Estreicher and Eigen on Adjudicating Employment Disputes

Sam Estreicher (NYU) and Zev Eigen (Northwestern) has just posted on SSRN their chapter, "The Forum for Adjudication of Employment Disputes," which will appear in the Research Handbook on the Economics of Labor and Employment Law (edited by Michael Wachter and Cynthia Estlund; published by Edward Elgar).  The abstract:

This chapter focuses on the appropriate design of the forum for adjudication of employment disputes. By the term “adjudication,” we refer to the resolution of “rights” disputes – disputes over the application of a contract or the application of a statutory or regulatory rule to a particular factual situation. We are not referring to “interests” disputes – disputes over the substantive content of an initial contract or renewal agreement. In considering the design question, we assume that all involved actors, (employees, employers, unions, etc.) retain whatever endowments they currently possess in terms of intelligence, energy, income, occupational status, access to resources, union representation, and statutory and contractual rights. Holding these endowments constant, we ask what institutional arrangements for adjudicating rights disputes would do the best job of resolving those disputes in a fair, efficient manner for workers, managers and the public generally.

On the legislative front, we oppose current efforts in Congress to amend the Federal Arbitration Act to prohibit predispute arbitration agreements. At least if applied in the employment context, this is a case of throwing out the baby with the bath water. Employment arbitration, if it is properly structured and regulated, improves the likelihood that employees, and most especially those who are relatively low-paid, will be able to obtain an adjudication on the merits of their rights disputes with the employer. Abolition of employment arbitration simply relegates those employees to the courts to fare as best they can on their own in a complex, formal litigation environment.

Based on what is practically and politically feasible as of this writing, employer-promulgated ADR should be the basis of an employment adjudication system that supplements the work of courts, administrative agencies and, in the union sector, the grievance and arbitration process. We say this because unless adequate resources are provided to administrative agency adjudicators or courts to handle responsibly the vast increase in self-represented employee claims – which we think unlikely – the appropriate legislative response, even for critics of employer-promulgated ADR, is to develop safeguards that help minimize their concerns without driving employers to abandon the process entirely.

If we were starting from scratch, we would be inclined to consider a system similar to Great Britain’s. The UK approach started as a wrongful dismissal statute and over time also assumed adjudicatory authority over discrimination claims. The UK system mixes government-supplied mediation services with a tripartite government-funded, public adjudication. The system supersedes any common law cause of action for breach of the employment agreement and employment statutes; employment disputes that go to the regular civil courts are limited to libel and slander, certain torts and claims for injunctive relief for breach of restrictive covenants. Class actions are not authorized.

There may be some institutional features of the UK approach that are difficult to replicate here. One such feature is the tripartite adjudicatory structure used in England. With our low union density in private companies and the fact that employers tend not to form representative associations in the employment law field, it will take some ingenuity to develop a regularized procedure for selecting employer- and employee-side adjudicators.

The more difficult question is whether there is any political will to adopt something like the UK system. Lawyers representing employees would not necessarily oppose such legislation if they could remove all caps on recovery and retain their ability to bring lawsuits (including class actions) in the courts. Employers might support such legislation, if it did not include abolition of employment at-will and there was some institutional guarantee of modest awards of the UK variety. Most employees, we believe, would be best off under the UK approach but we cannot get there politically. Therein lies the dilemma for law reform.

We do believe, however, that working with what is in place at many companies, much can be done to improve employer-promulgated ADR to pick up many of the desirable features of the UK approach but in an American flavor responsive to U.S. legal and popular culture.

Looks like an interesting approach to a significant problem in enforcing employment rights, so check it out.

-JH