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TESTIMONY OF LEWIS L. MALTBY PRESIDENT- NATIONAL WORKRIGHTS INSTITUTE REGARDING CIVIL RIGHTS PROCEDURES PROTECTION ACT (S. 121) BEFORE THE SENATE SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHTS AND THE COURTS MARCH 1, 2000

Executive Summary

Americans need improved access to justice. This is especially true of employees. The cost of bringing an employment dispute to court far exceeds the resources of most people, resulting in a complete denial of justice. Arbitration holds great promise to bring justice to many to whom it is currently denied.

But arbitration will achieve this promise only if it is fair. Unfortunately, many existing employment arbitration systems are not fair. The U.S. General Accounting Office has found that the majority of employment arbitration systems do not comply with the due process standards established by the American Bar Association.

The best way to ensure that arbitration is fair is to make it voluntary. Under these circumstances, employers would have to demonstrate that their arbitration system was fair in order to secure employees' participation.

Introduction

My name is Lewis Maltby. I am president of the National Workrights Institute. I was an active member of the American Bar Association taskforce that drafted its due process protocol for employment arbitration, and served as an advisor to the Uniform State Law Commissioners in their recent revision of the Uniform Arbitration Act. At the request of Chairman Dunlop, I testified before the federal government's Commission on the Future of Worker-Management Relations on the subject of employment arbitration. I serve on the board of directors of the American Arbitration Association and am co-chair of its advisory committee on employment issues. Thank you for inviting me to testify today.

Testimony

Americans need better access to justice. It is no secret that our courts have become so complex and expensive that it is difficult for the average citizen to achieve justice through litigation. Alternative dispute resolution, including arbitration, holds the potential to make justice more affordable and more available.

This is especially true of workplace disputes, which frequently involve complex factual and statutory issues. The cost of bringing a statutory employment dispute to court is at least $50,000. This is far beyond the financial resources of most people, even when they are employed. To raise such a sum when one has just been fired and has no income is virtually impossible. A few people circumvent this economic hurdle by obtaining counsel on a contingency fee basis. But an attorney can only afford to accept a case on contingency if the probability of success is very high and the amount of damages is large enough for the attorney's share of the final award (generally 35-40%) to compensate for the substantial number of hours he or she will have to work. Paul Tobias, founder and past president of the National Employment Lawyer's Association, testified before the Dunlop Commission that the private bar rejects at least 95% of those who come to it seeking help. Nor can federal agencies meet the need for representation. The EEOC, for example, is able to litigate only 1 out every 200 complaints it receives. Under these circumstances, the need for additional avenues to justice in employment disputes is clear.

But it is equally clear that these new methods of access to justice must be fair. Systematic access to injustice cannot be the goal or the result of our efforts.

It has been said that fairness, like beauty, lies in the eye of the beholder. But, fortunately, we now have an objective standard for due process in employment arbitration. In 1994, the American Bar Association assembled a national blue ribbon panel to discuss due process in arbitration and attempt to find common ground. This panel included representatives of all concerned groups, including management, labor, the dispute resolution community, and civil rights groups. I was privileged to serve on this panel representing the American Civil Liberties Union. In 1995, this group unanimously endorsed a set of due process principles, known collectively as the ADR Protocol.

The Protocol includes the following requirements:

  1. A neutral and unbiased arbitrator
  2. Right of the employee to an equal role in selecting the arbitrator
  3. Right to counsel
  4. Reasonable discovery
  5. Identical remedies to those available in court
  6. A written opinion.

These requirements are not difficult to meet. The American Arbitration Association, the world's largest provider of arbitration services, modified its rules to make these six points part of its mandatory operating procedures in 1996. After 4 years of experience, AAA has reported no difficulties with complying with these rules.

But many employers' ADR systems do not meet these requirements. When the U.S. General Accounting Office examined existing employment arbitration systems, they found that the majority did not provide the due process called for in the Protocol. A more recent survey published in the Dispute Resolution Journal reached the same conclusion. For example, 50% of the plans studied did not authorize the arbitrator to award the full range of legally authorized remedies.

There seems to be no limit to the injustice that is produced when due process standards are absent. Helen Walters was a trading room secretary at a California brokerage firm. Her boss called her a "bitch", a "hooker", and a "streetwalker", and a "f---ing idiot". When he wanted to talk to her, he told her to "drag your ass" over to him. He brandished a riding crop at her and threw condoms on her desk. It would be hard to imagine a more blatant case of sexual harassment. Yet when Walters took her case to arbitration, the arbitrators ruled in favor of her employer.

But the harm to individual employees, as bad as it is, does not reveal the true extent of the damage we face if the problem remains unaddressed. Our entire national effort toward a workplace free of discrimination is at risk. As every lawmaker knows, in order for a statute to be effective it must have a clear statement of the rules it establishes and an effective enforcement mechanism. Without a method of enforcement, a statute is merely an empty admonition which people are free to disregard.

This is the situation we face regarding our carefully constructed and vitally important civil rights laws, including Title VII, ADEA, and the ADA. If employees are required to surrender their right to take violations of civil rights laws to court and the arbitration systems to which they must turn do not provide due process, our nation's four decade struggle to create a workplace free of discrimination will be severely compromised.

This risk is especially great in light of the number of employers turning to arbitration. Private arbitration was virtually unknown outside the realm of collective bargaining until the 1980's. By 1995, the U.S. General Accounting Office found that 8.4% of all employers had established an arbitration system, and that 10% more were actively considering it. Only 2 years later, the GAO found that the use of arbitration had more than doubled; 19% of all employers were now using it. All the available evidence indicates that employment arbitration has continued its spectacular growth. At this rate of increase, the majority of employers have either already adopted arbitration programs or soon will have. Employment arbitration is well on its way to replacing the courts as the primary method of resolving statutory employment disputes. If arbitration does not provide justice to those who have been victims of racial discrimination or sexual harassment, our civil rights laws are in great danger.

The issue we face is how to encourage the growth of this potentially valuable new source of access to justice while ensuring that it is fair. The answer is to make arbitration voluntary. The courts should enforce agreements to arbitrate only when they represent the voluntary choice of both parties.

This is not the law today. Following the Supreme Court's decision in Gilmer v. Interstate/Johnson Lane Corp., federal courts have consistently held that employers may require all employees to sign an agreement to arbitrate as a condition of employment. While a few highly marketable employees may be able to accept another offer if they object to this provision, for most people this is no choice at all. They have rent to pay and children to feed and must accept whatever terms a prospective employer offers. Even employees who are in high demand lose their ability to exercise meaningful choice as arbitration becomes standard industry practice.

The reason so many arbitration systems fail to provide due process is because employers have little incentive to make them fair. In fact, it is in an employer's best financial interest to make the system unfair. By failing to provide an impartial arbitrator, or eliminating discovery, an employer can win many cases in which it broke the law and would have lost in court. By restricting the damages an arbitrator can award an employer often reduces the size of the award it must pay in the cases it loses. These financial incentives are substantial.

There are no offsetting financial incentives encouraging employers to be fair. The employer's objective in setting up an ADR program is to get as many as possible of its employees to enroll. When employees have no choice about enrolling, the employer can reap the financial rewards of stacking the deck with no loss in enrollment.

But if the agreement to arbitrate had to be a voluntary choice on the employee's part, the entire system of incentives would change. An employer who chose to cut corners on due process would pay the price of having employees opt out of the arbitration system entirely. The only manner in which employers could achieve the widespread participation they desire in order to avoid the costs of litigation would be to make the arbitration system fair.

Making the decision to arbitrate voluntary is also the right thing to do. The right to take legal disputes to court is a fundamental part of our democratic society. It is enshrined in our Constitution. Without an independent court system (and the ability of citizens to use it), the rule of law itself is undermined. Employers have every right to establish the terms on which they offer employment. But some rights are too fundamental to allow employers to tamper with. Employers may not require prospective employees to have sex with them as a condition of employment. Employers may not require employees to change their religion or tell them how to vote. Employers should also be prohibited from requiring employees to give up their right to go to court.

Making employment arbitration voluntary is not only right in principle, but feasible in practice. The American Arbitration Association, the world's oldest and largest provider of arbitration services, recommends that employment arbitration be voluntary. At least 12 major corporations have heeded AAA's advice and established voluntary arbitration programs. Every one of these programs has been successful.

The question facing us is not whether employment disputes will be arbitrated, but under what conditions this will take place. Under the present system, employers have the ability to establish arbitration systems that deny due process and force employees to use them. Employers have substantial financial incentives to take this low road, and many do. Surely this is intolerable. The solution is to make arbitration voluntary. This is right in principle and would ensure that arbitration provides the fairness and justice that all Americans deserve.

The Civil Rights Procedures Protection Act (S. 121) would accomplish this crucial goal. I urge the members of this subcommittee to support it.



 
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