NATIONAL ACADEMY OF ARBITRATORS
POLICY STATEMENT ON EMPLOYMENT ARBITRATION
May 20, 2009
It is the position of the National Academy of Arbitrators that voluntary arbitration is always preferable, and that it is desirable for employees to be allowed to opt freely, post-dispute, for either the courts and administrative tribunals or arbitration. We recognize, however, that the United States Supreme Court has extended the Federal Arbitration Act to most contracts of employment. As a result, employers may require their employees to arbitrate some or all future disputes, including statutory claims.
The abiding concern of the Academy is that all arbitration, including employment arbitration, be conducted in a manner that respects the rules of fundamental fairness essential to the integrity and credibility of the arbitration process. When serving in cases in which, as a condition of employment, an employee has signed an agreement that imposes arbitration as a substitute for direct access to either a judicial or administrative forum for the pursuit of statutory rights and judicially recognized claims for relief, arbitrators should be especially careful to ensure the fairness of any employment arbitration procedures in light of the Academy’s Guidelines for Employment Arbitration.
GUIDELINES FOR EMPLOYMENT ARBITRATION
NAA members are now being called upon to arbitrate employment claims in the non-collective bargaining sector. Cases arising under an employer promulgated arbitration plan require particular vigilance on the part of arbitrators to ensure procedural fairness and to protect the integrity and reputation of workplace arbitration. These Guidelines, together with the Due Process Protocol endorsed by the Academy, the American Bar Association, the American Arbitration Association and other interested agencies, are intended to assist arbitrators in deciding whether to accept a case and to provide guidance as to how such a case might be fairly conducted and concluded. They supplement the Code of Professional Responsibility for Arbitrators of Labor-Management Disputes. Members should also be alert to other applicable codes of ethics (e.g. code of Ethics for Arbitrators in Commercial Disputes) federal and state statutes or regulations, or any other ethical code or rules adopted by the parties.
Employment arbitrations can result from post-dispute arrangements made by the agreement of the parties. Often, however, they arise as a condition of employment or "pre-dispute agreement" with terms that are established by the employer. Either may involve statutory claims, common law claims or contractual claims. Academy members who undertake such cases should do so with full assurances that their powers and the procedures to be followed are consistent with minimum standards of due process and fairness. In matters involving statutory claims, the arbitrator's jurisdiction and remedial authority should permit a hearing, rulings and decision fully consistent with the provisions of the statute itself, no less than would be the case before a court.
Members should recognize that in adjudicating statutory, common law or contractual claims they are acting as substitutes for a court. If the arbitration plan under which a member is appointed lacks fundamental due process, the arbitrator should insist upon an agreed correction as a condition of service and, failing agreement, should decline the appointment or withdraw from any further participation. The power to withdraw from a case in the face of policies, rules or procedures that are manifestly unfair or contrary to fundamental due process can carry considerable moral suasion. However, in assessing the fairness of a given system, the arbitrator should be mindful that the parties to a post-dispute agreement have much more latitude to vary from the procedural and substantive requirements of statutory systems than do parties to a pre-dispute agreement.
I. SHOULD YOU TAKE THE CASE?
Do you have past or present connections, interests or relationships that should be disclosed?
Academy members are used to situations where disclosures are often unnecessary because the parties know them well and the labor-management universe is relatively small. In contrast, in the employment field the parties may not be familiar with one another or conversant with the arbitration process. Caution suggests detailed disclosure regarding any past or present involvement with or relationship with the parties, counsel or potential witnesses, and any similar considerations. It is important to proceed carefully and to err on the side of disclosure so there can be no question of impropriety or of your impartiality. State statutes, regulations, or rules of court on disclosure may be applicable, particularly where federal law is not controlling, and these should be fully complied with.
Do the parties have adequate rights of representation?
At times, the parties in these cases, especially claimants, may not have experienced, professional representation. Arbitrators should exercise special care when accepting appointments or hearing cases where one party is not represented. Some members elect not to accept a case when the claimant is unrepresented.
Were you selected in a fair manner?
When notified of selection, if you are not familiar with the parties' procedure, you should inquire as to how you were chosen. Did both parties have a meaningful selection opportunity? A negative answer to this question should cause you to decline the case, absent clear evidence that the selection process was fundamentally fair.
Are you satisfied that you can serve in light of the documents creating and defining the scope of the arbitrator's jurisdiction, including, where applicable, the following?
a. Arbitration agreement
b. Employment contract
c. Designating agency rules
d. Court order
e. Employer ADR plan or other policies
f. Any restrictions on class or group actions to the extent these might hinder
particular grievants in pursuing their claims, especially where the monetary
amount of each individual claim is relatively small, or hinder the vindication
of the public purpose served by the particular claim.
Before agreeing to serve you should receive all of the documents defining your authority and scope of jurisdiction. If there are restrictions, particularly with respect to your remedial authority and your ability to control the proceeding, such as unfair limitations on discovery or on the production of documents or witnesses, you should make sure that you have the authority to make such directions as may be necessary to ensure procedural fairness. If the restrictions have previously been found unconscionable by a court, but the employer offers to waive those restrictions in this particular case, you should consider whether accepting the case is appropriate.
5. Where a claim involves statutory or common law rights, are you authorized to provide adequate discovery and remedies fully consistent with any applicable statute or the common law?
In an employment relationship where arbitration is a condition of employment it is essential to ensure that your remedial authority is equal to that of a judge or jury under any statute or the common law applicable to the matter before you. Different considerations may apply if the arbitration agreement is truly negotiated at arm's length or is a post-dispute agreement made between sophisticated parties. Similarly, if there are no provisions for discovery, you should make a determination about your authority. Unlike the collective bargaining setting, there is no administrative agency available to require discovery in the absence of agreement. If you believe that your remedial authority is unfairly restricted, you should consider carefully whether it is appropriate to serve.
6. Are there unfair restrictions on the date, time and location of the hearing?
Academy members should ensure that all aspects of the scheduling of the hearing are fair. The location should not be so distant that it causes cost problems for a party of limited means or be inconvenient to reach for a person with physical disabilities. The arbitrator should also consider the reasonableness of a party’s request for a “neutral” site. The dates of hearings should not be so soon as to prevent adequate preparation or so delayed as to prevent a timely remedy.
7. Are you satisfied that the arbitrator compensation arrangement is consistent with fairness and impartiality?
Compensation arrangements can take a number of forms, including employer pays in full or in substantial part, the parties share equally, or loser pays. You must decide whether the basic arbitrator compensation arrangement is consistent with fairness and applicable law. If there is a mandatory arbitration agreement executed as a condition of employment, and the claim is based on a statute or the common law, an arbitrator should consider whether fairness demands that the employee’s share of the arbitrator’s fees and expenses be no greater than the filing fees for such a claim in the appropriate court.
II. PRE-HEARING CONSIDERATIONS
Employment cases require active management to ensure due process, fairness, and efficiency. At the outset of the case, the arbitrator should make clear the rules governing the proceeding and the full range of pre-hearing and remedial authority the arbitrator intends to exercise. Depending on the agreement and relevant statutory and case law, that authority may include sanctions, compensatory and punitive damages, interest, attorneys’ fees, and equitable relief.
If the agreement to arbitrate or the parties’ agreed-upon rules do not set forth the evidentiary standards to be followed at the hearing, the arbitrator should make clear the standards he or she intends to apply.
Pre-hearing discovery is essential for adequate case preparation. In addressing discovery issues, the arbitrator must balance the parties’ need for sufficient information to ensure full and fair exploration of the issues and the expedited nature of arbitration. Fairness, efficiency, and due process should guide the arbitrator in managing discovery. Where the agreement is silent, the arbitrator should establish discovery rules in conjunction with the parties.
In establishing discovery rules the parties may choose state or federal rules because of familiarity with them. Arbitrators should have some familiarity with both sets of rules and tell the parties whether they will be applied literally.
The arbitrator and the parties must establish time limits for pre-hearing activities, which the arbitrator is authorized to enforce. The arbitrator should determine whether dispositive motions shall be permitted, with or without further leave of the arbitrator.
When both parties are represented by counsel, arbitrators should encourage voluntary resolution of discovery issues. When claimants appear pro se, arbitrators should ensure that they understand the issues being discussed and the discovery obligations they must meet. Arbitrators should be careful, however, to avoid acting as advocates for pro se claimants, and should scrupulously maintain both the reality and the appearance of impartiality.
III. THE HEARING
Certain issues that often arise at the hearing in a labor arbitration will have already been discussed and ruled upon by the arbitrator in the pre-hearing process.
At the hearing, the arbitrator should seek a comfortable balance between the traditional informality and efficiency of arbitration and court-like diligence in respecting and safeguarding the substantive statutory, common law, and contractual rights of the parties.
While parties of equivalent capacity often object to what they consider excessive arbitrator intervention in their case presentations, arbitrators must exercise special care to ensure fundamental fairness when there is a pro se claimant. A frank statement to this effect at the beginning of a hearing may be helpful. Although an arbitrator should not take over the pro se claimant’s case as would an advocate, the arbitrator may appropriately point out the basic procedures to be followed and the elements that must be proven to establish the claim. The arbitrator may also raise questions to clarify confusing testimony or argument.
If not following the formal rules of evidence, arbitrators should be mindful of issues of privilege and confidentiality, and instances where the application of an informal evidentiary approach might prejudice an underlying substantive right under a statute, the common law, or a contract.
Arbitrators should familiarize themselves with any legally established burdens of going forward and any legally established burdens of proof, including any shifting burdens of proof, that are applicable to the claim.
During the hearing the arbitrator should remain alert to any ongoing disclosure obligations not anticipated and dealt with at the pre-hearing consultation.
If the parties do not agree on having a transcript, the arbitrator may have to rule on what, if any, record of the proceedings will be required other than the arbitrator’s own opinion and award. In statutory cases, an appropriate record is necessary for a court to accord the arbitrator’s award full weight. But unless a case is unusually complicated or the evidence is highly controverted, a professional transcript could be unduly expensive and time-consuming. An audio recording or similar device controlled by the arbitrator may suffice.
IV. OPINION AND AWARD
- The arbitrator should provide a written opinion and award.
The opinion should record the parties, the type of dispute, the issues to be decided, and the relief requested.
The opinion should recite the facts and the reasoning for any conclusions contained in the opinion and award. The arbitrator should identify and deal with all statutory, common law, or contractual issues raised, being mindful of the standards of judicial review which may apply. It is appropriate for the arbitrator to cite and rely on material supplied at the hearing, as well as on information in the public domain, including the jurisprudence of agencies and courts. In resolving public law claims the arbitrator is obligated to apply applicable statutory and case law.
Remedies should be consistent with the statutory, common law, or contractual rights being applied and with remedies a party would have received had the case been tried in court. These remedies may well exceed the traditional labor arbitration remedies of reinstatement and back pay and may include injunctive relief, compensatory and punitive damages, interest, and assignment of attorney's fees and costs.
The award should be signed by the arbitrator or by a majority of a panel of arbitrators. It should specifically cite the disposition of each claim and the damages and relief provided, if any.