& Harris, Inc.
Reagan Burch
Baker & Botts
Karen M. Claybourne
Federal Express
Robert Conway
Motorola, Inc.
Professor Samuel Estreicher
New York University
School of Law
Alfred G. Feliu*
Paul, Hastings,
Janowski & Walker
* Members of Drafting Subcommitice
** Chair of Drafting Subcommitice
Joseph A. Golden
Sommers, Schwartz,
Silver & Schwartz
David B. Goldin
Robert A. Goldstein
Bizar D'Alessandro
Shustak & Martin
Kenneth D. Hoffman
BankAmerica
Jerome B. Kauff
Dretzin & Kauff, P.C.
Thomas J. Knapp
Burlington Northern
Railroad
Professor Bruce
McLanahan*
Fordham University Law
School
Keith Miyahira
Prudential Insurance
Company of America
Edward J. Morehouse
Equitable Life Assurance
Socicty
A-3
John C. O'Meara
Dickinson, Wright, Moon,
Van Dusen & Freeman
Wayne N. Outten*
Lankenau & Bickford
Roberta V. Romberg
Aero Services International,
Inc.
Dr. Mary P. Rowe
Massachusetts Institute of
Technology
Edwin Schallert
Debevoise & Plimpton
George P. Sape
Epstein, Becker,
Borsody & Green
Wayne Slitt, “sq.
Aetna Life & Casualty
Company
Eric A. Taussig
Philip Morris, Inc.
Jay W. Waks**
Kaye, Scholer, Fierman,
Hays & Handler
Professor Alan F. Westin
Columbia University
Patrick J. Wilson
Northrop Corporation
CPR STAFF
Peter Kaskell
Senior Vice President
* Members of Drafting Subcommitice
** Chair of Drafting Subcommitice
A-4
INTRODUCTION
In 1987, the CPR Employment Disputes Committee
prepared two model procedures for the resolution of employment
disputes. Both procedures -- the "CPR Model Procedure for
Mediation of Termination and Other Disputes" and the "CPR Model
Procedure for Employment Termination Dispute Adjudication" --
were intended for application, by agreement between the parties,
after the dispute had arisen. Following publication of these post-
dispute procedures, the Committee tackled the more sensitive and
challenging task of constructing a comprehensive procedure which
could be implemente. > a pre-dispute basis to resolve employ-
ment claims, whether based on contractual, common law or
statutory principles. Its objective was to construct a fair, private,
expeditious, economical and final procedure, less burdensome or
adversarial than litigation, which any private employer could
implement, at the inception of employment or upon sufficient
advance notice to employees, through use of a standardized pre-
dispute arbitration agreement.
The Committee delegated initial study and drafting
to a subcommittee of Jay W. Waks (chairman), Alfred G. Feliu,
Bruce McLanahan and Wayne N. Outten. The subcommittee
focused initially on disputes in regard to employment termination,
and its work culminated in the Committee's approval of two models,
the texts of which are contained later in this report:
(1) the Model Agreement to Submit Termination
Disputes to the Model Employment Termination Dispute
Resolution Procedure (the "Model Agreement"); and
(2) the Model Employment Termination Dispute
Resolution Procedure (the "Model Procedure").
The Committec, which includes a broad spectrum
of lawyers and arbitrators in the ficld of employment disputes,
believes that the Model Agreement and Model Procedure can serve,
sometimes with appropriate modifications, the interests of
employers, employees and the public in many cases. In addition,
the Committee has consulted with other lawyers who represent
various parties in these disputes, and most have concurred that the
procedure would often be appropriate for their clients.
The Model Agreement and Model Procedure are
predicated on having an executive or other employee, when hired
or with ample advance notice, agree to arbitrate any dispute which
might arise out of the termination of that relationship (including to
prospectively waive recourse to an administrative or judicial forum).
On this premise, claims of improper termination, breach of
employment contract or employment discrimination, and other
claims ancillary to them, could be resolved quickly, fairly, fully
and finally in arbitration.
In making available the Model Agreement and
Model Procedure, the Committee is mindful that, although certain
court decisions beginning with Alexander v. Gardner-Denver, 415
U.S. 36 (1974) ‘, appear to have been undermined, they remain on
the books and, accordingly, an employer cannot count on having
pre-dispute arbitration agreements enforced in all circumstances
: In Alexander v. Gardner-Denver, the Court held that an employee,
whose claim of employment discrimination is subject to compulsory
arbitration under a collective bargaining agreement, is not precluded from
suing in court under Title VII of the Civil Rights Act of 1964. In its
footnote 21, the Court explained, however, that the arbitrator's decision,
although not final, may be entitled to appropriate weight (415 U.S. at 60
n.21).
so
(see the Model Procedure's commentary to Article Two). The
arbitrability under a pre-dispute agreement of a claim of age
discrimination is scheduled for argument in early 1991 before the
United States Supreme Court. Gilmer v. Interstate/Johnson Lane
Corp., cert. granted 59 U.S.L.W. 3212 (Oct. 1, 1990). The
Committee believes that, ultimately, this type of agreement and
procedure is likely to be held to be enforceable under the Federal
Arbitration Act and, in any event, should dispose of most cases as
a practical matter.
SUMMARY ?
The Model Procedure is predicated on the Model
Agreement and sets out the rules by which any controversy over
the termination of employment, including discrimination issues,
would be resolved in arbitration. An employee who signs the
Model Agreement would be agrecing to have arbitration of these
disputes governed by the Model Procedure. They could be used
This summary is adapted from the article by J. W. Waks and L.
Ginsberg, “Arbitrating Executive and Other Employment Disputes: Let's
Put A Pin In Gardner-Denver'” to be published in Proceedings of New
York University's 43rd National Conference on Labor (Little, Brown
1990).
when hiring particular executives or made applicable generally to
all employees or selectively to some, as a matter of corporate
policy. The Model Procedure itself provides that an employer may
cancel the Model Agreement and Model Procedure on 180 days’
written notice to the signatory employee.
The Model Procedure is designed to relate only to
employment terminations, though it may easily be adapted to
include other types of employment claims. Initially, the term
"dispute" is defined broadly so it encompasses all manner of claims
arising out of an employment termination. This is to force them
into arbitration at the same time and ensure their resolution in a
single proceeding.
In addition, all claims which can be brought under
the Model Procedure must be so brought first, even if recourse to
a judicial or administrative forum is preserved by law. Thus, the
doctrine of exhaustion of remedics is of key importance to the
Model Procedure.
Furthermore, by employee-employer agreement,
resolution of any dispute pursuant to the Model Procedure is to be
final and binding, or if not, to be accorded the fullest weight
permitted by law. This should result in the efficient, cost-
effective resolution of employment termination disputes, be they
based on statutory, common law or contractual protections.
All claims involving a particular termination are
heard by a single "adjudicator", who will be selected by agreement
between the parties, if possible. Otherwise, the adjudicator will be
an attorney with experience in employment disputes selected from
the American Arbitration Association commercial arbitration panel
pursuant to the AAA Commercial Arbitration Rules.
An employee must commence the Model Procedure
within 180 days after written notice of the termination, unless a
dispute over a deferred or later awarded bonus is involved, in which
case the period runs from the time the terminated employee receives
or is notified of a denial of compensation. This provision is
intended to achieve an expeditious resolution of claims.
Limited discovery involving the exchange of
documents is permitted though it is confined to that which is
relevant and for which each party has a “substantial, demonstrable
need". The employee is expressly granted the right to depose one
employer representative on the assumption that the employer has
A-10
greater access to the reasons for termination. The employee is also
entitled to review his or her personnel record unless, upon a
showing of good cause, the adjudicator excludes certain confidential
matters. Although some management counsel] may bridle at the
thought of even this limited discovery permitted a discharged
employee, it serves the important purpose of ensuring the
procedure's acceptability by employees and by the courts, especially
in cases challenging the fairness of the procedure in adjudicating
Statutory claims.
The employee bears the burden of persuasion to
demonstrate that the termination was not based on any legitimate
business reason, considering the nature of the employee's position
and responsibilitics and the employer's stated policies. Such a
burden distinguishes the Model Procedure from an arbitration
pursuant to a collective bargaining agrecment's grievance procedure
where an employer usually must prove “just cause". It instead
places the burden on the employce in a manner roughly comparable
to what it would be in civil rights or other employment litigation,
and the commentary to the Modcl Procedure makes this clear.
Hence, the adjudicator is expected to apply relevant statutory .aw,
both substantive and procedural, and if, for instance, the Civil
Rights Act of 1990 were passed, the adjudicator would have to
apply that law as well. Indeed, under the Federal Arbitration Act,
on a motion to vacate an award ‘ssued pursuant to the Model
Procedure, a party would be able to argue that an adjudicator, who
failed to apply prevailing iaw as required by the Model Procedure,
exceeded his authority.
Under another provision, all aspects of the
proceeding are confidential, thus avoiding the inevitable publicity
attendant to litigation which could adversely affect the terminated
employee or the employer, or otherwise possibly impact the
workforce.
As far as the expenses of the adjudication are
concerned, the employce is required only to pay the lesser of one-
half of these costs or two days’ gross compensation. These include
the costs of the adjudicator and filing fees (but not attorneys’ fees
unless the adjudicator awards them). This would make the Mode]
Procedure more accessible to employees than would litigation.
Significantly, unlike most commercial and
specialized industry arbitrations, the Modcl Procedure requires the
adjudicator to render a decision in writing with express findings of
fact on each issue of fact raised, the rationale for the decision and,
if necessary, conclusions of law and discussion of legal authorities.
This requirement reflects the reality that statutory claims are often
pleaded in all manner of employment litigation. Accordingly, it
ensures that the decision can be reviewed in any subsequent
proceeding. It would allow a reviewing court, confronted with the
issue of whether the arbitral award is dispositive of statutory claims,
to ensure that the adjudicator decided the matter at hand.
Moreover, even if the arbitral award is not ultimately deemed final
and binding as to its disposition of statutory claims, a reasoned
decision could serve persuasively in another procecding.
Of equal or perhaps greater importance, the
requirement of a reasoned decision may also serve a therapeutic
and deterrent function in that it guarantees the proverbial “day in
court” and an explanation of exactly why the party lost in whole
or part, hopefully discouraging any possible rclitigation.’
' Indeed, one study found thai, even aficr Gardner -Denver, relitigation of
arbitration decisions had not occurred in a majority of cases and, where
it had occurred, the arbitrator was rarely contradicted. M.M. Hoyman
(continued...)
The adjudicator has broad remedial powers and
may award reinstatement, back pay and attorneys’ fees. If
reinstatement is warranted but not appropriate, up to two years’
front pay may be awarded. An employee has a duty to mitigate
and any award of back pay will be reduced by interim
compensation and benefits, including unemployment, disability,
severance and retirement benefits. In addition, the adjudicator may
award up to one year in liquidated damages where appropriate.
These broad powers should allay any lingering doubts that an
employee's substantive rights can be protected adequately in
arbitration.
A proceeding under the Model Procedure is
considered to be an arbitration subject to the Federal Arbitration
Act, and an award may be vacated or modified only on grounds
specified in the applicable law. This assures limited judicial review
of adjudications under the Model Procedure, thus promoting the
finality of awards.
*(...continued)
& LE. Stallworth, "Arbitrating Discrimination Grievances in the Wake
of Gardner - Denver,” BLS Monthly Labor Review at 3-10 (Oct. 1983).
A-14
In short, the Model Agreement is basically a forum
selection device, and the Model Procedure ensures a fair proceeding
equivalent to that provided for in a court of law, while eliminating
the needless waste and delay of litigation.
Center for Public Resources
MODEL AGREEMENT TO SUBMIT TERMINATION
DISPUTES TO THE MODEL EMPLOYMENT
TERMINATION DISPUTE RESOLUTION PROCEDURE
Statement of Principles
Termination of an employment relationship may
give rise to disputes between the Employce and the Employer. It
is in their mutual interest to resolve any such disputes through a
procedure that is
fair,
private,
expeditious,
economical,
final and
less burdensome or adversarial than
litigation.
The Model Employment Termination Dispute
Resolution Procedure (the “Model Procedure") of the Center for
Public Resources was devcloped by a committee of leading
A-16
attorneys representing both employees and employers to achieve
the above objectives.
In order for the Employee to prevail under the
Model Procedure (paragraph 13-1), the Adjudicator must find that
termination of employment was not based on legitimate business
reasons, taking into account (a) the nature of the Employee's
position and responsibilitics and (b) the Employer's stated policies.
(This standard generally is more favorable to the Employee than
the law of most states and Iess favorable than the law of a small
number of states.)
(the "Employer") has adopted
and agrees to follow the Mode] Procedure in the event of a dispute
with a terminated Employee and expects its Employees to similarly
agree by signing this document (the "Model Agreement").
The Model Agreement and the Model Procedure
affect significant legal rights. The Employee is advised to
consult legal counsel before signing the Model Agreement.
The Model Agreement
I agree that all Disputes, as that term is defined in
Article One of the Model Procedure, will be determined under the
Model Procedure.
On , I received a copy of this Model Agreement
and the Model Procedure. | understand that I am entitled to receive
a copy of the signed Model Agreement.
I have had at least 72 hours (excluding weekends and holidays)
before signing this Agreement to read the Model Agreement and
Model Procedure and to consult legal counsel about them.
I have read and understand the Model Agreement and Modcl
Procedure.
1 understand and agree that:
1. It is a material condition of my employment
that I agree to the Model Agreement and
Model Procedure.
tv
] will first raise pursuant to the Model
Procedure any claim against the Employer
I may have regarding the termination of
my employment (including any claim of
6.
constructive termination), even if I may
also file a legal action based on that claim
in another forum.
I must file my claim under the Model
Procedure within 180 days of my being
notified by the Employer: of its decision to
terminate my cmployment.
Any award rendered by the Adjudicator is
final and binding upon both me and the
Employer.
The Employer may cancel the Model
Procedure at any time on 180 days’ written
notice to me.
Should this Model Agreement or the Model
Procedure he held unenforceable in whole
or in part or be cancelled, my employment
will be "at-will" to the extent permitted by
applicable law. (The term "at-will"
employment means that cither the Employee
or the Employer may terminate — the
A-19
employment at any time, without notice,
and for any or no reason. Certain federal
and state laws, however, limit the reasons
for which the Employer may terminate “at-
will" employees.)
7. The provisions of the Model Procedure,
and not any summary thereof, shall control.
AGREED:
(Type or print name of Applicant
or Employee)
Date:
The Company agrees to adhere to the Model
Agreement and the Model Procedure in connection with the
employment of the Employce whose signature appears above.
(NAME OF COMPANY)
BY:
Date:
A-20
Center For Public Resources
MODEL EMPLOYMENT TERMINATION
DISPUTE RESOLUTION PROCEDURE
Pursuant to the Model Agreement, the Employee
and the Employer (collectively, the "Parties") agree to submit for
resolution as provided for in this Modcl Employment Termination
Dispute Resolution Procedure (the “Model Procedure"), any
employment termination Dispute (as this term is defined below).
ARTICLES
ONE: Disputes (and Parties) Subject to Model Procedure
1-1. The term "Dispute", whether in the singular
or plural, means (a) all claims, disputes or issucs of which the
Employee is or should be aware and which are directly related to
or arise out of the termination of the employment of the Employee
by the Employer (including any claim of constructive termination),
and (b) all Employer counterclaims against that Employee of which
the Employer is or should have been aware prior to the termi-
nation.
1-2. The term "Employer" means the employer of
the Employee and its parent company, subsidiaries and affiliates
and their respective directors, officers, employees and agents.
1-3. All Disputes are subject to this Model
Procedure.
TWO: Exclusivity, Exhaustion, Waiver and Binding Effect
2-1. All Disputes shall be presented for resolution
pursuant to this Model Procedure.
2-2. Resolution of any Dispute pursuant to the
Model Procedure is intended to be final and binding on the Parties
to the extent permitted by law.
2-3. Even if not found to be final and binding,
the Award of the Adjudicator shall be accorded the fullest weight
permitted by law.
2-4. The failure of an Employee to initiate the
Model Procedure within the time limits set forth in Article Four
shall be deemed a waiver and release by that Employee of the
Employer with respect to any Disputes relative to that Employee,
unless the right to pursue a statutory claim or remedy is preserved
by law.
A-22
2-5. Once an Employee initiates the Model
Procedure to adjudicate a Dispute, the failure of the Employer to
state a counterclaim of which the Employer is or shoulc have been
aware prior to an Employee's termination, within the time limit of
paragraph 6-3, shall be deemed a waiver and release by the
Employer of that Employee with respect to that counterclaim, unless
the right to pursue a statutory claim or remedy is preserved by law.
2-6. The Partics shall be precluded from bringing
or raising in court or before another forum any Dispute which could
have been brought or raised pursuant to this Model Procedure,
unless the right to pursuc a statutory claim or remedy is expressly
preserved by law.
2-7. Prior to receiving an Award of the
Adjudicator, neither Party shall seck to enjoin any proceeding
puisuant to the Model Procedure on the basis that the Award would
not be enforceable.
THREE: Distribution of Model Procedure
3-1. The Employer will give a copy of the
executed Model Agreement and the Model Procedure to the
Employee (a) at the commencement of employment or at the time
A-23
of the adoption of the Model Procedure, and (b) within 5 days after
the Employee is given written notice of the decision to terminate
employment.
FOUR: Time Limit To Initiate Model Procedure
4-1. An Employee must initiate the Model
Procedure pursuant to Article Six within 180 days after the
Employee is given written notice of the decision to terminate his
or her employment, except that an Employee must initiate the
Model Procedure with respect to any Dispute over deferred or later
awarded or calculated compensation or bonus within 180 days after
the Employee receives it or is notified in writing that it is denied.
4-2. If the Employer fails to comply with
paragraph 3-1(b) as to the Employce, that Employee's time limit
to initiate the Mode] Procedure shall be extended from 180 days to
1 year.
FIVE: Representation
5-1. The Partics may be represented by counsel
or by any individual of their choice.
A-24
SIX: Initiation of Model Procedure and Time Limit for
Counterclaims
6-1. To initiate the Model Procedure to adjudicate
a Dispute, the Employee shall give written notice to the
Department of the Employer and to any person
who is alleged to have committed the act or made the omission
which is the basis of the Dispute.
6-2. The notice shall state the nature of the
Employee's claim and the address which the Employee will use for
the purpose of the Model Procedure.
6-3. Within 20 days after the Employee's notice
is given, the Employer shall give the Employee a statement of the
reasons for termination and any pre-termination counterclaims then
known to the Employer.
6-4. Within 20 days after the Employer's
counterclaims are given, the Employee shall give the Employer a
statement of the Employee's defenses thereto.
SEVEN: Timing and Method of Giving Notice
7-1. Any notice, commencing with notice given
pursuant to Article Six, shall be decmed given for the purposes of
A-25
the Model Procedure upon delivery by hand or, if mailed, by
depositing the notice in a postage-paid envelope, return receipt
requested, in a U.S. Postal Scrvice deposit box regularly main-
tained for this purpose.
7-2. Delivery by hand shall be to a person of
suitable age and discretion at the office or address specified in
paragraph 7-3. Delivery by hand shall include delivery by a non-
U.S. Postal Service package delivery service which provides a
return receipt as proof of delivery.
7-3. The Employer shall use the address last listed
by the Employee with the Employer for income tax withholding in
order to give the Employee the materials according to Article Three.
For all other purposes, the Employcc's address pursuant to Article
Six shall be used.
7-4. The production of an affidavit of service,
signed and dated acknowledgement of receipt or a signed and dated
return receipt shall be adequate proof to presume delivery.
A-26
EIGHT: The Adjudicator
8-1. Any Dispute will be decided by a single
decisionmaker, called the "Adjudicator".
8-2. The Partics will attempt to agree on the
selection of the Adjudicator. If the Parties cannot promptly so
agree, the Adjudicator will be chosen pursuant to Rule 13 of the
Commercial Arbitration Rules of the American Arbitration
Association ("AAA") and shall be an attorney who is a member of
the AAA commercial arbitration pancl with experience in employ-
ment disputes. Either party may request the AAA's assistance
through its regional office responsible for the venue specified in
paragraph 9-1. The functions of the AAA shall be limited to
assistance in selection of the Adjudicator in accordance with this
paragraph, and the AAA's Commercial Arbitration Rules shall not
otherwise apply. At the request of the Employee, the AAA's filing
fee, normally payable at the time a case is filed, shall be advanced
by the Employer, subject to apportionment pursuant to Articles
Sixteen and Nineteen.
8-3. Unless the partics agree otherwise, all
Disputes related to the Employee shall be submitted in the same
proceeding to the Adjudicator sclected pursuant to this Article
Eight.
8-4. The Adjudicator shall not be liable to either
Party for any act or omission in connection with the proceeding.
Neither Party shall suc, join, subpocna or in any manner otherwise
involve in any action or procccding the Adjudicator, unless the right
to so involve the Adjudicator is expressly preserved by statute.
NINE: Venue and Place of Hearing
9-1. The venue of any Dispute shall be the county
in which the Employce performed the principal duties of his or her
job.
9-2. Unless the Partics otherwise agree or the
Adjudicator otherwise directs for good reason, any hearing shall be
conducted and the adjudication shall be decmed held in that county
of venue.
TEN: Discovery
10-1. The Parties shal! cooperate in the voluntary
exchange of such documents and information as will serve to
expedite the adjudication
A-28
10-2. Discovery shall be conducted in the most
expeditious and cost-effective manncr possible, and shall be limited
to that which is relevant and for which cach Party has a substantial,
demonstrable need.
10-3. Upon request, cither Party shall be entitled
to receive, prior to the hearing, copics of documents subject to
discovery. Upon request, the Employcc shall also be entitled to a
true copy of his or her personnel records kept in the ordinary course
of business aria pursuant to Employer policy, other than records
relating to pre-employment procedures, subject to any condition or
limitation imposed by the Adjudicator upon a showing of good
cause.
10-4. Upon request, the Employee shall be entitled
to take at least one deposition of an Employer representative
designated by the Employee.
i0-5. Any disputes relative to discovery shall be
presented to the Adjudicator for final and binding resolution.
10-6. The Adjudicator may grant, upon good cause
shown, either Party's request for discovery in addition to or limiting
that for which this Article Ten expressly provides.
A-29
ELEVEN: Subpoenas
11-1. Counsel may issue subpoenas of witnesses
or documents to the extent permitted in a judicial proceeding.
11-2. The Adjudicator is empowered to subpoena
witnesses or documents to the cxtent permitted in a judicial
proceeding, upon his or her own initiative or the request of a Party.
11-3. Unless the Adjudicator directs otherwise
pursuant to Articles Nineteen or Twenty, the Party requesting the
production of any witness or proof shall bear the costs of such
production.
TWELVE: Order of Presentation
12-1. At the hearing, the Employer shall first
present its evidence as to the Dispute over termination.
12-2. The order of presentation as to any other
issue shall be determined by the Adjudicator.
THIRTEEN: Standard and Burden of Persuasion
13-1. In order for the Employee to prevail on any
Dispute over termination, the Employce shall demonstrate that the
termination was not bascd on any Icgitimate business reason, taking
A-30
into account (a) the nature of the Employee's position and
responsibilities, and (b) the Employcr's stated policies.
13-2. Each Party bears the burden of persuasion
on any claim or counterclaim raised by that Party under the Model
Procedure.
FOURTEEN: Evidence and Argument
14-1. The Adjudicator shall afford each Party a
full and fair opportunity to present any relevant proof, to call and
cross-examine witnesses and to present its argument.
14-2. The Adjudicator shall not be bound by any
formal rules of evidence with the exception of applicable law with
respect to attorney-client privilege and work product.
14-3. The Adjudicator shall decide the relevancy
of the evidence offered, and the Adjudicator's decision on any
question of evidence or argument shall be final and binding.
FIFTEEN: Confidentiality
15-1. All aspects of the adjudication pursuant to
the Model Procedure, including the hearing and record of the pro-
ceeding, are confidential and shall not be open to the public, except
(a) to the extent both Partics agrce otherwise in writing, (b) as may
A-3]
be appropriate in any subsequent proceedings between the Parties,
or (c) as may otherwise be appropriate in response to a
governmental agency or legal process.
15-2. The Employee or counsel for the Employee
shall be entitled to review copics of rclevant Awards rendered
within 1 year preceding initiation of the Model Procedure, from
which copies the Employer shall redact names and sensitive or
confidential information. The Employee and counsel shall hold in
confidence information regarding a prior adjudication and Award.
SIXTEEN: Expenses :
16-1. The Employee shall bear the reasonable
expenses of the adjudication up to the lesser of (a) one-half these
expenses or (b) 2 days’ gross cash compensation (including bonuses,
commissions and related cash compensation) of the Employee
during the 12 months immediately preceding the notice of claim.
The Employer shall bear the remainder of these expenses.
16-3. The "expenses of the adjudication", to which
this Article Sixteen refers, shall mean the expenses of the Adjudi-
cator (such as daily fee and travel), filing fee, and the cost of
producing at the direction of the Adjudicator any witnesses or
A-32
proof, and shall exclude the Parties’ respective attorneys’ fees and
disbursements, expenses of witnesses and costs of producing other
evidence.
SEVENTEEN: The Award
17-1. The Adjudicator shall render his or her
decision and award (collectively the " Award") based swiely on the
evidence and authorities presented, the policies and practices of the
Employer, the applicable law argucd by the Parties, and the
provisions of the Model Procedure as interpreted by the
Adjudicator.
17-2. The Award shall be in writing and signed
and dated by the Adjudicator and shall contain express findings of
fact (including findings on cach issue of fact raised by a Party),
the rationale for the Award and, if necessary to dispose of any
— law, conclusions of law and discussions of legal
authorities. The Adjudicator shall give signed duplicate original
copies of the Award to both Parties.
17-3. The Award may be entered as a judgment
in any court of competent jurisdiction.
A-33
17-4. Unless applicable law provides otherwise,
the Award shall be final and binding and not subject to review or
appeal.
EIGHTEEN: Record of Proceeding
18-1. A record of the hearing shall be made, at
the election and expense of the Employer, by audio or video taping
or by verbatim transcription.
18-2. The Adjudicator shall be responsible, in
cooperation with the Partics, for assembling the record of the
proceeding and shall maintain possession of that record for at least
1 year after issuing the Award, unless the Parties, with the
Adjudicator's consent, agree otherwise.
18-3. The record of the proceeding shall include
at a minimum the following: distribution pursuant to Article Three;
the notice and any statements required by Article. Six; any
documents and depositions discovered pursuant to Article Ten; any
evidence and argument (including any bricfs) submitted pursuant
to Article Fourteen; the record of the hearing pursuant to paragraph
18-1; and the Award pursuant to Article Seventeen.
A-34
NINETEEN: Damages and Relief
19-1. Upon a finding that the Employee has
sustained his or her burden of persuasion, the Adjudicator may
grant such relicf as may be just and reasonable, including some or
all of the following relief where warranted: (a) back pay (including
lost benefits), less interim carnings, unemployment, retirement and
disability and other benefits and scvcrance payments received by
or to be received by the Employee, (b) the expenses and costs of
bringing the adjudication, if any, including reasonable attorneys’
fees and costs of producing witnesses or other proof; and (c)
reinstatement to the same or a substantially cquivalent position with
the Employcr.
19-2. If rcinstatement is warranted but is not
reasonable or practical under the circumstances at the time the
Award is issued, the Adjudicator may award to the Employee an
amount equivalent to up to 2 years front pay (including benefits)
from which the Adjudicator may subtract any severance payments
received by or to be received by the Employee.
19-3. The computation of front pay or back pay
shall be based upon, in appropriate circumstances, the Employee's
gross cash compensation including bonuses, commissions and
related cash compensation.
19-4. Upon a finding that the Employer has
sustained its burden of persuasion on any counterclaim, the
Adjudicator may award such monctary and/or injunctive relief as
may be just and reasonable.
19-5. In the Award, the Adjudicator may direct
the payment, as liquidated damages, of up to 1 year of gross cash
compensation in addition to other remedics described above under
circumstances in which punitive, special or compensatory damages
would be awardable under applicable law in the jurisdiction.
19-6. Both Partics have a duty to mitigate their
damages by all reasonable means, including in the case of the
Employee mitigation by way of making application for unemploy-
ment, disability, retirement or other available benefits. The
Adjudicator shal] take a Party's failure to mitigate into account in
granting relief pursuant to Articles Nineteen and Twenty.
19-7. The Award of any damages or relicf
provided for in Articles Nineteen and Twenty is left to the
A-36
discretion of the Adjudicator and may be made in a bifurcated
proceeding.
TWENTY: Sanctions
20-1. The Adjudicator may award either Party its
reasonable attorneys’ fees and costs, including reasonable expenses
associated with production of witnesses or proof, upon a finding
that the claim or counterclaim was frivolous or brought solely to
harass the Employee, the Employer or the Employer's personnel.
20-2. The Adjudicator may award cither Party its
reasonable attorneys’ fecs and costs, including reasonable expenses
associated with production of witnesses or proof, upon a finding
that the other Party (a) engaged in unreasonable delay, (b) failed to
comply with the Adjudicator's discovery order, or (c) failed to
comply with requirements of confidentiality under the Model
Procedure.
TWENTY-ONE: Arbitration Statute
21-1. Any proceeding pursuant to the Model
Procedure shall be an arbitration proceeding subject to the Federal
Arbitration Act, 9 U.S.C. §§ 1-16, if applicable, or, otherwise, to
the law of the state of venue.
A-37
21-2. The Adjudicator shall have all powers
granted to arbitrators and the Adjudicator's Award shall be
enforceable as would an arbitrator's award, pursuant to the
applicable statute.
21-3. If any part of the Model Procedure is in
conflict with any mandatory requirement of applicable law, the
statute shall govern, and that part shall be reformed and construed
to the maximum extent possible in conformance with the applicable
law. The Model Procedure shall remain otherwise unaffected and
enforceable.
21-4. The Award may be vacated or modified
only on the grounds specified in the applicable law.
TWENTY-TWO: Voluntary Use of Model Procedure
22-1. After a claim, dispute or issue has arisen,
the Parties may agree in writing voluntarily to employ these Model
Procedures to hear and resolve with finality that claim, dispute or
issue although (a) it is not related to termination of the Employee,
or (b) it is not clear that the claim is, by law, subject to final and
binding arbitration.
A-38
TWENTY-THREE: Court and Administrative Proceedings
23-1. Nothing in the Model Procedure shall
prevent a Party from pursuing a statutory right which is preserved
by law or from bringing a proceeding pursuant to the applicable
arbitration statute to vacate or enforce an Award or to compel
arbitration or seek temporary cquitable relicf in aid of arbitration.
23-2. Subject to paragraph 23-1, the Parties agree
not to commence or pursuc any litigation or administrative
proceeding on any claim, dispute or issue subject to the Model
Procedure and will promptly move to discontinue any such
procecding if commenced.
23-3. If any litigation or administrative proceeding
is pending at the time of submission of a claim under the Model
Procedure, the Party who commenced the litigation or proceeding
will promptly move to discontinue it. A Party who contends that
a claim, dispute or issue is not subject to final and binding
resolution under the Mode! Procedure nonctheless shall promptly
move to stay any litigation or proceeding on that claim, dispute or
issue pending the Adjudicator's rendering of an Award; and if that
Party fails to so move, the other Party may do so.
A-39
i
TWENTY-FOUR: Cancellation of Model Procedure and
Reversion to At-Will Employment
24-1. The Employer may cancel the Model
Agreement and Model Procedure on 180 days’ written notice to the
signatory Employee, although the Procedure shall still apply to any
Dispute arising before the cancellation takes effect.
24-2. Should the Model Procedure or the Model
Agreement be cancelled pursuant to paragraph 24-1 or be held
unenforceable in whole or in part, the employment relationship
between the Employer and the Employee reverts back to an
employment-at-will relationship to the extent permitted by the
applicable law then in effect.
TWENTY-FIVE: Revision of Model Procedure
25-1. The Partics to a Dispute for which the
Model Procedure has been initiated may agree in writing to vary
the Model Procedure at any time before the Adjudicator gives
copies of the Award to both Partics.
TWENTY-SIX: Center For Public Resources
26-1. In preparing and disseminating the Model
Agreement and Mode! Procedure, the Center for Public Resources,
A-40
Inc. ("CPR") is not rendering any legal advice or opinion and is
not responsible or liable to cithcr Party for the application or
enforcement of the Model Agreement and Model Procedure to
specific situations.
26-2. Neither Party shall sue, join, subpoena or in
any manner otherwise involve in any action or proceeding the CPR
and anyone affiliated with the CPR in connection with the
application or enforcement of the Model Agreement or Model
Procedure.
TWENTY-SEVEN: Effectuation of Purpose
27-1. The Model P ocedure shall be construed in
a manner which is consistent with its Commentary, and the
provisions of the Model Agreement and of the Model Procedure
and its Commentary shall be broadly interpreted and applied so as
to effectuate their purpose and spirit
A-41
Center For Public Resources
COMMENTARY ON MODEL EMPLOYMENT TERMINATION
DISPUTE RESOLUTION PROCEDURE
COMMENTARY ON ARTICLES
ONE: Disputes (and Parties) Subject to Model Procedure
The Model Procedure is intended to be interpreted
broadly and would encompass, to the fullest extent permitted by
law, claims under any contract or the federal, state or local
decisional law, statutes, regulations or constitutions. The rule of
paragraph 1-2 is both procedural and substantive, in order to
promote the streamlined resolution of all issues related to the
terminated Employcc.
Disputes between the Partics beyond those directly
related to the termination decision (for example, claims for
compensation or other monics owed and duc as a consequence of
the termination) are properly submitted for adjudication under this
Model Procedure. This applics to both Employee and Employer
claims. As a consequence, the enforceability of this Model
Procedure may not be challenged on.the grounds of a lack of
A-42
mutuality. See Sablosky v. Edward S. Gordon Co., 73 N.Y.2d 133,
535 N.E.2d 643, 538 N.Y.S.2d 513 (1989). As an example, a
defamation claim must be submittcd under the Model Procedure if
it arises out of the decision to terminate, just as would a claim that
the termination violates a civil rights or whistleblower statute.
Claims relating to previous employment actions
(e.g., disciplinary action or denial of salary increases in previous
years), however, may not be submitted because they do not directly
relate to the final disciplinary step of termination. Certain claims
arising out of post-termination conduct, such as employment
references, may be subject to the Modcl Procedure (unless the
Parties agree otherwisc). See Ileck v. Lt’. liutton Group, 891 F.
2d 1047 (2d Cir. 1989)(post-termination claims alleging defamation
by a former employer, related to performance of former employee,
are arbitrable under agreement referring disputes to New York
Stock Exchange arbitration).
By virtuc of the definition of "Employer", an
aggrieved Employcce is obligated to arbitrate any dispute relating to
termination which he or she may have with another employee,
including a supervisor, officer or director.
A-43
Once the Employce initiates the Model Procedure,
the Employer (and, by definition, any implicated employees,
officers or directors) must pursuc all counterclaims under the Model
Procedure, so long as they arise prior to the date of termination
even if they are unrelated to the termination. The Employer,
however, may not initiate the Model Procedure.
Although the focus here is on employment
terminations, the Employer may amend this Model Procedure to
cover other employment disputcs as well.
TWO: Exclusivity, Exhaustion, Waiver and Binding Effect
The Award of the Adjudicator is intended to have
the fullest force and binding cffect permitted by applicable federal,
state or local law. This Article establishes that all claims which
are cognizable wed, consecucntly, can be brought under the Modcl
Procedure must be brought, and that it is-the intention of the Parties
that all disputes related to and arising out of the termination
decision may be heard and resolved only pursuant to the Model
Procedure.
Clearly, where federal, state or local law prevents
contractual preclusion of certain claims, or the filing of such claims,
A-44
the Model Procedure cannot displace appropriate judicial or
administrative considcration. This Article, however, bars any action
or claim which could have been brought pursuant .o the Model
Procedure, unless a court holds otherwise.
Accordingly, Article Two introduces the principle
of “exhaustion of remedics", compelling use of the Model
Procedure even in those situations in which the determination of
the arbitrator (known here as an "Adjudicator") will not be binding,
although it may be given some weight in a subsequent court or
administrative proceeding. Compare Alexander v. Gardner-
Dever Co., 415 U.S. 36, 60 n.21 (1974) (Title VII claim is not
subject to compulsory arbitration under collective bargaining
agreement, but arbitrator's decision may be entitled to some weight),
Utley v. Goldman Sachs & Company, 883 F. 2d 184 (1st Cir. 1989),
cert. denied 110 S. Ct. 842 (1990) (court refused to enforce
arbitration of Title VII claim, under New York Stock Exchange
arbitration agreement), and Nicholson v. CPC International, Inc.,
877 F.2d 221 (3d Cir. 1989) (claim under Age Discrimination in
Employment Act is not subject to compulsory arbitration under pre-
dispute agreement), and Alford v. Dean Witter Reynolds, Inc., 905
A-45
F.2d 104 (Sth Cir. 1990) (fired brokcr could pursue Title VII suit
for sex discrimination, rather than subject to commercial] arbitration
under employment agreement); with Shearson Lehman/American
Express, Inc. v. Bird, 110 S. Ct. 225 (1989), remanded, mem. op.,
No. 88-7704 (2d Cir. Jan.- 19, 1990) (Second Circuit ordered to
reconsider its ruling that a private agreement to arbitrate pension
fund claims is not enforceable as to claims based on substantive
violations of the Employee Retiree Income Sccurity Act of 1974),
Rodriguez De Quijas v. Shearson/American Express, Inc., 109
S.Ct. 1917 (1989) (the Federal Arbitration Act requires
enforcement of a private agreement between a securities firm and
an investor to arbitrate claims arising under the Securities Act of
1933, just as statutory claims under the Sccurities Act of 1934,
federal antitrust laws, and the Rackcteer Influenced and Corrupt
Organizations Act are subject to arbitration), Gilmer v.
Interstate/Johnson Lane Corp., 895 F.2d 195 (4th Cir. 1990),
petition for cert. granted, 59 US.L.W. 3212 (October 1, 1990)
(enforcing arbitration of age discrimination claim as_ being
consistent with the ADEA, court expressly disagreed with Third
Circuit in Nicholson casc), //all v. Nomura Securities International,
A-46
1990 Cal. App. LEXIS 318 (Cal. Ct. App. 1990), motion for
reconsideration denied (Cal. Ct. App. 1990) (in reliance upon the
Federal Arbitration Act, arbitration under pre-dispute agreement
was properly compelled of fired employee's age and disability
discrimination claims brought under California's Fair Employment
and Housing Law), and DeSapio v. Josephthal and Co., 143 Misc.
2d 611, 540 N.Y.S.2d 932 (Sup. Ct. N.Y. Co. 1989) (Altman, J.)
(claim of disability discrimination under New York's Executive Law
is referable to arbitration in an action to compel arbitration pursuant
to New York's CPLR and the Federal Arbitration Act).
The law's conclusion, however, that certain claims
must later be heard in another forum should not bar the initial
adjudication of the same claim in the contractually-established
forum. Article Two sets forth the Partics’ agreement on this point,
and the primacy of the Model Procedure is bolstered by Articic
Twenty-Three.
The enforceability of this exhaustion requirement
will have to await a judicial determination. A question as to
whether the Dispute is capable of being adjudicated to finality,
however, should not be a basis for staying an adjudication. After
A-47
all, the Parties agrec to submit all Disputes for resolution, and the
Adjudicator's Award "shall be accorded the fullest weight permitted
by law” as subsequently determined upon review in court or by an
administrative agency.
THREE: Distribution of Model Procedure
The goal of Article Three is to ensure that these
Model Procedures are communicated to the Employee both upon
commencement of employment (or adoption of the Model
Procedure after employment has begun) and at the time the
Employer gives notice of termination.
FOUR: Time Limit To Initiate Model Procedure
The 180-day time limit is intended to encourage a
prompt filing of claims and, consequently, an expeditious resolution
of the dispute. The extension of the time limit to 1 year is designed
to encourage the Employer to comply with this disclosure
requirement.
FIVE: Representation
This provision places no restrictions on the Parties’
selection of representatives. There may be an advantage to
representation by counsel, especially in those matters in which the
A-4%
application and interpretation of protective legislation, such as the
civil rights laws, are at issue. Accordingly, the Employer may
encourage the Employee to rctain Iegal counsel in those matters.
EIGHT: The Adjudicator
Providing the recently terminated Employee with
the option to go to a neutral organization for the selection of an
Adjudicator substantially enhances the reality of fairness and the
perception of it in the Employce’s cycs and undoubtedly upon
review in court
It is anticipated that, upon the request of either
party, the AAA will assist in sclecting an Adjudicator who has the
experience and qualifications desired by the Partics. Paragraph 8-
2 removes any financial impediment to an Employee's seeking to
select an Adjudicator with AAA assistance by requiring the
Employer to advance the filing fee
If the mutually acceptable choice of Adjudicator is
not made by the Partics, the AAA ultimately will make the
designation in conformance with its Commercial Arbitration
Rule 13.
A-4Y
"If the partics have not appointed
an arbitrator and have not provided
any other method of appointment,
the arbitrator shall be appointed in
the following manner:
Immediately after the filing of the
Demand or Submission, the AAA
shall submit simultancously to cach
party to the dispute an identical list
of names of persons chosen from
the pancl.”
"Each party to the dispute shall
have ten days from the mailing
date in which to cross off any
names objected to, number the
remaining names in order of
preference, and return the list to
the AAA. If a party docs not
return the list within the time
specified, all persons named thercin
Shall be deemed acceptable. From
among the persons who have been
approved on both lists, and in
accordance with the designated
order of mutual preference, the
AAA shall invite the acceptance of
A-50
an arbitrator to serve. If the parties
fail to agree on any of the persons
named, or if acceptable arbitrators
are unable to act, or if for any
other reason the appointment
cannot be made from the submitted
lists, the AAA shall have the
power to make the appointment
from among other members of the
panel without the submission of
additional lists.”
Other than to appoint an Adjudicator under Rule
13, however, the AAA has no role, and neither its other rules nor
its administrative fee schedule for commercial arbitration cases
(other than its filing fee, currently $300.00) will apply.
If the Dispute involves a claimed violation of a
civil rights or other statutc, it would be prudent to select as the
Adjudicator cither a former judge or an attorney who has special
competence and expericnee in the interpretation and application of
that statute. The AAA must be notified of the Parties’ needs in this
regard.
TEN: Discovery
Article Ten guarantees limited discovery to the
Parties under the supervision of the Adjudicator. The Employee is
expressly provided with the opportunity to depose one Employer
representative on the assumption that the Employer has more
thorough access to the reasons for the termination than does the
terminated Employce.
The Employee is also entitled to a copy of his or
her personne! records unless the Adjudicator determines, upon a
showing of good cause, to exclude certain material, such as
confidential business or medical information, or the identity of
confidential sources. Pre-employment records, on the other hand,
ordinarily are not discoverable because of the overriding
expectation of confidentiality. normally afforded them. If the
Dispute focused, however, upon a misrepresentation by the
Employee during the pre-employment stage, such as on the
Employee's application, the application would be relevant and
should be produced, as ordinarily should an Employer's written
report, if any, of the misrepresentation.
A-52
Because the Adjudicator may grant additional
discovery, the Employer may seck, for example, the Employee's
deposition and the Employee may scck pre-employment records;
the moving Party, however, bears the burden of demonstrating
"good cause", including the relevance of and_ substantial
demonstrable need for the additional discovery.
The Adjudicator's resolution of any discovery
dispute is not subject to judicial review. Moreover, the availability
of sanctions under Article Twenty should act as an incentive to
cooperate in discovery and comply promptly with an Adjudicator's
decision on a discovery dispute.
TWELVE: Order of Presentation
The Employer, which presumably best knows the
reasons for the termination, must present its evidence first, before
the Employee puts in his or her proof regarding the termination.
Article Twelve states only the order of production of evidence and
is not intended to place the burden of persuasion on the Employer.
THIRTEEN: Standard and Burden of Persuasion
To prevail, the Employce must demonstrate that the
Employer did not have any Icgitimate business reason for the
discharge. The Parties, by adopting expressly this standard, have
waived any argument that another standard or burden should apply.
Placing the burden of persuasion on the Employee distinguishes the
Model Procedure from labor arbitration in which the Employer
typically bears the burden of demonstrating that there was "just
cause" for the discharge.
In deciding whether the Employee has met this
burden, the Adjudicator is expected to take into account the
Employee's position and responsibilitics as well as the Employer's
policies and applicable law. Any reason that would be a violation
of Title VII of the Civil Rights Act of 1964 and other federal, state
or local fair employment Icgislation would not be a “legitimate
business reason".
The burden placed on the Employee here is roughly
comparable to what would be encountered in litigation on the same
claims. By way of illustration, a female Employee may claim that
her discharge for a rules violation amounts to sexual discrimi-
nation unlawful under Title VII of the Civil Rights Act of 1964, in
that she was fired in reality as a result of her manager's
stereotypical gender-based view of her work, or perhaps because
A-54
she spurned his advances. Although this Employee may bear the
initial and ultimate burden of persuasion on the termination
decision, the Employee will demonstrate that the Employer had no
legitimate reason to fire her if she produces direct evidence of a
Title VII violation, as would be required by Price Waterhouse v.
Hopkins, 109 S. Ct. 1775 (1989) (once an employee proves that
gender played a "motivating part" in an employment decision, the
burden of proof shifts to the employer to prove by a "prepond-
erance of evidence" that the decision would have been the same
had such illegal discriminatory motive not played any part), or
otherwise satisfics her initial burden under 7exas Department of
Community Affairs v. Burdine, 450 US. 248 (1981), and
McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), and the
Employer fails to introduce evidence required by those cases. See
Wards Cove Packing Co. v. Atonio, 109 S. Ct. 2115 (1989) (burden
of persuasion remains with Title VII civil rights plaintiff at all
times).
FOURTEEN: Evidence and Argument
Article Fourteen ensures that cach Party has a full,
fair, and fundamentally cqual opportunity to present evidence and
argument in accordance with due process. As it is commonplace
in arbitration, however, rulcs of evidence are not to be strictly
applied. The Adjudicator's determination of relevancy, material-
ity, or any other evidentiary question, including on an issue of
attorney-client privilege or work product, is not subject to judicial
review.
FIFTEEN: Confidentiality
The proceedings are not open to the public unless
otherwise agreed in writing by the Parties.
The Adjudicator's Award is kept confidential unless
otherwise agreed or necessary in any subsequent proceedings
between the Parties, or by a governmental agency (such as to
‘satisfy an inquiry of the Internal Revenue Service) or other legal
process (such as a valid third party subpoena).
Prior Awards, issucd within the past year and
relevant to the instant Dispute, are available in redacted form in
subsequent procecdings, and all information about them, including
that which the Employer may choose to disclose orally, must be
held in confidence.
A-56
To encourage strict confidentiality, Article Twenty
sanctions may be awarded for brcach of Article Fifteen.
SIXTEEN: Expenses
This provision requires the Employer to bear the
bulk of expenses. The Employce's fee cap of 2 days’ gross
compensation is minimal and should not inhibit the Employee's use
of the Model Procedure. The Employer, of course, may always
waive this apportionment.
Certain expenses excluded from apportionment
under Article Sixteen, however, may be awarded pursuant to
Article Nineteen or Twenty.
SEVENTEEN: The Award
By this provision, the Adjudicator may not take
into account extraneous information or views or mete out his or her
own brand of “industrial justice” ia resolving Disputes under the
Model Procedure.
Article Seventeen compels the Adjudicator to state
findings of fact and offer bases for the decision in a writing which
the Parties would be likely to consider to be dispositive of the
matters in dispute and which can be reviewed and analyzed, if
permitted by law, in any subscqucnt proceedings.
NINETEEN: Damages and Relief
The Adjudicator may award to an Employee
reinstatement, back pay, and costs and expenses, including
attorneys’ fees. If the Adjudicator determines that reinstatement is
warranted but not reasonable or appropriate under the
circumstances, front pay of up to 2 years may be awarded. Such
circumstances may include a dramatic change in the nature of the
work or character of the workforce in the interim period, the utter
incompatibility of the Partics, or the demonstrated inability of the
Parties to work together in an effective manner, or other legitimate
reasons.
An Employee has a duty to mitigate damages, and
any Award of back pay will be reduced by intcrim earnings and by
unemployment, disability, severance and/or retirement or other
benefits. Front pay may also be reduced by severance payments.
For example, as a matter of cquity or to avoid unjust enrichment,
the Adjudicator may decide to reduce an award of front pay by an
Employer's ad hoc or enhanced payment of severance pay which
the Employer had no legal obligation to make. On the other hand,
the Adjudicator may find that it would be unfair to subtract from
front pay severance payments made under a formal plan since the
award of front pay assumes that the Employee will not be
reinstated, at which point the Employce would be entitled to the
severance payments alrcady reccived under the terms of the plan.
The Model Procedure also recognizes that in some
States the Employee, by agrecing to the Model Procedure,
surrenders certain causes of action that could result in the awarding
of compensatory or punitive damages. Paragraph 19-5 gives the
Adjudicator the option of awarding up to 1 year in liquidated
damages in circumstances where the cmployee might otherwise be
entitled to compensatory or punitive damages under federal or state
law, such as damages which may arise from an injury to reputation
resulting from a defamatory statement. Compare Fahnestock &
Co., Inc. v. Waltman, F. Supp. , 1990 US.
Dist. LEXIS 11024 (S.D.N.Y. 1990) (arbitration panel under New
York Stock Exchange rules did not exceed their authority in
awarding former manager of securities firm $50,000 for wrongful
termination, $100,000 for defamation and $14,000 in attorneys’
>. =
fees; however, $100,000 punitive damages award was disallowed
since, in application of Garrity v. Lyle Stuart, 40 N.Y.2d 354
(1976), arbitrators are powerless to award punitives even if agreed
upon by the parties), with Raytheon Company v. Automated
Business Systems, Inc., 882 F.2d 6 (1st Cir. 1989) (upholding
punitive damages award, in application of strong federal policy
favoring arbitration, under circumstances “where such conduct
could give rise to punitive damages if proved to a court" id. at 12).
An Award of liquidated damages, however, is subject to all
requirements of an Award made pursuant to Article Seventeen.
The Adjudicator also retains the discretion to hold
a bifurcated proceeding -- i.¢. a separate proceeding following the
Adjudicator's determination of liability -- for the purpose of
determining the award of damages.
These remedics are not automatic, and the
discretion to award any of them remains with the Adjudicator.
TWENTY: Sanctions
Any oward of sanctions will be enforceable as an
arbitrator's Award under federal or state law. Without this power
to sanction, the Model Procedure could be used by cither Party as
A-60)
a means to abuse the process rather than seek resolution of the
Dispute.
TWENTY-ONE: Arbitration Statute
Article Twenty-One confirms that an adjudication
proceeding pursuant to the Model Procedure is an aibitration
proceeding and subject to and governed by the Federal Arbitration
Act, unless its jurisdictional requirement of interstate commerce is
not met. In that event, state arbitration law applies.
TWENTY-TWO: Voluntary Use of Model Procedure
Article Twenty-Two provides that the Parties may
agree, after a Dispute has arisen, to proceed under the Model
Procedure on matters that by law may not be subject to final and
binding arbitration (for example, if certain case law is read broadly,
allegations of race or scx discrimination). These pre—dispute
procedures are transformed, in cffect, to post-dispute procedures
as the Partics acknowledge prior to proceeding that the law might
not otherwise permit final and binding arbitration of the claim.
Disagreement over the arbitrability of a claim (for
example, of race or sex discrimination), however, docs not excuse
A-6!
a Party from application of the Modcl Procedure in the first
instance, as explained in Articles Two and Twenty-Three.
TWENTY-THREE: Court and Administrative Proceedings
Article Twenty-Three provides that a Party will not
proceed with and will discontinue or stay, to the extent permitted
by law, any litigation or administrative proceeding on a claim that
is subject to the Model Procedure. In this way, duplication of
expense and remedics is climinated.
This requirement will not prevent a Party from
exercising his or her statutory right, if expressly preserved by law,
to file a claim with an administrative agency.
For those claims that are not subject to final and
binding resolution under the Modcl Procedure, or where the right
to pursue a statutory claim is expressly preserved by law, a Party
may still pursue its other action though this may require that Party
to petition the court or agency for a stay of that proceeding so that
the Adjudication may proceed first. As a practical matter, in most
instances, this should not result in any material delay or injustice,
since a proceeding under the Modcl Procedure will usually precede
@
,
A-62
a trial or hearing in a litigation or administrative action raising the
same issues.
TWENTY-FOUR: Cancellation of Model Procedure and
Reversion to At-Will Employment
Article Twenty-Four provides __ that, upon
cancellation of the Mode! Procedure or upon a finding that the
Model Procedure is unenforceable, the rclationship between the
Parties shall revert back to what it would have been under the
applicable state law (and what it would have been in the absence of
the Model Agreement), which in a vast majority of states will be
employment-at-will or some variation thercof.
TWENTY-FIVE Revision of Model Procedure
~" Article Twenty-Five sccks to inject some flexibility
in the sate Procedure so that it may be adapted to the special
needs of the Parties. The Mode! Procedure should not be amended
or revised in such a way, howcver, so as to undermine its
fundamental fairness
A-63
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.