employment

Supreme Court Limits California’s PAGA Law on Employment Claims, Preempting It in Part under the Federal Arbitration Act

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By Arjan Bir Singh Sodhi & Russ Bleemer

The U.S. Supreme Court ruled this morning that employers may require their workers to arbitrate employment disputes under California’s Private Attorneys General Act, a 2003 law that allows Californians to file suit on behalf of the state for employment-law violations.  

The Federal Arbitration Act, the Court found today in Viking River Cruises Inc. v. Moriana, No. 20–1573, preempts at least in part the California state PAGA law, which had been the source of tens of thousands of court claims in the face of arbitration requirements, according to an industry interest group formed to fight the PAGA arbitration ban.

This morning’s decision is available on the Supreme Court’s website here.

The dispute traces to the controversial California Supreme Court case of Iskanian v. CLS Transp. Los Angeles LLC, 327 P.3d 129 (Cal. 2014) (available at https://stanford.io/3ILcTY5), where the state’s top Court held “that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”

Today’s majority opinion by Justice Samuel A. Alito Jr. does not fully invalidate PAGA, and takes issue with arguments on both sides. In fact, it leaves wiggle room for the California courts and legislature to tinker with PAGA to provide relief for what it terms “non-individual” claims that the original plaintiff no longer has standing to make under the decision.

But it strikes the Iskanian reasoning, and criticizes the PAGA statute’s orientation, noting that it isn’t clear on individual’s claims as opposed to representative actions.  Alito explains that representative actions under the law are not only those of the “individual claims” of employees who seeks to file suit for workplace claims under the state’s Labor Code, but also representative PAGA claims predicated on code violations “sustained by other employees.” The latter, under Iskanian, may not be subject to mandatory arbitration.

That didn’t sit well with the majority opinion, which contrasts PAGA’s single suit involving many claims but solely by an individual on behalf of the California Labor & Workforce Development Agency, as opposed to class-action cases which may involve many claims but also on behalf of many absent plaintiffs who are certified as a class. 

The bottom line is that the representative aspect of PAGA as it applies to arbitration was stricken in today’s Court decision, an 8-1 decision with two concurring opinions. There was a dissent by Justice Clarence Thomas, who maintained his longstanding view–a short dissenting opinion that he has issued on at least seven other occasions–that the Federal Arbitration Act doesn’t apply in state courts.

The results already are seen as a relief by California business interests, with the Iskanian arbitration bar eliminated.  Los Angeles-based Anthony J. Oncidi, a partner and co-chair, of Proskauer Rose’s Labor and Employment Department, writes in an email,

Employers all over California are rejoicing today with the news that this peculiar PAGA exemption from arbitration is finally gone. Employers should run, not walk, to take advantage of this significant new development by immediately reviewing and, if necessary, amending their arbitration agreements to encompass PAGA claims. And as for those employers who, for whatever reason, have not yet availed themselves of an updated arbitration program, this is just the most recent reason to consider doing so.

Another management-side attorney, Christopher C. Murray, an Indianapolis shareholder in Ogletree, Deakins, Nash, Smoak & Stewart, P.C., writes,

Today’s decision is, for now, a victory for employers with well-crafted arbitration agreements containing class action and representative action waivers and severability clauses. However, it’s a nuanced decision that leaves open a number of issues.  One is whether the California legislature can amend PAGA to give a plaintiff standing to bring a representative PAGA action even if the plaintiff cannot pursue an individual claim in the same action. In short, it’s unlikely that today’s opinion will be the final word on representative PAGA actions and arbitration.

[Murray co-chairs the Employment Disputes Committee at the International Institute for Conflict Prevention and Resolution-CPR, which provides this blog.]

“While today’s decision is disappointing and adds new limits, key aspects of PAGA remain in effect and the law of our state,” noted California State Attorney General Rob Bonta in a statement this afternoon. He added: “Workers can continue to bring claims on behalf of the State of California to protect themselves and, in many instances, their colleagues all across California. At the California Department of Justice, we will continue to stand with workers to fight for their rights everywhere.” (The full press release is available here.)

Today’s decision may serve to derail efforts to enact PAGA-like statutes in other states. Had the law stood in its entirety and its arbitration end-run survived, labor likely would have reinvigorated pushes in blue states to add similar laws. See, e.g., Dan Walters, “The Fight Over the Private Attorneys General Act,” Orange County [Calif.] Register (April 5) (available at https://bit.ly/3MOO7s5).

The PAGA law, according to employers, negated the effects of the U.S. Supreme Court cases of Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018) (available at http://bit.ly/2Y66dwK), which authorized mandatory predispute arbitration, and AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (available at http://bit.ly/2VcI4mi), which permits mandatory arbitration backed with class waivers in consumer contracts.

The Court heard the oral arguments on March 30, the last of four arbitration cases argued in nine days at the nation’s top court. See Russ Bleemer, “Adding a Claim, and Avoiding Arbitration: The Supreme Court Reviews California’s Private Attorneys General Act,” CPR Speaks blog (March 30) (available at https://bit.ly/3NWMFoQ).

It’s also the last of the five arbitration cases the nation’s top Court has accepted and decided in its 2021-2022 term, following closely on Monday’s decision in consolidated international arbitration cases focused on cross-border discovery issues.  Links to reports on all of the U.S. Supreme Court decisions, as well as case previews and in-depth reviews of the arguments, can be found on the CPR Speaks blog here.

* * *

Under the PAGA law, employees may bring forth disputes on behalf of similarly situated workers who also allege employment violations. Angie Moriana, who worked as a sales representative for Viking River Cruises in 2016 and 2017, filed suit against the company in a representative action for alleged violations of California labor laws. Moriana alleged that Viking River Cruises violated California wage and hour laws. She had signed a pre-dispute agreement agreeing to file her claims in arbitration individually, and waiving her ability to bring a class action. As a result, Viking River Cruises sought arbitration.

In Iskanian in 2014, the California Supreme Court ruled that though PAGA suits are filed on behalf of the state, employees cannot forgo their ability to file these claims individually. The California Supreme Court decided Iskanian before the U.S. Supreme Court–showing its broad deference to the Federal Arbitration Act’s recognition of the enforcement of arbitration agreements–decided the Epic Systems mandatory employment arbitration case.

This Iskanian mandatory arbitration bar reasoned that PAGA plaintiffs represent the state as private attorneys general even though the state was not a party to the arbitration agreement. In Epic Systems v. Lewis, the U.S. Supreme Court held that mandatory arbitration agreements do not violate employees’ rights under Section 7 of the National Labor Relations Act. 

PAGA supporters argued that the law supplements the California Labor and Workforce Development Agency’s limited enforcement capability by allowing employees to enforce the state labor laws.  Employers contended that the inability to arbitrate workplace disputes cost money and jobs.

During the March 30 Supreme Court oral arguments (full CPR Speaks coverage at the link above), the court’s liberal justices were more animated, and appeared to back the California Supreme Court prohibiting mandatory arbitration of PAGA claims. Justices Sonia Sotomayor and Elena Kagan questioned why the state’s choice to enforce its workplace regulations should be overridden by the FAA, a statute now nearly a century old.

The Court conservatives did not share the same doubts. Contrary to Moriana’s assertion that requiring arbitration essentially waives a PAGA claim, Chief Justice John G. Roberts Jr. stated that a PAGA plaintiff does have a right to pursue the substantive claim, although through a different means. Today’s opinion author, Justice Alito, appeared to imply that the court’s Epic Systems decision supported finding arbitration agreements enforceable in the face of PAGA allegations.

* * *

Alito continued that line of reasoning in this morning’s decision, invoking the Court’s arbitration precedents, and discussing the expected characteristics of arbitration as a bilateral process, not a representative or class proceeding.

Alito criticized the California statute’s structure—”a PAGA action asserting multiple code violations affecting a range of different employees does not constitute ‘a single claim’ in even the broadest possible sense”—and noted that the law prohibited dividing the matter into the constituent individual and representative claims.

The opinion focused on the definitions of representative claims in bilateral arbitration.  It states that while precedents don’t hold “that the FAA allows parties to contract out of anything that might amplify defense risks,”  the practice makes “it . . . impossible to decide representative claims in an arbitration that is ‘bilateral’ in every dimension.” Alito wrote, “[O]ur cases hold that States cannot coerce individuals into forgoing arbitration by taking the individualized and informal procedures characteristic of traditional arbitration off the table.”

The federal-state law conflict, however, was elsewhere.  The majority opinion–in a section where Chief Justice Roberts, and Justices Brett Kavanaugh and Amy Coney Barrett, did not join with the majority—finds a conflict between PAGA and the FAA in PAGA’s “built-in mechanism of claim joinder.”  The Court says that Iskanian’s mandate of joinder of “aggrieved” employees’ “personally suffered” Labor Code violations “as a basis to join to the action any claims that could have been raised by the State in an enforcement proceeding” coerced parties’ PAGA claims out of arbitration.

The majority invoked its historic view of arbitration, holding that “state law cannot condition the enforceability of an arbitration agreement on the availability of a procedural mechanism that would permit a party to expand the scope of the arbitration by introducing claims that the parties did not jointly agree to arbitrate.”

Alito adds that PAGA allowed parties to avoid their agreement to arbitrate their individual claims after the fact and demand court or arbitration that exceeds the scope of the original agreement: “The only way for parties to agree to arbitrate one of an employee’s PAGA claims is to also ‘agree’ to arbitrate all other PAGA claims in the same arbitral proceeding.” [Emphasis is in the opinion.]

That aspect of the California law did not survive. “We hold that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate,” Alito wrote. The agreement’s severability clause, the opinion concludes, allows Viking River Cruises to compel individual arbitration of respondent Moriana’s claims.

The opinion also dismisses Moriana’s non-individual claims, holding that, with the dismissal, Moriana no longer had standing, leaving those claims–still valid in the majority’s view–in limbo. Instead of court or arbitration, however, the opinion targets the law. Alito concludes, “PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding.”

* * *

In her concurrence, Justice Sotomayor picks up on the majority’s closing point as well as followed from her oral argument concerns about whether the FAA could eliminate claims chosen by the California Legislature for its constituents via PAGA.

First, she asserts that the majority “makes clear that California is not powerless to address its sovereign concern that it cannot adequately enforce its Labor Code without assistance from private attorneys general.”

But then, returning to Alito’s closing point that the nonindividual claims have no outlet due to Moriana’s apparent lack of standing under California law, Sotomayor agrees, noting that there are options:

Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word. Alternatively, if this Court’s understanding is right, the California Legislature is free to modify the scope of stat­utory standing under PAGA within state and federal con­stitutional limits.

Viking River Cruises, says Washington, D.C., arbitrator Mark Kantor, who closely follows the Court’s arbitration jurisprudence and previewed the case for CPR Speaks here, “leaves considerable scope for the California legislature to rework PAGA to reestablish a representative action that could survive FAA preemption and make a waiver of PAGA unenforceable, although possibly enforceable in an arbitral forum if the relevant employment agreements calls for arbitration.”

* * *

Justice Amy Coney Barrett’s additional opinion is brief but goes further–concurring in the judgment, at the same time stepping away from much of the majority’s discussion of representative and individual actions.

She concurs with Section III of the opinion, the FAA-PAGA conflict because of the California law’s mandatory joinder provisions that would bring representative claims to arbitration. Joined by Chief Justice Roberts and Justice Kavanaugh, Barrett writes that she agrees “that reversal is required under our precedent because PAGA’s procedure is akin to other aggregation devices that cannot be imposed on a party to an arbitration agreement,” citing four seminal Supreme Court cases including Epic Systems and AT&T Mobility (see above).

But her one-paragraph concurrence concludes, and could add fuel to moves by the California Legislature to reform PAGA in light of today’s decision:

I would say nothing more than that. The discussion in Parts II and IV of the Court’s opinion is unnecessary to the result, and much of it addresses disputed state-law questions as well as arguments not pressed or passed upon in this case.*

That asterisk is to a footnote, in which Justice Barrett adds, “The same is true of Part I,” which described the PAGA, Iskanian, and case histories.

Chief Justice Roberts dissented from the footnote, and joined in the Alito majority opinion for Parts 1 and III.

* * *

Sodhi, a former CPR intern, last month received his LLM at the Straus Institute for Dispute Resolution, at Malibu, Calif.’s Pepperdine University Caruso School of Law.  Bleemer edits Alternatives to the High Cost of Litigation for CPR.

[END]

The Fight over Arbitration and Class-Action Access Returns to the Supreme Court Tomorrow on California’s PAGA Law

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By Russ Bleemer

Wednesday’s U.S. Supreme Court oral argument in Viking River Cruises v. Moriana, No. 20-1573, will sort the relationship between the Federal Arbitration Act and California’s Private Attorneys General Act. The case concludes a Supreme Court run of five arbitration cases in four oral arguments over nine days.

The Court tomorrow will likely revisit its extensive history on federal preemption of state laws in deciding whether the state law will continue to allow individuals with arbitration agreements to file suits in courts.

The issue is crucial for California employers, which have argued that the law is used as an end-run around their workplace dispute programs that forces them into class processes they seek to avoid with mandatory arbitration dispute resolution procedures.

Employment attorneys and consumer advocates have countered that PAGA is an essential state law that allows people to vindicate their employment rights.

The result is a return to the nation’s top Court on the broad issue of arbitration fairness. The fight over whether the California representative-class PAGA cases may continue in the place of individual arbitration—business groups say there have been tens of thousands of such cases—is also an amicus battleground among the nation’s leading business and consumer advocacy groups.  The amicus participants include business and consumer groups that have faced off in Washington, D.C., and federal and state courts nationwide on arbitration fairness issues for decades.

There are 22 amicus briefs filed.  Friend of the Court briefs on behalf of business petitioner Viking River Cruises, which is trying to overturn the PAGA law, have been filed by the California New Car Dealers Association; the Washington Legal Foundation and Atlantic Legal Foundation, nonprofit public interest law firms focusing on free marker principles, both based in Washington; the Employers Group, a 126-year-old California-based industry organization; Uber Technologies Inc. and Postmates LLC; the U.S. Chamber of Commerce, California Chamber of Commerce, and the National Federation of Independent Business Small Business Legal Center; the Retail Litigation Center Inc. and the National Retail Federation; the California Employment Law Council, a 29-year-old nonprofit that lobbies and advocates on behalf of employers; the Civil Justice Association of California, a 43-year-old tort reform organization; the Restaurant Law Center; and the California Business and Industrial Alliance, a five-year-old trade group of business executives and entrepreneurs formed specifically to fight the PAGA law.

Backing Angie Moriana, a sales representative for the cruise line who brought several wage claims against her employer, are consumer and employee association representatives including the National Academy of Arbitrators, a 75-year-old nonprofit professional organization; Steve Chow (who, according to his filing, is “a first-generation American who owns and operates three convenience stores in the San Francisco Bay Area” and who “writes in favor of [PAGA]. Mr. Chow cannot afford to require his few employees to arbitrate, and the [FAA] might not apply to his small business anyway.”); the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO); the California Rural Legal Assistance Inc. (a 56-year-old legal services organization) and the California Rural Legal Assistance Foundation (a legal nonprofit that represents California immigrant farmworkers and others in class processes, including PAGA cases, in front of state agencies); a group of 10 civil procedure and arbitration law professors; the California Employment Lawyers’ Association, the National Employment Law Project, and the National Employment Lawyers’ Association, all nonprofit worker advocacy groups; Public Justice, a Washington nonprofit law firm and consumer advocacy group; the Taxpayers Against Fraud Education Fund (a 36-year-old Washington, D.C., nonprofit “dedicated to preserving effective anti-fraud legislation at the federal and state levels,” focusing on whistleblower statutes); the State of California (which in its statement of interest in the case notes, “In the State’s experience, PAGA is an important law enforcement tool enacted to address serious and widespread violations of the California Labor Code”); “Arbitration Scholar” Imre Stephen Szalai, a Loyola University New Orleans College of Law professor filing his own brief [Szalai recently wrote on the Court’s arbitration caseload for CPR Speaks’ publisher CPR’s monthly newsletter Alternatives; see link below]; Tracy Chen, “in Her Representative Proxy Capacity on Behalf of the State of California” (noting in her interest statement that she is “a proxy of the State of California’s Labor and Workforce Development Agency . . .pursuant to PAGA” and a plaintiff in a securities industry class action case seeking employer reimbursement of investment adviser fees), and the American Association for Justice, the Washington-based trial lawyers’ professional organization.

The PAGA law enables an individual employee to seek a court judgment for breach of California labor laws as a “private attorney general” on behalf of the state of California.

The question presented to the Supreme Court is

Whether the Federal Arbitration Act requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.

The controversial California Supreme Case of Iskanian v. CLS Transp. Los Angeles LLC, 327 P.3d 129 (Cal. 2014) (available at https://stanford.io/3ILcTY5), authorizes California employees to avoid mandatory arbitration employment contracts requirements by filing representatives suits under the PAGA law.  California’s top court held that PAGA was not preempted by the FAA.

As the Supreme Court itself points out in a prelude to the Viking River Cruises question presented, Iskanian has authorized Californians to avoid the Court’s ruling backing mandatory individualized arbitration in consumer cases in the seminal matter preceding Iskanian, AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (available at http://bit.ly/2VcI4mi), and the case that extended the authorization to employment cases that followed, Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018) (available at http://bit.ly/2Y66dwK).

For more background on Viking River, see Mark Kantor, “US Supreme Court to Review Whether Private Attorney General Action Can Be Waived by an Arbitration Agreement,” CPR Speaks (Dec. 16) (available here).

The audio stream of Wednesday’s argument will be available on the U.S. Supreme Court’s home page at 10 a.m. Eastern, here. Tomorrow afternoon, the Court will make available an archive of the stream and a transcript of the argument here.

* * *

A preview and an analysis of the 2021-2022 Supreme Court arbitration docket, including the cases argued this week and last week, can be found at Russ Bleemer, “The Supreme Court’s Six-Pack Is Set to Refine Arbitration Practice,” 40 Alternatives 17 (February 2022), and Imre Szalai, “Not Like Other Cases: SCOTUS’s Unique Arbitration Year,” 40 Alternatives 28 (February 2022), both available for free at https://bit.ly/3GDEJEK. Argument coverage is available on CPR Speaks, here.

* * *

The author edits Alternatives to the High Cost of Litigation at altnewsletter.com for CPR.

[END]

Looking for Definitions, the Supreme Court Weighs the Limits of the Federal Arbitration Act’s Sec. 1 Exemption

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By Russ Bleemer

Today’s Federal Arbitration Act oral argument in the U.S. Supreme Court gives the justices the opportunity to refine the meaning of the first section of the nearly century-old law designed to discourage bias against arbitration.

They struggled with that task in trying to set the limits of the types of workers who would be exempt from arbitration under the law, at the same time sounding skeptical that a residual exemption would not provide the exemption to some transportation workers.

The justices explored the classes of workers currently exempt from arbitration under the FAA, and discussed expansions to particular jobs in relation to the statute’s wording.  At times the justices appeared sympathetic to arguments from both sides as they tried to divine current application to commercial airline workers—job categories that didn’t exist when the FAA was enacted in 1925.

Southwest Airlines Co. v. Saxon, No. 21-309,  presents a Federal Arbitration Act Sec. 1 question:

Whether workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport such goods themselves, are interstate ‘transportation workers’ exempt from the Federal Arbitration Act.

The statute’s defines its application to maritime transactions and commerce. The key section before the Court this morning is the conclusion that notes “nothing [in the statute] shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

The Court has interpreted the law to mean that the exception from FAA application is only for transportation workers “engaged in” interstate commerce. Circuit City Stores Inc. v. Adams, 532 U.S. 105 (2001) (available at https://bit.ly/2HhwYLu).

The Seventh U.S. Circuit Court of Appeals in the case (available at https://bit.ly/3rRA8Ln) held that the plaintiff was a transportation worker, and therefore exempt from the FAA, and didn’t have to arbitrate her Fair Labor Standards Act claim.

Petitioner Southwest Airlines requires all workers who aren’t covered by collective bargaining agreements to arbitrate workplace disputes, according to court papers which also note that the original plaintiff worked only locally—a “ramp agent supervisor” at Chicago’s Midway Airport.  

For background, see Russ Bleemer, Supreme Court Preview: An Airline and an Employee Will Argue Over the Reach of an Exclusion from the Federal Arbitration Act, CPR Speaks (March 25) (available here).

Southwest Airlines’ lawyer said the FAA carves out the employee, who did not travel, for not being in interstate commerce, and therefore out of the flow of interstate commerce, following “from Circuit City and Section 1’s text and structure.”

Shay Dvoretzky, a Washington, D.C., partner at Skadden, Arps, Slate, Meagher & Flom, told the Court that meant that “an exempted class of workers must perform work analogous to that of seamen and railroad employees,” whose employment was characterized by working on moving ships and trains.

Jennifer Bennett, the lawyer for respondent Latrice Saxon, who heads the San Francisco office of Gupta Wessler, said that railway workers’ class was informed by the treatment of seamen in the statute and the “residual” wording of Sec. 1—“any other class of workers engaged in foreign or interstate commerce”—and that covered the original plaintiff, who therefore was not obligated to arbitrate her case under her employment agreement because of the exemption.

* * *

Dvoretzky opened on behalf of Southwest Airlines noting that petitioner Saxon was like a stevedore, land-based shipping industry cargo loaders who don’t travel, originally perceived as separate from the statute’s arbitration exemption.  “Seamen”, he said, was a term of art, with a long case history, and was based on the fact that they went on “long voyages,” unlike stevedores.

Chief Justice John G. Roberts Jr. told Dvoretzky that he was “very precise” in “emphasizing border crossing in . . . determining interstate commerce” in his opening and in his court papers, and asked whether a border crossing was required for the worker to be in interstate commerce under FAA Sec. 1.

No, Dvoretzky replied, the question “is whether movement of people or goods through the channel of interstate commerce is central to the job of the class of workers.” The inquiry, he explained, was “the job of the class of workers”—here, the ramp agent supervisor. “They all have the same job description,” he said, “and their job description doesn’t involve getting on the plane.”

But Dvoretzky initially added that the work, following Congress’s lead, would have to cross the border.  Even if not going across borders, he said, seamen as a class have the central characteristic of traveling on a ship.  He contrasted the ramp agent supervisors, with their own class characteristics, and which doesn’t include traveling across borders.

Justice Sonia Sotomayor said she didn’t see any difference between the FAA Sec. 1 definition of railway workers, which includes cargo loaders, and stevedores in the shipping industry. Dvoretzky countered that the view incorporated the “the fundamental characteristic of seamen is predominantly spending time on the ship.”

Justice Neil Gorsuch turned to the FAA Sec. 1 language, and asked repeatedly what evidence Dvoretzky could use to indicate that some railway workers were not covered by the statutory exclusion. “I know you like to talk about people who travel,” said Gorsuch, “What about the fellow who unloads cargo that’s come in interstate commerce from the railroad and hands it off to a carrier locally.  . . .  [W]hy isn’t the same person unloading cargo from a plane in the same position?”

Dvoretzky said those workers weren’t covered by the FAA Sec. 1 exemption. He said there are many types of railway workers, suggesting that many would not be part of the class of workers in the statute.

Gorsuch pressed for more. Dvoretzky conceded there was nothing that directly answers the FAA Sec. 1 definition limits, but insisted there were multiple solid indicators: statutory context, which shows that less than all railroad employees were included; the treatment of “seamen” engaged in interstate context, not all maritime employees; and the texts “engaged in foreign or interstate commerce” and “class of workers,” noting “the workers in particular have to be engaged in foreign or interstate commerce.”

Gorsuch responded, “I’m going to take all that as, ‘No, we don’t have any evidence.  . . .’”

Justice Brett Kavanaugh pressed the point in a different way, noting an old case just before the 1925 FAA enactment that similarly classified workers loading and unloading shipments under the Federal Employers’ Liability Act to be a part of interstate commerce.

The question began a long exchange. Dvoretzky strongly contested the FELA cases’ view of interstate commerce as focusing on the businesses themselves, not on the workers.  FAA Sec. 1 provides a narrower standard, he said.

He said that the view that seaman doesn’t include everyone involved in shipping should be applied to railway workers, too, under the FAA Sec. 1 exemption, noting that, for example, railway management is excluded.  “The most natural reading,” he said, “isn’t everybody who works for the railroad.”

Later, at the conclusion of his argument, Kavanaugh returned to the FELA cases, but Dvoretzky deflected, noting that the case’s dormant Commerce Clause challenges were analyzed differently.  Those cases characteristically looked at local laws prejudicing interstate commerce.  “That is simply answering a different question on whether the people doing the loading and unloading are engaged in interstate commerce as [FAA] Sec. 1 uses that term,” he said.

Before Kavanaugh’s final questions, Justice Elena Kagan asked Dvoretzky to concede that if the Court found that baggage handers are included in interstate commerce, Southwest Airlines would lose the case.  But he countered that Congress didn’t mean “to exempt the airline industry,” and returned to stevedores’ exclusion from the seaman definition as the proper ruling point for the Court.

Circuit City, he emphasized, supports the exclusion of the ramp supervisors and baggage handlers. “You still look at ‘engaged in foreign or interstate commerce,’” he said, “which, under Circuit City, is supposed to be a narrow construction.”

Justice Clarence Thomas, returning to the Court after missing last week, hospitalized for an unspecified infection, participating remotely, also pressed Dvoretzky on whether an individual seaman would have to travel interstate or internationally to qualify.  The Southwest Airlines attorney said yes, the seaman would be part of the class even if the worker didn’t make such travels as part of the class of worker specifically cited in FAA Sec. 1.

Kagan returned to particular jobs.  She asked whether railway signal operators would be considered railway employees for the Sec. 1 exclusion, and Dvoretzky said “they’re not riding the train,” so they wouldn’t be included. 

She asked whether the test is that the employee is moving. Yes, replied Dvoretzky, “through the channels of interstate commerce.”

* * *

Respondent’s attorney Bennett, representing original plaintiff Saxon, told the Court that her client engaged in interstate commerce, and made historical arguments via the FAA’s legislative history of the FAA.

“Southwest contends that workers who load and unload airplanes are not part of any class of workers engaged in commerce for purposes of the FAA,” said Bennett in her opening, adding, “There’s no support for this contention in the text of the statute. Southwest can’t point to even a single example from any time period in which the phrase ‘engaged in foreign or interstate commerce’ has ever been given the meaning it proposes.”

She suggested that Congress intended to exempt cargo workers from the statute, at least under the residual clause, discussed above. The Court and Bennett explored—and struggled–putting limits on a definition as to who was included under the exemption, with Bennett conceding that some examples were borderline.

 Bennett told Chief Justice Roberts that railroad ticket workers in 1925 would be exempt-from-arbitration transportation workers under FAA Sec. 1, as well as station employees. “[T]he ordinary meaning was those people who did the customary work of the railroad at that time” were exempt from FAA arbitration, she said.

But she stopped short of office workers, noting that a general counsel, and executives, were not included in the statute, agreeing with her adversary.  Both Bennett and the Court wrestled with airline workers’ fit with the statute.

Justice Gorsuch said that Southwest Airlines’ strongest argument was that “seamen were people who rode the waves and did not include stevedores,” who therefore weren’t in interstate commerce, which would be analogous to Saxon’s airline role in Chicago. Bennett countered on the differences under the statute between railway workers and seamen in separate industries, and said the lack of “commonality” in the statute—referring to the specificity of “seamen”–also pointed to respondent Saxon’s distinct job at an airline.

She conceded that Southwest’s credit card points program workers aren’t doing FAA Sec. 1 transportation work, but under questioning said that schedulers would be doing the customary work under the statute.

Justice Kagan asked about website designers. “That’s a difficult question,” replied Bennett, “but it’s at the outer edge.”

Bennett earlier declined to extend the rule to Lyft and Uber drivers who may not cross state lines, but might pick up goods and travelers who have come from interstate commerce.  She told Gorsuch, that the question would be “[I]s it part of this continuous journey . . . [or] is it really a separate sort of local transportation?”

Both of the shared ride companies, along with Amazon.com, filed amicus briefs in the case asking the court to exclude local workers from the FAA Sec. 1 exemption. (The briefs are available at the Supreme Court docket link above.) But Bennett leaned toward a narrower definition in a discussion with Kagan.

That discussion continued with Kagan and Alito on bright line exemption rules by industry or, alternatively, more narrowly, in interstate commerce for classes of workers under Sec. 1.

Alito asked if the rule covered industries, which besides airlines would be subject to the exemption. Bennett she said two major industries would be trucking and busing, and perhaps space travel, but still likely with the narrower test under FAA Sec. 1. That was followed by a discussion led by Chief Justice Roberts on shipped goods, and the status of warehouse workers.

The exploration of the variations, without definitive views from the Court, suggested that the FAA Sec. 1 exemption fate of local Lyft and Uber drivers, and warehouse and local driver Amazon workers, may be left for future cases.  Bennett pushed for workers at warehouses to be included in the FAA Sec. 1 exemption—” you know, a warehouse that is in the middle of . . . the goods journey.”

Justice Samuel A. Alito Jr. questioning potential FAA Sec. 1 exemptions and exclusions, told Saxon attorney Jennifer Bennett that her arguments shifted back and forth, with just about every commercial activity included today, but under a statute which is narrow. He said he couldn’t see how a Queen Mary cruise ship ticket seller could be included, and the FAA Sec. 1 foreign and interstate commerce meaning “has to have a narrower meaning.”

Bennett strongly disagreed.  She said the language wasn’t “surplusage” as Alito suggested, because under Circuit City, being engaged in commerce was in the transportation requirement. She added that the two classes of workers cited in the statute, which also had preexisting dispute resolution statutes, “were commonly understood categories” illustrative of classes of workers.

It wasn’t thoroughly job specific, she explained. “Here, it doesn’t say seamen, you know, flagmen, railroad conductors,” said Bennett, “It says seamen and railroad employees. And so we’re talking about the classes of workers that are specific to the industry.”

She closed noting the distinctions between seamen and railroad employees, and the residual clause.

* * *

Today’s case is expected to be decided before the Court’s term ends at the end of June. The transcript and audio of the Sec. 1782 arguments are available on the Supreme Court’s website here. Justice Amy Coney Barrett was not present on the audio stream today.  The Court earlier announced she took no part in the consideration or decision of the certiorari petition in the case.

* * *

The author edits Alternatives to the High Cost of Litigation for CPR at altnewsletter.com. Andrew Ling, a third-year law student at the University of Texas School of Law, in Austin, Texas, and a CPR 2022 Spring Intern, contributed to the research and writing of this post, which was based on the live audio stream provided by the Court Monday morning, March 28.

[END]

CPR Employment Disputes Committee: Ombud’s Role in Addressing Worker Complaints Is Analyzed

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By Daneisha LaTorre

Last month, CPR’s Employment Disputes Committee presented a Zoom discussion highlighting ombuds programs. The panel focused on how ombuds are set up, the services they provide, and their roles within organizations.

Natalie C. Chan, an associate in Sidley Austin’s Chicago office, moderated the June 16 discussion between Joan C. Waters, the University Ombuds Officer at Columbia University in New York, and Timothy Shore, former ombuds at Pfizer Inc.

The event began with a short presentation introduced by the CPR committee chair, Aaron Warshaw, a shareholder in the New York office of Ogletree, Deakins, Nash, Smoak & Stewart, on CPR’s recently released Administered Employment Arbitration Rules, which are available here.

A rules discussion was led by veteran committee members Alfred G. Feliu, a neutral based in New Rochelle, N.Y.; Christopher C. Murray, a shareholder in the Indianapolis office of Ogletree, Deakins, Nash, Smoak & Stewart’s Indianapolis office, and Wayne N. Outten, chair and founding partner of New York’s Outten & Golden. It highlighted Rule 1.4 (Due Process Protections) and Rules 3.12-3.13 (Joinder and Consolidation).

The due process rule is in place to provide fairness, and link to the separate Due Process Protections established by CPR, which can be found at https://bit.ly/3hELLQa.  

CPR also created an innovative procedure through the joinder and consolidation rule, which uses an Administrative Arbitrator to address those issues.

The rules were developed by counsel from the plaintiff’s bar, in-house employment counsel, corporate defense attorneys, and neutrals to ensure fairness throughout the rules. For example, the rules provide detailed guidance to address cases where a party has refused to pay required fees, including guidance on preserving the rights of the defaulting party. The rules also provide factors to consider for discovery, early disposition and remote hearings.

The discussion noted that the rules are specifically designed to avoid ambiguity and interpretative disputes.

The discussion also emphasized the importance of the arbitration rules on addressing imbalances between employees and employers. A CPR Speaks post devoted to the rules can be found here.

* * *

After the arbitration rules presentation, Natalie Chan opened the discussion about ombuds programs, their function, and their benefits . Panelists Joan Waters and Tim Shore provided insight into their experience as ombuds from an academic and corporate perspective.

An ombuds is an official appointed to hear individual concerns regarding issues that may arise in the workplace—Shore emphasized the session’s focus on “organizational ombuds,” as opposed to, say, consumer advocate ombuds jobs. In comparison to human resources professionals, ombuds have an obligation to keep the employee information provided confidential. This method creates a safe space and helps to surface workplace conflict or concerns.

As an ombuds in academia, Joan Waters explained that her role at Columbia University is to serve faculty, students, staff, and any affiliates connected to the institution, including parents and alumni, to hear concerns, act as a referral source and help with conflict negotiation.

Waters explained confidentiality is the most significant contributor to her work. As an ombuds, Waters is not authorized to accept notice on behalf of the university or to keep records of any interaction with the individuals who seek guidance. Specifically, individual’s identities are not disclosed unless there is an imminent risk of serious harm. Waters explained that if an ombuds is presented with information that seems to cause an imminent risk of harming an employee, she can use her discretion to disclose the information.

Tim Shore provided perspective on the responsibilities and role of a corporate ombuds. In his former longtime role at Pfizer—where he was the company’s first ombuds–Shore had the responsibility to oversee the operations of the Ombuds Office.  In this capacity, Shore reported administratively to the chief compliance officer but had direct access to the company’s chief executive officer and board of directors.

Shore explained that an ombuds provides employees with a place that they can raise issues confidentially.

Ombuds help individuals get to the roots of their issues.  If appropriate, the ombuds can also help workers understand the formal steps to be taken if the employee decides that he or she wants to formally report the issue to the company. The process allows employees to control their conflicts and decide if and how that want to take steps to resolve the matter.

To help attendees better understand ombuds programs, moderator Natalie Chan proposed a hypothetical from an employee’s perspective, stating on behalf of a complainant, “I just feel like I’m not being treated properly. My manager doesn’t seem to take my suggestions seriously . . . and I don’t like his tone.  . . . I feel like my male counterpart in the same department is getting preferential treatment and better opportunities.”

Joan Waters explained that the hypothetical is typical of what she often hears from employees. As an ombuds, the mission includes helping employees refine their concerns and understand the process of resolving their dispute. Shore explained that often, people will label their issues, such as, “I’m being bullied” or “I’m being discriminated against,” instead of explaining in detail the core issues at hand.

The ombuds’ goal, said Shore, is to identify the specific issues an employee is facing and help provide the employee with the tools he or she needs to resolve those issues.   During these conversations, ombuds may walk employees through constructive meetings with their managers about their issues or discussing the formal internal process if an employee wants to escalate the situation.  

The question of whether ombuds must report potential discrimination claims that come to their attention was raised. The panelists explained that an ombuds is precluded from reporting unless there is an imminent risk of serious harm.

As ombuds, however, their mission is never to let an employee walk out of the office without a plan to resolve the situation, especially when dealing with a discrimination or harassment issue.

Waters stated that her goal when individuals discuss their situations is to help them specifically identify the problem. She believed once employees understood their options, the individuals would be better equipped to move forward with their concerns if they choose.  

Shore stated that his former organization does not track the specific identity of individuals.  But, he reported, it does track demographic information such as race or gender of the individuals that came to the ombuds office.  This allows the ombuds office to identify trends across the organization.  When the data reveals a pattern in a location or department, an ombuds can bring that issue to the attention of the appropriate leadership without revealing the identity of any of the individuals involved.

Shore also stated that the employee’s perceptions should not be ignored. He said that perceptions are real, and if there are numbers of employees with the same perception, the problems the perception reveal must be addressed.

Shore added that formal employment claims have declined at the company since the launch of Pfizer’s ombuds program. Additionally, he emphasized the cost of an ombuds resolving an employee dispute is a fraction of the time and money spent resolving more formal claims.   

Shore said that, despite their effectiveness, ombuds programs are not common in corporations, with less than 10% of U.S. companies having a program.  

Finally, panelists highlighted training programs for individuals interested in becoming ombuds. Both panelists suggested training from the International Ombudsman Association. Waters also suggested Columbia University’s masters’ program in Negotiation and Conflict Resolution.

To learn more about ombuds, Tim Shore has a video on the CPR Speaks blog. Additionally, for training opportunities, you can access the Columbia Ombuds Office masters’ program here and IOA training here.

The June 16 CPR Employment Disputes Committee video on the panel discussion can be viewed by individuals at CPR members after logging into CPR’s website here.

* * *

The author, entering her second year at Washington, D.C.’s Howard University School of Law, was a CPR 2021 Summer Intern.

[END]

Part III: Deference Change–Analysis of a Shift on a Labor Arbitration Review Standard

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By Antranik Chekemian

CPR Spring Intern Antranik Chekemian has provided extensive highlights on CPR Speaks of a Feb. 24 CPR online panel discussion, hosted by CPR’s Employment Disputes Committee and its Government & ADR Task Force, covering the current state of employment conflict resolution in the executive and legislative branches.  In “Part I: How Workplace ADR Will Evolve Under the Biden Administration,” Antranik covered presentations by panelist Mark Kantor, a Washington, D.C., arbitrator, who focused on prospects for legislative changes for employment and labor ADR issues, and possible regulation, and panelist Mark Gaston Pearce, Visiting Professor and Executive Director of the Georgetown University Law Center Workers’ Rights Institute, who discussed developments in decisions of the National Labor Relations Board, where he served as chairman from 2011 to 2017. In “Part II: More on Workplace ADR Under the Biden Administration,” panel moderator Arthur Pearlstein, who is Director of Arbitration for the Federal Mediation & Conciliation Service, turned to panelist Kathryn Siegel, a shareholder in Littler Mendelsohn’s Chicago office, whose presentation was highlighted, and then led a general discussion.  Here, Antranik returns to the program to highlight a piece of the discussion on the recent evolution of a key NLRB arbitration standard as discussed by panelist Pearce.

* * *

At CPR’s February webinar, “What Will Labor and Employment ADR Will Look Like Under a Biden Administration?” former NLRB board chair Mark Gaston Pearce discussed the effects of a 2019 United Parcel Service Inc. Board decision overruling its 2014 Babcock & Wilcox decision.

Babcock & Wilcox had changed the standard of post-arbitration deferral on resolution of a grievance concerning an employee’s discipline or discharge that has been alleged to violate the National Labor Relations Act.  

United Parcel Service reverted to the previous, long-running arbitration-deference standard.  NLRB Chairman John F. Ring (currently a board member), and members Marvin E. Kaplan and William J. Emanuel, all Trump appointees, unanimously decided the case.

Babcock & Wilcox Construction Co. Inc., Board Case No. 28-CA-022625 (reported at 362 NLRB No. 36) (Board summary here) (9th Cir. review Oct. 17, 2017, under the name Beneli v. NLRB), provided that the Board will “defer to an arbitral decision if the party urging deferral shows that: (1) the arbitrator was explicitly authorized to decide the unfair labor practice issue; (2) the arbitrator was presented with and considered the statutory issue, or was prevented from doing so by the party opposing deferral; and (3) Board law reasonably permits the award.”

The Babcock & Wilcox standard shifted the burden of proof to the party urging deferral. In addition, deferral was appropriate only when the party urging deferral was able to demonstrate that the specific statutory right at issue was incorporated in the collective-bargaining agreement.

In employers’ views, this made deferral to an arbitral decision less likely, with the need to prosecute cases at the grievance stage and the unfair labor practice stage. The NLRB decided to apply the standard prospectively.

During the webinar, Mark Gaston Pearce noted that it was still difficult to say whether Babcock & Wilcox had an impact on businesses, because any contract negotiated prior to the decision was not affected by the new change in standards. 

The Board in United Parcel Service Inc., 369 NLRB 1 (Dec. 23, 2019), reversed the Babcock & Wilcox decision, returning to the arbitral deferral standards established in Spielberg Mfg. Co., 112 NLRB 1080 (1955) and Olin Corp., 268 NLRB 573 (1984).

The United Parcel Service decision states that the Board will defer to an arbitration award in cases alleging discharge and discipline in violation of Section 8(a)(3) and (1), “if (1) the arbitration proceedings were fair and regular, (2) the parties agreed to be bound, (3) the contractual issue was factually parallel to the unfair labor practice issue, (4) the arbitrator was presented generally with the facts relevant to resolving the unfair labor practice, and (5) the decision was not clearly repugnant to the purposes and policies of the [NLRA].”

The NLRB stated in United Parcel Service that Babcock & Wilcox “disrupted the labor relations stability” and that the 2014 decision disfavored “the peaceful resolution of employment disputes about discharge and discipline issues through collectively bargained grievance arbitration proceedings.”

In a press release announcing the decision of United Parcel Service, the NLRB stated it “will continue to safeguard the exercise of Section 7 rights—particularly by ensuring that arbitral awards are not clearly repugnant to the Act—while better promoting the strong federal policy in favor of arbitration as the parties’ agreed-upon mechanism for resolving employment disputes.”

Mark Gaston Pearce told the CPR seminar attendees that the burden was once again placed on the party resisting deferral to the arbitration decision. He stated that the explicit authorization under the collective bargaining agreement sending the matter to the arbitrator to decide on a specific issue was not required anymore, and that there is no longer a requirement that the statutory issue be precisely articulated by the arbitrator.

Pearce concluded that it is still a “big question mark” whether a new Board under President Biden will reinstate the Babcock & Wilcox standard eliminated at the end of 2019, as it was to be effective prospectively. It was only recently that newly negotiated contracts would be subject to that standard.

* * *

The author, a second-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern.

[END]

#CPRAM21: Managing Workplace Conflicts, On-site and Remote

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If you missed the 2021 CPR Annual Meeting in January—the first free public meeting held online in the organization’s 40-year history—the videos are being posted on CPR’s YouTube Channel. While additional videos will be posted for CPR members only, the first, linked here on CPR Speaks, is open access and features the keynoters, CNN Anchor and Chief Political Correspondent Dana Bash and General James Mattis, who is former U.S. Defense Secretary. Click the Subscribe button at YouTube for alerts and for more CPR content. For information on full access and joining CPR, please visit CPR’s Membership webpage here.

By Antranik Chekemian

Kimberley Lunetta, who represents management in employment matters as of counsel at Morgan Lewis & Bockius, moderated a third-day CPR Annual Meeting panel on state-of-the-art best practices for addressing and resolving workplace disputes. The panel mainly concentrated on managing employees and disputes in the current remote environment, and how to set up an ADR program in order to prevent and resolve conflicts.

The Jan. 29 session included four panelists:

  • Alfred G. Feliu, who heads his own New York firm, is a longtime panelist for CPR Dispute Resolution and the American Arbitration Association’s commercial and employment arbitration and mediation panels. He is past chair of the New York State Bar Association’s Labor and Employment Law Section and a fellow of the College of Commercial Arbitrators and the College of Labor and Employment Lawyers.
  • Wayne Outten is chair and founder of New York’s Outten & Golden LLP, which focuses on representing employees. He has represented employees for more than 40 years as a litigator. He has long advocated for using mediation in employment disputes. His practice focuses on problem solving, negotiating, and counseling on behalf of employees.
  • Cheryl M. Manley is a veteran labor employment attorney with more than 25 years of  experience, and since 2005 has been at Charter Communications, where she is senior vice president and associate general counsel of employment law, leading the broadband/cable operator’s Employment Law Group.
  • Andrew J. Weissler is a partner in the labor and employment group of Husch Blackwell. He is a member of the firm’s virtual office, the Link, based in Bloomington, Ill. Weissler advises and represents public and private clients on workplace issues involving difficult personnel decisions.

Feliu and Outten are on a subcommittee of CPR’s Employment Disputes Committee that is working on a model workplace disputes program, along with a new version of CPR’s Employment Dispute Arbitration Procedure to be issued soon.

A poll conducted at the beginning of the panel showed that remote working was new for most of the participants.

Lunetta launched the discussion by asking Feliu about the threshold questions employers should ask themselves when considering an ADR program.

If the principal goal is avoiding litigation, responded Feliu, then employers “are really focusing on processing existing or incipient claims.” As a result, he said, employers “are going to focus more on arbitration–on ending up with a process that brings an ultimate result.”

But if the employer’s goal is more on problem solving and identifying tensions before they become disputes and the employer views conflict resolution as a strategic imperative, then the alternative approach of problem-solving should be embraced, he said. Here, the focus is different than pure litigation avoidance. Said Feliu, “Litigation avoidance or reduction of legal costs will be part–will be an effect, hopefully–of the problem-solving process but wouldn’t necessarily be the goal.”

This approach would also help the organization become more competitive, he said–to work more constructively and efficiently while, as an after-effect, avoiding litigation.

Feliu explained, “How do you do this? You do this is by opening up lines of communication, by necessarily undercutting to a certain extent the chain of command. You’re empowering employees to come forward with their disputes at whatever level and whatever the nature. And by doing that, you are creating a different kind of an organization that is less hierarchical, less structured, and more fluid.”

Wayne Outten added that ADR is ideal for workplace disputes. Because there already is an important relationship between both sides and the relationship is typically continuing, said Outten, it “is a perfect place for identifying problems and solving them early on.” He then presented two approaches that companies can embrace for dispute resolution procedures, the legal mentality and the human resources mentality.

The legal mentality, said Outten, is, “Let’s find a way to avoid lawsuits and to maximize the chances that we will win them with the least possible costs.” He said the HR approach is better, with goals of making employees happy and providing an environment where workers can be productive and focus on their jobs in an effective and efficient manner.

With the HR approach, Outten said, a program should start identifying problems at the earliest possible stage. “If a problem ripens into a dispute,” he said, the goal is “resolving the dispute in the simplest, quickest way possible and escalating only as and when you need to.” The HR approach also serves the lawyers’ perspective as it “tends to avoid disputes ripening into the possibility of litigation.”

Lunetta then asked the panelists whether having employees working from home in a number of states, possibly new states to the company, would affect the design of an ADR program.

Al Feliu responded that working from home would not alter or change the program itself, but it increases and amplifies “the need for it to be enforceable across 50 states and 50 jurisdictions.”

Wayne Outten discussed some of the positive and negative changes regarding the nature of workplace disputes that come with remote working. On one hand, the kind of disputes that arise from being in the same place, and having interpersonal reactions, presumably will be reduced with the increase in virtual offices, such as sexual harassment claims and bullying.

“On the other hand,” he said, “the opportunities for disputes are exacerbated because you don’t have as much free-flowing communication, and the ability to address things face to face.” Outten added, “Disputes may fester.”

From the management-side perspective, Husch Blackwell’s A.J. Weissler noted that the HR model Outten mentioned “has changed quite a bit in this remote work environment.” If the employees are typically working remotely, then having difficult conversations over the Internet should be acceptable, he said.  

But if a human resources or corporate employee is working from home while the business has essential workers who have been going to the employer’s worksite, then, says Weissler, “there’s a real disconnect there” that can make the on-site workers feel and sense that the employer is not in touch with the employee.

Moderator Kimberley Lunetta then asked panelists whether CPR has resources that can help employers think through these issues if they are considering any of the dispute resolution options that were discussed.

Outten said that this was the reason for CPR to be founded decades ago, with the goal of helping companies figure out how to avoid and resolve disputes.

Outten announced that CPR and its Employment Disputes Committee will be publishing a new set of rules for administered employment dispute resolution.  Accompanying the rules will include “draft programs that companies can adopt and adapt for their own use, which have within them the various different stages that employers can consider […] including things . . . [like] informal dispute resolution and problem solving, . . . open-door policies that invite people to take their problems up the chain of command,” ombudspersons, peer review processes and “all the way up to mediation which . . . is perfectly suited for employment disputes of all kinds.”

The conversation then revolved around the pluses and minuses for an employer of establishing a mandatory arbitration program.

“In reaching the decision that our arbitration program was going to be mandatory,” responded Charter Communications’ Cheryl Manley, “one of the factors that went into play was either reducing the litigation costs, or perhaps not having to deal with court litigation.” She mentioned that her company’s program was built to resolve issues in a timely manner and on an individualized basis.

She further added that her organization has many steps before getting to the arbitration phase to resolve the employment issue. And “when it finally does get to arbitration, we believe that there’s some certainty,” said Manley, “We believe that both parties have some skin in the game, in terms of selecting the arbitrator and primarily, it’s cost effective and efficient.”

Outten then answered a question about CPR’s employment ADR program and how it can help employers not only set up, but also ensure long-term success.

Outten reiterated the program’s strength in early-stage problem solving and early dispute resolution, and added that the program offers room for flexibility and adaptability in different workplaces.

Mediation with a third-party facilitator, he said, “can be extremely valuable and beneficial. It gives the parties an opportunity to air their grievances.” When it comes to arbitration, he said, every successful workplace ADR program really needs to comply “at a minimum,” with due process protocols.”

He then presented several key features of the due process protections (which CPR has adopted here), which include:

  • “The employee isn’t required to pay more than they would pay if they were going to file in court.”
  • “The arbitrator has the authority and power to provide any remedy that a court can provide so that there’s no takeaway of remedies for the affected employee.”
  • “The employee has a fair opportunity to pick the decision maker–the arbitrator–especially given the binding power of the decision of this person to resolve the dispute.”
  • “The employee has to have a full and fair opportunity to gather information in order to present the case and . . . [any] defenses.”
  • “The employee needs to have an opportunity to have counsel of his or her choosing.”
  • “The hearing itself should be reasonably convenient . . .  so the employee doesn’t have to go a long distance to have his or her day in court.”
  • Finally, “the arbitration should end with a reasoned decision, so the parties know what the arbitrator took into account, what the findings were on the evidence, and what the legal conclusions were in determining” the decision.

A.J. Weissler added that “there are great legal reasons” not to “cram down” arbitration in a workplace disputes program, citing fairness. He said that arbitrator selection is an important factor in presenting a fair process, with a say for the employees.

Al Feliu noted that there is a dearth of diverse panelists, but major providers have made strides and continue to work on the problem to enhance and ensure fairness.

Cheryl Manley agreed with the comments, and emphasized that panelists need to reflect the workplace population.

Manley discussed Charter Communication’s Solution Channel, which she described as a 2017 program to compel arbitration use—a mandatory program for newly signed-on employees, with about 10% of the company’s 90,000 employees opting out when it was launched.  She reported that the complaints are restricted to legal claims—non-legal disputes are addressed in other ways–that are submitted through a third-party vendor which create a record over the claim. She said the American Arbitration Association is the provider.  The company absorbs the AAA filing fees and the arbitrator costs. If either side is unsatisfied with the panel, they return to the AAA for more choices.

Weissler says arbitration should be part of any dispute resolution system but if it’s made mandatory and employees are forced to use it, he said, it is counterproductive and it creates problems going forward due to the “asymmetrical” views.

Weissler said he encourages mediation as a best option. He said he is skeptical of programs that outline steps that do not allow a course of mediation to be developed.

Feliu says he has been mediating for 30 years and familiarity has grown during his period of practice after skepticism.  He agreed with Weissler’s points, but noted that mandatory mediation in New York federal court, where he said he would have expected resistance—mandatory is counterintuitive, said Feliu—it has been just as successful as voluntary mediation over about the past 10 years.

Feliu said sometimes there is grumbling but mostly, when parties get to the bargaining table, they try to settle. And he said that while joint sessions are fading, flexibility is needed.  “Every mediation is different,” he said.

Wayne Outten said that he shared Al Feliu’s experience.  In the mid-1980s, he said, the plaintiffs’ bar “viewed this newfangled process as a conspiracy to take away their rights, and I soon discovered that was not necessarily the case and became a big advocate.”

Over the past 35 years, said Outten, mediation “has become quite normal.” He echoed Feliu again,  noting that when parties attempt mediation in good faith, it is successful.

Even in situations with a lot of open issues, he said, mediation “has a very high success rate, . . .  and is always worth trying.”

Cheryl Manley said that pre-pandemic, her company didn’t want anything done virtually or remotely—all depositions, mediations and arbitration hearings were done in person, exclusively.  The change was swift, she said. “Fast forward seven, eight, nine months, . . . when we finally emerge from this pandemic, we aren’t going to go back to all depositions in person, all mediations in person or hearings,” said Manley, adding, “In fact, I think that there is no reason . . . to start putting people back on planes traveling all over the country.  It is expensive. It’s time consuming.  And it is not efficient. “ She said that the “only issues” are “the occasional technological” problems.

A.J. Weissler said he has participated in virtual matters frequently during the pandemic, and found “an incredible benefit.” Having the people resources ready on video, whether from home or for those back in their offices, has “been an incredible thing,” he said, adding that he strongly supports virtual mediations.

Wayne Outten said he always has had a concern whether real decision makers would be in the mediation room.  “Now with virtual mediations,” he said, “that problem can be more readily addressed.”

Al Feliu said he has only done virtual mediations since his first in March.  “All of the impediments, and all of the arguments against them, have been rebuffed, “ he said. For example, he explained, he can evaluate credibility better on close-up video than across a bargaining table.

Feliu conceded that there is a different feel in an in-person gathering where people have committed to the process.  That intensity, he said, isn’t present where people are sitting on their couches, are more relaxed, with their dogs nearby.  “It’s just a different process,” he said.  “I don’t have the shrieking episodes. I don’t have a lot of emotions.  Is it good or bad? It’s just different.”

The result, he said, has been that he isn’t settling cases on the first day as much as he did at in-person mediations.

Addressing audience questions, Al Feliu said he discusses confidentiality with the parties with heightened concerns, noting that a potentially serious issue could be where extra people are present, and not visible on screen, as well as individuals texting on the side. “These are all serious concerns we need to get equilibrium on” going into the mediation, he said.

* * *

The author, a second-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern. Alternatives editor Russ Bleemer contributed writing and research to this report.

[END]

Understanding the Landscape of Labor Dispute Resolution in Brazil

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By Yixian Sun

The CPR Institute hosted a June 4 webinar, “Resolving Employment Disputes in Brazil: Myths, Facts, and Opportunities,” organized by CPR’s Brazil Advisory Board, CPR’s Employment Committee, and the São Paulo, Brazil-based international law firm, Mattos Filho.

It provided an overview of Brazil employment disputes and the current legal and ADR framework to resolve them. The panelists offered their views and practical insights on 2017 labor and employment reform in the country, as well as how companies could benefit from and add ADR as an alternative option to resolve employment disputes.

Daniel Vergna introduced that Brazil’s labor litigation is most well-known for the enormous amount of lawsuits filed in the court system. Three main factors, according to him, contribute to this phenomenon.

First, at least before the labor reform, plaintiffs were not worried about the potential fee-shifting risk even if they lost at the end. Second, courts in Latin America are generally friendly to the employees, and thus it is relatively easy for employees to get a favorable judgment. Third, from a cultural perspective, employees in Brazil are proactive in filing complaints in the court and tend not to see out-of-court settlement as an option.

The 2017 labor reformation was introduced against this background. As Fabio Chong de Lima noted, before this radical modification of the Brazilian Labor Code, arbitration clauses were generally banned from employment agreements.

Under the new law, parties can agree to incorporate an arbitration clause in the employment agreement, with one caveat–the employees’ remuneration must exceed around BRL 12,000, since these higher-ranking employees are seen as those with better resources to access ADR services.

Still, as de Lima commented, this marked the first time when alternative dispute resolution methods, especially arbitration, were accepted by the Brazilian authorities as a legitimate way to resolve labor disputes, thereby offering employers a tunnel to avoid litigation, especially in cases with higher stakes. Besides, as Vergna mentioned, the losing party now bears a certain portion of the defendant’s attorney’s fee, which disincentivizes at least those with a weaker case.

To some, the fact that this seemingly essential reform did not take place until 2017 shows the Brazilian court system’s mistrust of arbitration. Cleber Venditti offered his insights on why. To begin with, according to traditional wisdom, labor rights are not arbitrable by nature.

While the labor reform effectively refuted this idea, it may take a while for the court system to change its understanding.

Next, misuse of arbitration is a factor. Many employers tend to choose the “most unreliable chambers,” which only charge a minimum administration fee and makes the arbitration process look more like forced settlement than neutral dispute resolution.

Thus, Venditti said, it is important for businesses to use well-known and well-qualified chambers and arbitrators in order to obtain a trustworthy award.

Last but not least, the judiciary needs to change its mindset. Currently, many courts still see themselves as the only guardians as labor rights, and believe that delegating the dispute resolution power to private entities would threaten the traditional protection of labor rights.

The Brazilian story may sound shockingly different for those who are more familiar with United States ADR programs, which have grown prevalent since Congress’s enactment of the Federal Arbitration Act in the 1920s. As Western Digital’s Michelle Dangler noted, with arbitration’s privacy and uniquely personal approach, it is a standard practice to include an arbitration clause in employment agreements. In addition, mediation is a mandatory pre-trial proceeding for labor litigation, and the settlement agreement has binding force.

While there are criticisms–for instance, over “forced” arbitration clauses used by employers to silence sexual harassment victims–Dangler reported that ADR remains to be a primary tool for resolving U.S. labor and employment disputes.

Fortunately, despite all the difficulties, the panelists noted that ADR is growing more prominent in Brazil. In arbitration, as Venditti said, companies and higher-level employees are working together to promote the inclusion of arbitration clauses in the employment agreement, since the confidential and expeditious nature of the process is beneficial for both sides.

As for mediation, more Brazil mediation chambers have been created. For example, workers in the telecommunication industry can now submit mediation applications to the telecom unions under certain circumstances. Banco do Brasil also implemented a mediation program to resolve sexual and moral harassment complaints, and has achieved significant success, the panel reported.

The active participation of unions in mediation enhances the confidence of the court system, which proves to be essential for ADR success. In the United States, courts rarely invalidate a mediation settlement agreement. In Brazil, according to Vergna, those agreements are not shielded by the principle of finality unless they are approved by the courts.

That is why most effective mediation agreements are created in labor litigation proceedings where courts “push” the parties, usually with relatively small claims, to settle by themselves.

Moreover, the Covid-19 pandemic is bringing both opportunities and challenges to the Brazil ADR scene. De Lima reported that more than one million people have lost their jobs in Brazil in the past two months, and economists expect more jobs to disappear.

While the total number of cases filed in courts has declined due to the heightened difficulty of receiving assistance from lawyers, the number of cases involving Covid-19 has increased by 20%. De Lima provided an example on how Covid-19 could give rise to disputes in the labor context. For instance, there might be disagreement about whether the virus could be classified as an occupational disease, particularly for employees who have to work in places with a higher likelihood to get exposed to the virus, or for those who have to resume working with minimal protective measures.

Amidst the pandemic, said Fabio Chong de Lima, employers have two options. They can either react negatively, or act collectively and creatively with their employees to address disputes in an earlier stage. ADR can be a part of the toolkits for creative responses. De Lima said that they anticipated that with its flexibility and promptness, arbitration could respond better to the changing pandemic situation, and thus attract more support and use.

Pfizer Brazil, according to panelist Shirley Meschke, has explored the value of ADR service, and has promoted ADR culture in Brazil. After the labor reform, Pfizer incorporated an arbitral clause into the employment agreement for qualified employees. It has also been pursuing opportunities for settlement in court proceedings.

From the perspective of an in-house counsel, it is equally, if not more important, to prevent disputes from emerging and escalating in the first place–a philosophy that the CPR Institute has consistently endorsed. The key to this goal, according to Meschke, is to help employees build a healthy work-life balance and to maintain smooth communication between employers and employees.

For instance, the Healthy Pfizer program provides confidential support for employees to deal with their psychological health issues, and offers training on how to keep physical and mental well-being. Pfizer has also taken measures to meet with new challenges brought by the pandemic, such as helping employees resolve technical issues and resist the tendency to work beyond business hours as a result of working from home.

The panelists concluded by noting that arbitration and mediation have their own virtues when compared with litigation. Despite a presumption that arbitration is always more expensive than court proceedings, Cleber Venditti demonstrated that after adding the cost of time and fee adjustment, litigation could be much costlier than arbitration. Labor arbitration usually takes about six to eight months to complete, whereas court proceedings can take up to three to four years, and can incur costs that amount to half of the total amount in dispute.

Fabio Chong de Lima added that arbitration could offer parties a higher quality and better dispute resolution experience. He said arbitration chambers can review more types of evidence, are usually less clogged than labor courts, and thus invest more time and care to prepare for and examine the cases at hand.

* * *

The author, a second-year Harvard Law School student, is a 2020 CPR Institute Summer Intern.

Update on CPR’s Employment-Related Mass Claims Protocol

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Recently, there have been reports in the news relating to the International Institute for Conflict Prevention and Resolution’s (CPR) Employment-Related Mass Claims Protocol (Protocol).  We thought some background might be useful.

As more and more mass employment arbitration claims are filed around the United States, arbitral institutions have become increasingly aware of the tremendous challenges they face when trying to bring timely – and comprehensive – resolution to these claims.  CPR responded to these challenges by borrowing techniques that had proved successful in the resolution of other mass claims and applied them to the employment space with the goal of facilitating a comprehensive resolution of mass employment claims for all parties involved. The result was the Protocol.  In developing its Protocol, CPR was aware that, in order to be successful, it was imperative that the features of the Protocol be balanced and designed to facilitate global resolution.

As noted by former Southern District of New York district court judge, Shira Scheindlin, a veteran of mass claims matters, in connection with her appointment as the Administrative Arbitrator under the Protocol:

This protocol offers advantages, not only to claimants, whose cases will likely be resolved at the defendant’s cost and far more quickly than they would be in court, where mass claims often take years to resolve, but also to defendants, with the greater odds it offers of reaching a prompt global resolution in a more cost-effective manner than the courts would offer.  And, most unusually, the defendant-employer will release an individual from mandatory arbitration if no global resolution is reached and the individual employee prefers a court proceeding to arbitration.

The terms of the Protocol itself speak to its innovative approach to facilitating resolution in the most efficient way possible.  The initial phase of the Protocol provides for “test” arbitrations (10-20) to first proceed on an accelerated track followed by a mediation process that encourages resolution of all claims.  If that process is unsuccessful in identifying a mediated solution, the Protocol allows claimants to opt-out of the entire arbitration process.  Not only does this opt-out allow for employees to pursue their individual claims in court, but it also allows for the possibility that these claimants might, with court approval, be able to proceed collectively in a class action.

The objective of the initial phase of the Protocol is to resolve all the cases as a whole as quickly as possible.  During this initial phase, the non-test cases are paused with all rights preserved in order to give the parties a chance to explore a global resolution. CPR believes that this procedure will actually encourage faster overall resolution of mass claims – especially when compared to the substantial delay that employees inevitably face while waiting for appointment of an arbitrator for, and the proceedings on, their claim when their claim is one of hundreds or thousands of mass arbitrations filed at the same time. If a mediated solution is reached, employees have the option of accepting that resolution or proceeding with individual arbitrations.  In the case of individual arbitrations, each employee – and the employee alone – nominates the arbitrator from a Master List of arbitrators provided by CPR, and the employer pays all fees – including for the arbitrators, the mediator, and the administrator.

The Protocol gained attention in the press recently after DoorDash adopted the Protocol in agreements with its workers and a dispute arose as to where DoorDash should arbitrate its workers’ claims that had previously been filed before the AAA.  In the context of that dispute in the case of Abernathy v. DoorDash, No.19-CV-07545 (N.D. Cal.), it has been suggested that CPR’s work on the Protocol may have been guided unfairly by counsel for Respondent DoorDash.  CPR disagrees with this characterization.

As made plain by the discovery already undertaken of CPR in the Abernathy case, including a deposition of CPR’s President & CEO, it was CPR, not counsel for the employer, who conceived of, wrote and controlled the Protocol.  This is underscored by the inclusion in the Protocol of the provision allowing claimants to opt out of the arbitration process and proceed in court – a provision disfavored by counsel for DoorDash. An examination of the Protocol itself shows that its provisions favor neither side; rather, the Protocol was intended to – and does – provide for an innovative and balanced solution for resolving mass employment claims for all parties involved.

With respect to interactions between CPR and counsel for DoorDash, the deposition testimony also discusses, as CPR previously explained in a letter to the Court dated December 12, 2019 (publicly available at Docket Entry 137), that counsel for the employer reached out to CPR last year to express concern over options for administration of a mass of claims and the fee structures being imposed and asked whether CPR could offer an alternative fee schedule for administering future arbitrations.  Rather than just focusing on alternative fees, CPR took the opportunity to try and develop an innovative and fair process for resolving these claims for all parties involved.  As a result, CPR developed the Protocol based on its own experiences in other mass claims areas.  CPR then sought and considered input on the Protocol from a variety of sources, including counsel for DoorDash — who was contemplating applying the Protocol in future contracts with its workers. CPR sought input from labor and employment counsel with experience representing both management and employees on an individual and class basis, and attorneys with mass claims and complex commercial litigation and arbitration experience, some of whom are also prominent arbitrators and mediators, including one of the foremost experts in facilitating the resolution of mass claims. CPR also received input from particular members of its Board of Directors, who have served as advisors to ALI’s Restatement of Employment Law and who have chaired the New York Chief Judge’s Advisory Committee on Alternative Methods of Dispute Resolution.

CPR developed the Protocol for the broader marketplace, not for any particular matter or party, and did so in the hopes that it would facilitate resolution and help solve for many of the challenges facing employees and employers dealing with mass individual employment arbitrations. We invite you to review the features of the Protocol for yourself.  CPR believes its Protocol will allow for the efficient, fair and balanced administration of employment-related mass claims for both employees and employers.

About CPR

CPR is an independent nonprofit organization formed in 1977 to, among other things, identify alternatives to litigation and ways to prevent and resolve legal conflicts more effectively and efficiently.

The CPR Institute is a think tank that has long brought leadership to the improvement of conflict management, as exemplified by work such as:

  • The Model Rule for the Lawyer as a 3rd Party Neutral and the Provider Principles developed jointly with Georgetown University
  • The Model Procedures for Mediation and Arbitration of Employment Disputes developed by a Committee of lawyers representing employees and employers as well as academics and neutrals
  • CPR’s Master Guide to Mass Claims Facilities compiled by a Commission co-chaired by Kenneth Feinberg and Deborah Greenspan
  • CPR’s book Cutting Edge Advances in Resolving Workplace Disputes published together with Cornell’s Scheinman Institute

CPR Dispute Resolution is a provider of dispute resolution services and will be administering the Employment Related Mass Claims Protocol to applicable arbitrations, along with its Panel of Distinguished Neutrals, who will be relied upon to mediate and arbitrate these claims.

New California Law Prohibits Pre-Dispute Employment Arbitration Agreements

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By Andrew Garcia

California last week enacted a new law that prohibits employers from requiring job applicants, or any existing employee, to enter into pre-dispute arbitration agreements as a condition of employment.

California Gov. Gavin Newsom signed the bill into law Oct. 10. It also criminalizes any retaliation against an employee who refuses to enter into a pre-dispute arbitration agreement.

Assembly Bill 5, introduced by Assemblywoman Lorena Gonzalez, D., San Diego, says that a violation of the amended California Labor Code is a misdemeanor. Despite the law’s harsh prescriptions for violators, the bill clarifies that it does not purport to invalidate any existing arbitration agreement that is consistent with the Federal Arbitration Act.

The California Chamber of Commerce identified AB 51 as a “job killer.” (See the chamber’s press release ahead of the first major hearing on the bill in March at http://bit.ly/2pmYYEu.)  The chamber said that the new law conflicts with the U.S. Supreme Court’s decision in Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S.Ct. 1421 (2017), among many cited cases that it notes are part of the Supreme Court’s jurisprudence favoring arbitration agreements. The chamber predicts that the law will be challenged and overturned, preempted by federal law. (You can read the chamber’s statement in opposition to the California Legislature, joined by 41 local chamber and specialized industry groups, at http://bit.ly/33zTLIz.)

As other jurisdictions wrestle with local restrictions, courts are beginning to see challenges.  A New York federal court last spring stuck down a New York state pre-dispute mandatory arbitration bar in a decision that was mirrored by the California Chamber’s view. See Latif v. Morgan Stanley & Co. LLC, No. 18-cv-11528, 2019 WL 2610985 (S.D.N.Y. June 26, 2019), where the U.S. District Court held that a newly enacted New York state law that invalidated pre-dispute employment arbitration agreements was preempted by the Federal Arbitration Act. See also, Andrew Garcia, “Update: Legislatures on Invalidating Pre-Dispute Arbitration Agreements,” CPR Speaks blog (Aug. 1) (available at http://bit.ly/2IPg6dd).

AB 51 is one of three bills signed by Gov. Newsom, a Democrat who took office in January, that expanded California’s workplace protection laws.  “Work is about more than earning an income,” he stated, adding, “For many, a job can provide a sense of purpose and belonging–the satisfaction of knowing your labor provides value to the world. Everyone should have the ability to feel that pride in what they do, but for too many workers, they aren’t provided the dignity, respect or safety they deserve. These laws will help change that.”

That move is a big change from Newsom’s predecessor. The new law is a reintroduction of an identical 2018 bill that was vetoed by then-Gov. Jerry Brown, also a Democrat–the second time Brown vetoed legislation restricting arbitration.  The California Chamber of Commerce opposition letter quotes Brown’s 2018 veto extensively, including the Kindred Nursing decision, which noted, “A rule selectively finding arbitration contracts invalid because improperly formed fares no better under the [Federal Arbitration Act] than a rule selectively refusing to enforce those agreements once properly made. Precedent confirms that point.”

An August California court decision, however, shares the new law’s skeptical arbitration view. In OTO LLC v. Kho, 447 P.3d 680 (Cal. 2019) (available at https://stanford.io/2ON8f3x), the California Supreme Court rejected the validity of an arbitration agreement because, among other reasons, the defendant required plaintiff Kho to sign the agreement as a condition of his employment.

The court found that the porter who delivered the agreement remained at Kho’s place of work until he signed the agreement, which created an impression that he had to sign it immediately. Therefore, the court ruled that since Kho had no choice but to sign the arbitration agreement or lose his job without an opportunity to review the agreement in his native language, it could not be enforced.

To view the bill in its entirety, click here.

The author, a Summer and Fall 2019 CPR Institute intern, is a law student at Brooklyn Law School.

 

 

Gov Cuomo Signs New Legislation Barring Use of Mandatory Arbitration to Resolve Workplace Discrimination and Harassment in New York State

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By Anna Hershenberg

As expected, on Monday, August 12, 2019, Governor Cuomo signed new legislation that, among other things, purports to bar the use of mandatory arbitration to resolve discrimination and harassment cases in the workplace in New York state.

The prior version of this law, New York CPLR § 7515, which went into effect last year, aimed to prohibit mandatory arbitration of workplace sexual harassment claims only; this version expands the prohibition to claims of other types of discrimination.

In June, Judge Denise Cote (SDNY) found the prior version of  § 7515 to be preempted by the Federal Arbitration Act and therefore invalid. (Latif v. Morgan Stanley & Co. LLC et al. (S.D.N.Y. 2019) (available at http://bit.ly/2y9w6AL)) Her ruling should apply with equal force to the amended version of § 7515, at least with respect to interstate matters.

CPR covered this issue earlier this month on CPRSpeaks:

https://blog.cpradr.org/2019/08/01/update-legislatures-on-invalidating-pre-dispute-arbitration-agreements/

The full text of the newly enacted § 7515 is pasted below (revisions in blue).

Section 7515: Mandatory arbitration clauses; prohibited

(a) Definitions. As used in this section:

1. The term “employer” shall have the same meaning as provided in subdivision five of section two hundred ninety-two of the executive law.

2. The term “prohibited clause” shall mean any clause or provision in any contract which requires as a condition of the enforcement of the contract or obtaining remedies under the contract that the parties submit to mandatory arbitration to resolve any allegation or claim of an unlawful discriminatory practice of sexual harassment. discrimination, in violation of laws prohibiting discrimination, including but not limited to, article fifteen of the executive law.

3. The term “mandatory arbitration clause” shall mean a term or provision contained in a written contract which requires the parties to such contract to submit any matter thereafter arising under such contract to arbitration prior to the commencement of any legal action to enforce the provisions of such contract and which also further provides language to the effect that the facts found or determination made by the arbitrator or panel of arbitrators in its application to a party alleging an unlawful discriminatory practice based on sexual harassment in violation of laws prohibiting discrimination, including but not limited to, article fifteen of the executive law shall be final and not subject to independent court review.

4. The term “arbitration” shall mean the use of a decision making forum conducted by an arbitrator or panel of arbitrators within the meaning and subject to the provisions of article seventy-five of the civil practice law and rules.

(b) (i) Prohibition. Except where inconsistent with federal law, no written contract, entered into on or after the effective date of this section shall contain a prohibited clause as defined in paragraph two of subdivision (a) of this section.

(ii) Exceptions. Nothing contained in this section shall be construed to impair or prohibit an employer from incorporating a non-prohibited clause or other mandatory arbitration provision within such contract, that the parties agree upon.

(iii) Mandatory arbitration clause null and void. Except where inconsistent with federal law, the provisions of such prohibited clause as defined in paragraph two of subdivision (a) of this section shall be null and void. The inclusion of such clause in a written contract shall not serve to impair the enforceability of any other provision of such contract.

(c) Where there is a conflict between any collective bargaining agreement and this section, such agreement shall be controlling.

Anna Hershenberg is CPR’s Vice President of Programs and Public Policy