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Rethinking Mandatory Arbitration of Employment Disputes
In 1991, Congress amended Title VII of the Civil Right Act of 1964 to permit employees to demand jury trials for alleged violations of the statute. Before the 1991 act, Title VII plaintiffs were not entitled to a trial by jury and were limited to remedial damages, e.g., back pay, reinstatement, front pay, and injunctive relief. The 1991 act amended Title VII to create the right to a jury trial and to allow employees to recover compensatory and punitive damages. Employers reacted swiftly to these changes in the law by requiring their employees to enter into mandatory arbitration agreements in which the employees waived their right to pursue in a court of law any claims arising out of their employment and instead submit such claims to final and binding arbitration. The general sentiment among employers at the time was that they would be much better off having employment claims decided by neutral arbitrators instead of juries. Arbitrators were less likely than juries to be swayed by emotions or anti-corporate sentiments and more likely to base their decisions on the facts before them. Employers also believed that, even if an arbitrator were to find in favor of the employee, the damages awarded against the employer would be lower and more realistic than those awarded by juries and that arbitrators (unlike juries) generally would be hesitant to award punitive damages. In essence, employers were relying on arbitration to eliminate the 'lottery ticket' mentality among employees who were considering pursuing employment claims.
In addition to allowing employers to avoid jury trials, binding arbitration agreements promised a host of other benefits for employers. At the time, arbitration of employment claims was considered to be faster than litigating those same claims in court. While parties often waited years for a trial date on overflowing judicial dockets, a hearing date before an arbitrator could be set relatively quickly. Getting claims resolved more quickly meant employers could reduce the internal effect of lingering litigation on its workforce and business.
Employers also expected that arbitration would be cheaper than court litigation. For example, the parties' rights to engage in various forms of discovery, such as depositions and written discovery ' which can be a costly ' were generally limited in arbitration of employment claims. Moreover, in addition to limited discovery, arbitration of employment claims typically did not include expensive motion practice and other costly pretrial preparation related to a jury trial (such as preparation of jury instructions, motions in limine, etc.). Indeed, to achieve additional cost savings, some employers included 'loser pay all' provisions in their mandatory arbitration agreements. Thus, if the employer prevailed, the entire cost of the arbitration would shift to the employee.
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