Mandatory Arbitration Clauses, Mediation and Class Action

A huge problem facing particularly “common law” legal systems around the world is the gradual disappearance of court judgements. The law needs courts to keep laws sharp and relevant. But the spread of compulsory pre-court hearings, mediation and wider use of arbitration is forcing judgements underground. Soon it could be quite difficult to know how to keep legal interpretations consistent – let alone fair.

Compulsory mediation has been in existence in Norway for many years and it is quite normal for the state to intervene in collective labour disputes and require the parties to be subject to a period of mediation. In the UK, individual disputes between employees and employers must first be mediated through ACAS before they may be taken to an employment tribunal – and now in Turkey changed court procedures involving obligatory prior mediation were introduced in 2018 for handling most labour disputes.

In the USA mandatory arbitration clauses reached the public eye in 2017 with the imposition of “gagging orders” on those raising sexual harassment claims. Mandatory arbitration clauses had the effect of keeping matters under wraps and limiting copycat claims. However, such practices have led to the drawing up of Bills in the Federal Senate and New York State Senate banning the use of such clauses where sexual harassment claims are made.

Uber is one of the first major US companies to voluntarily switch its employment dispute practices from mandatory arbitration, with a built-in confidentiality clause, to a choice of mediation (with a confidentiality option), arbitration, or a court action. The company has also undertaken to publish a report following any case where it is found that an employee has committed a sexual assault. However, the new policy continues to retain a ban on class action lawsuits by employees against the company.

In a final twist of the battle that has been raging in the USA between the National Labour Relations Board and employers on the legality of anti-class action clauses in arbitration agreements, the Supreme Court on May 21st 2018 finally opened the door for avoiding the courts in most future employment cases. This is a case that will go down in history as Epic Systems Corp Vs Lewis. The US Supreme Court ruled that arbitration agreements in which an employee waives the right to pursue his or her employment claims in a class or collective action are enforceable under the Federal Arbitration Act (FAA). From now on, an employer in the USA may therefore safely pursue cases swiftly and privately through arbitration with individual employees, or ex-employees, to resolve workplace disputes – safe in the knowledge that it will not escalate into a more widespread claim.

Conclusion

The dust is still falling on Epic Systems Corp Vs Lewis, but already it has been named by the ruling’s opponents as “a backdoor way to repeal workplace laws”. Indeed, it does effectively allow employers to take challenges on a case by case basis, often with employees who cannot afford the costs of taking a case through arbitration purely on their own behalf. The principal exception will, however, remain California where a 2004 law permits an employee to seek support from the state Department of Labor to act as their representative party in a class action against an employer. Of course, there is also another short-cut avenue for US employees who want to take advantage of a previous judgement about the same issue – such as non-payment of wages to another party. This is called “offensive nonmutual collateral estoppel” and it can be used by a new plaintiff (employee) in a subsequent suit who wants to assert a final judgment on an issue against the defendant from the first suit – although it may take a court action, rather than arbitration decision, to trigger it.

For further information about the use of Alternative Dispute Resolution Systems around the world contact the Federation of International Employers (FedEE®) at admin@fedee.com

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