Assessing the case for employment arbitration: A new path for empirical research

Stanford Law Review

Volumn 57, Issue 5, 2005, Pages 1557-1591

  Sherwyn, David ^a   Estreicher, Samuel ^b   Heise, Michael ^c  

^a 335 Statler Hall   (United States)

^b NEW YORK UNIVERSITY SCHOOL OF LAW   (United States)

^c MIT Sloan School of Management   (United States)

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EID: 33646060406     PISSN: 00389765     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (178)

1. 500 U.S. 20 (1991).
2. Id. at 26. Subsequent lower courts extended Gilmer to cover other discrimination claims, including those arising under Title VII of the Civil Rights Act of 1964 (Title VII) and the Americans with Disabilities Act (ADA). See infra notes 5-6.
3. See, e.g., Richard A. Bales, Compulsory Employment Arbitration and the EEOC, 27 PEPP. L. REV. 1 (1999);
4. Samuel Estreicher, Predispute Agreements to Arbitrate Statutory Employment Claims, 72 N.Y.U. L. REV. 1344 (1997) [hereinafter Estreicher, Predispute Agreements]
5. Samuel Estreicher, Saturns for Rickshaws: The Stakes in the Debate over Predispute Employment Arbitration Agreements, 16 OHIO ST. J. ON DISP. RESOL. 559 (2001) [hereinafter Estreicher, Saturns for Rickshaws];
6. Paulette Delphene Hardin, Sacrificing Statutory Rights on the Altar of Pre-Dispute Employment Agreements Mandating Arbitration, 28 CAP. U. L. REV. 455 (2000).
7. See EEOC v. Waffle House, Inc., 534 U.S. 279 (2002); Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001); cf. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003); Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (2000).
8. See, e.g., Cunningham v. Fleetwood Homes of Ga., 253 F.3d 611 (11th Cir. 2001) (requiring arbitration of Title VII and state law discrimination claims); Safrit v. Cone Mills Corp., 248 F.3d 306 (4th Cir. 2001) (same); Patterson v. Tenet Healthcare, Inc., 113 F.3d 832 (8th Cir. 1997) (same); Great Western Mortgage Corp. v. Peacock, 110 F.3d 222 (3d Cir. 1997) (requiring arbitration of New Jersey Law Against Discrimination, N.J. STAT. ANN. §§ 10:5-1 to -49 (West 2002)); Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482 (10th Cir. 1994) (holding that plaintiffs claim under the Pregnancy Discrimination Act of 1978, 42 U.S.C. 2000e(k) (2000), is arbitrable); Bender v. A.G. Edwards & Sons, Inc., 971 F.2d 698 (11th Cir. 1992) (holding that a Title VII claim was subject to arbitration); Mago v. Shearson Lehman Hutton, Inc., 956 F.2d 932 (9th Cir. 1992) (holding that sexual harassment claims under Title VII are arbitrable); Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305 (6th Cir. 1991) (holding that claims of sexual harassment and sexual discrimination under KY. REV. STAT. ANN. § 344.040 (Banks-Baldwin 1997) are arbitrable); Tuskey v. Volt Info. Scis., Inc., No. 00 Civ. 7410, 2001 U.S. Dist. LEXIS 10980 (S.D.N.Y. Aug. 3, 2001); Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229 (5th Cir. 1991) (holding that Gilmer controlled on the issue of the enforceability of a predispute agreement to arbitrate a sexual discrimination claim under Title VII); Dumais v. Am. Golf Corp., 150 F. Supp. 2d 1182 (D.N.M. 2001); Roberson v. Clear Channel Broad., Inc., 144 F. Supp. 2d 1371 (S.D. Fla. 2001); Olivares v. Hispanic Broad. Corp., No. CV00-00354-ER, 2001 U.S. Dist. LEXIS 5760 (C.D. Cal. Apr. 26, 2001); Nur v. K.F.C., USA, Inc., 142 F. Supp. 2d 48 (D.D.C. 2001); Brown v. KFC Nat'l Mgmt. Co., 921 P.2d 146 (Haw. 1996), S. 63 § 2; H.R. 983 § 2
9. See, e.g., Civil Rights Procedures Protection Act of 1997, S. 63, 105th Cong. (1997) (proposing to outlaw mandatory arbitration of all civil rights claims); Civil Rights Procedures Protection Act of 1997, H.R. 983, 105th Cong. (1997) (same). The Civil Rights Procedures Protection Act proposed to amend all key federal civil rights statutes so as to bar mandatory arbitration of claims arising under those acts. See S. 63; H.R. 983. For example, section 2 of the Act proposed amending Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2 (2000), to read as follows: Notwithstanding any Federal statute of general applicability that would modify any of the powers and procedures expressly applicable to a claim arising under this title, such powers and procedures shall be the exclusive powers and procedures applicable to such claim unless after such claim arises the claimant voluntarily enters into an agreement to resolve such claim through arbitration or another procedure. S. 63 § 2; H.R. 983 § 2.
10. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24-25 (1991); see also 9 U.S.C. §§ 1-4 (2000).
11. See infra text accompanying notes 14-21.
12. See Kathryn Van Wezel Stone, Mandatory Arbitration of Individual Employment Rights: The Yellow Dog Contract of the 1990s, 73 DENV. U. L. REV. 1017 (1996);
13. Stephen J. Ware, Employment Arbitration and Voluntary Consent, 25 HOFSTRA L. REV. 83 (1996).
14. See Bales, supra note 3; Estreicher, Predispute Agreements, supra note 3;
15. Michael Green, Debunking the Myth of Employer Advantage from Using Mandatory Arbitration for Discrimination Claims, 31 RUTGERS L.J. 399 (2000); Hardin, supra note 3.
16. After Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), the FAA applies to all employment situations, except those in the transportation industry.
17. Indeed, the influence of empirical research in the mandatory arbitration field parallels the influence of empirical legal scholarship on legal scholarship generally. For a discussion, see Lee Epstein & Gary King, The Rules of Inference, 69 U. CHI. L. REV. 1 (2002),
18. and Frank Cross et al., Above the Rules: A Response to Epstein & King, 69 U. CHI. L. REV. 135 (2002).
19. See David S. Sherwyn et al., In Defense of Mandatory Arbitration of Employment Disputes: Saving the Baby, Tossing out the Bath Water, and Constructing a New Sink in the Process, 2 U. PA. J. LAB. & EMP. L. 73, 100 (1999) (indicating that some of the reasons why employers prefer arbitration to litigation include reduced costs, increased speed, greater privacy, and the elimination of juries).
20. This position was based on Alexander v. Gardner-Denver Co., 415 U.S. 36, 47 (1974). In Gardner-Denver, the Supreme Court held that an employee has a right to proceed with a Title VII claim regardless of an arbitrator's prior decision pursuant to a collective bargaining agreement. Id. at 59-60 ("[T]he federal policy favoring arbitration of labor disputes and the federal policy against discriminatory employment practices can best be accommodated by permitting an employee to pursue fully both his remedy under the grievance-arbitration clause of a collective-bargaining agreement and his cause of action under Title VII."). The lower courts extended this holding to the nonunion setting and thus, for some years, it seemed clear that mandatory arbitration agreements for civil rights claims were unenforceable. See, e.g., Utley v. Goldman Sachs & Co., 883 F.2d 184 (1st Cir. 1989) (relying on Gardner-Denver to hold that arbitration was inconsistent with Title VII); Swenson v. Mgmt. Recruiters Int'l, Inc., 858 F.2d 1304 (8th Cir. 1988) (relying on Gardner-Denver to find that Title VII was not subject to waiver through an arbitration clause). But see Alford v. Dean Witter Reynolds, Inc., 905 F.2d 104 (5th Cir. 1990) (relying on Gardner-Denver to find that Title VII was not subject to arbitration, but vacated for reconsideration in light of Gilmer), vacated and remanded by 500 U.S. 930 (1991).
21. The Gilmer Court based its holding (and distinguished Gardner-Denver) on four grounds: (1) labor arbitrators are limited to enforcing only the collective bargaining agreement that the parties asked them to interpret and have no authority to determine if the employer violated federal or state statutes; (2) labor arbitrators must enforce the collective bargaining agreement even if it conflicts with external law; (3) in labor arbitrations, the union, not the employee, "owns" the grievance and decides whether to pursue it; and (4) the FAA covered the individual arbitration agreement in Gilmer, but not in Gardner-Denver, where rights based on a collective bargaining agreement were at issue. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 35 (1991).
22. In Gilmer, the Court held that the arbitration agreement at issue was not an "employment contract" because the parties to the agreement were the New York Stock Exchange and Gilmer, not the "employer" and the "employee." 500 U.S. at 25 n.2. Because the agreement Gilmer signed was not an "employment contract," the Court elected not to address the question of whether the term "engaged in foreign or interstate commerce" of section 1 of the FAA referred to all employees or only those in the transportation industry. Id. This question has now been resolved by Circuit City Stores, 532 U.S. 105.
23. In examining fairness, Gilmer and its progeny addressed a number of issues: (1) the method of delivering opinions, (2) the procedures for selecting the arbitrator, (3) prehearing discovery, (4) available damages, and (5) whether the employee entered into the agreement knowingly and voluntarily. As for the first three, it is broadly agreed that arbitration agreements should provide for written opinions, that both parties must have a substantial role in selecting the arbitrator, and that agreements must provide a reasonable opportunity for discovery (though not necessarily the same as would be afforded in court). Although there is some conflicting authority as to whether arbitration agreements may limit damages available to prevailing parties, compare, e.g., Graham Oil Co. v. Arco Prods. Co., 43 F.3d 1244 (9th Cir. 1994) (holding an arbitration clause unenforceable where it limited damages otherwise available under the Petroleum Marketing Practices Act), with Degaetano v. Smith Barney, Inc., No. 95 CIV 1616 (DLC), 1996 U.S. Dist. LEXIS 1140 (S.D.N.Y. Feb. 5, 1996) (granting motions to compel arbitration), and Kinnebrew v. Gulf Ins. Co., No. CA 3:94-CV-1517-R, 1994 U.S. Dist. LEXIS 19982 (N.D. Tex. Nov. 28, 1994) (same), Gilmer's premise that arbitration should not result in any cutback in substantive rights, see 500 U.S. at 35, suggests that such agreements must permit an arbitrator to award the same damages that would have been available to parties had they prevailed in court. Finally, with respect to the knowing, voluntary waiver requirement, agreements are enforceable so long as they clearly describe their terms and are not hidden in an employee handbook or another long and intimidating document. Any general assertions that arbitration agreements are enforceable simply because they are often presented on a take-it-or-leave-it basis would seem unavailing in view of the Gilmer Court's statement that "[m]ere inequality in bargaining power . . . is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context." Id. at 33. In any event, such assertions would need to comport with the general law of contracts in the jurisdiction. See 9 U.S.C. § 2 (2000) (stating that arbitration agreements "shall be valid, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract"); see also, e.g., Allied-Bruce Terminix v. Dobson, 513 U.S. 265 (1995); Perry v. Thomas, 482 U.S. 483 (1987).
24. See, e.g., Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998).
25. 532 U.S. 105 (2001).
26. 345 F.3d 742 (9th Cir. 2003).
27. Two issues remain to be litigated: (1) whether exclusions from arbitration have to be identical for both parties, compare, e.g., Armendariz v. Found. Health Psychare Servs., Inc., 6 P.3d 669, 682 (2000) (holding that an arbitration agreement lacking mutuality was unconscionable absent reasonable justifications based on business realities), with Ex parte McNaughton, 728 So. 2d 592, 598-99 (Ala. 1998) (rejecting this mutuality argument); and (2) whether arbitration agreements can impose forum costs on claimants that would be higher than fees charged for access to the courts, see, e.g., Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (2000); Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465 (D.C. Cir. 1997).
28. See EQUAL EMPLOYMENT OPPORTUNITY COMM'N, EEOC POLICY STATEMENT ON MANDATORY BINDING ARBITRATION OF EMPLOYMENT DISCRIMINATION DISPUTES AS A CONDITION OF EMPLOYMENT pt. V(A)(2) (EEOC Notice No. 915.002) [hereinafter EEOC POLICY STATEMENT]
29. Id. pt. V(A)(1).
30. See id. pts. V(A)(3), V(B); Stone, supra note 9, at 1037-40.
31. See generally Stone, supra note 9, at 1036-37.
32. See, e.g., THEODORE EISENBERG & ELIZABETH HILL, EMPLOYMENT ARBITRATION AND LITIGATION: AN EMPIRICAL COMPARISON (N.Y. Univ. Sch. of Law, Public Law and Legal Theory Paper Series, Research Paper No. 65, 2003);
33. Estreicher, Saturns for Rickshaws, supra note 3, at 564;
34. David Sherwyn, Because It Takes Two: Why Post-Dispute Voluntary Arbitration Programs Will Fail to Fix the Problems Associated with Employment Discrimination Law Adjudication, 24 BERKELEY J. EMP. & LAB. L. 1, 22-31 (2003); Sherwyn et al., supra note 13, at 129-47.
35. Sherwyn, supra note 26, at 30-31; Sherwyn et al., supra note 13, at 146-47.
36. One argument critics have made is that employees, at the time they agree to arbitration agreements, are not able properly to value the right to sue in court they are being asked to give up. See, e.g., Joseph R. Grodin, Arbitration of Employment Discrimination Claims: Doctrine and Policy in the Wake of Gilmer, 14 HOFSTRA LAB. L.J. 1 (1996). It is unclear how arbitration differs in this respect from severance pay and employment-at-will provisions that are typically enforceable even if presented in take-it-or-leave-it contracts. Arbitration critics must be able to satisfy the FAA requirement that the agreements they are seeking to void are invalid under the general law of contracts of the jurisdiction. See supra note 17;
37. see generally Estreicher, Saturns for Rickshaws, supra note 3; Sherwyn et al., supra note 13, at 146.
38. In theory, union-represented employees may be able to both arbitrate and litigate a claim. See Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974). This does not, however, produce a rich data set because (1) arbitrators often do not have jurisdiction to decide statutory issues, (2) plaintiffs rarely bring the cases in both forums, and (3) the union contract and the statutory law usually have different legal standards and burdens of proof. In any event, even where plaintiffs attempt to relitigate claims that have already been arbitrated, the arbitration award will often be given substantial weight in the litigation. See, e.g., Collins v. N.Y. City Transit Auth., 305 F.3d 113 (2d Cir. 2002).
39. To be sure, cases settle for an array of reasons, including a case's underlying merits. For a helpful discussion, see generally Samuel R. Gross & Kent D. Syverud, Getting to No: A Study of Settlement Negotiations and the Selection of Cases for Trial, 90 MICH. L. REV. 319 (1991);
40. Kent D. Syverud, The Duty to Settle, 76 VA. L. REV. 1113 (1990).
41. It can be argued, as N.Y.U. law student Navid Vazire has suggested to us, that prearbitration procedures usually found in employer ADR systems also weed out many cases, thus reducing the employee win rate (if viewed as a function of initiated cases) as much as dispositive motions do in litigation. Under this view, win rates in adjudicated cases may be compared across the two systems. Although further work needs to be done, we think it more likely that employees insisting on an adjudicated resolution, irrespective of the merits of their claims, are more likely to get their wish in arbitration than in court because of the lower costs of the arbitral forum and the typical absence of a mandatory screen to ferret out weak cases.
42. See, e.g., Paul D. Carrington & Paul H. Haagen, Contract and Jurisdiction, 1996 SUP. CT. REV. 331, 385-88; Joseph R. Grodin, supra note 28, at 29;
43. Sharona Hoffman, Mandatory Arbitration: Alternative Dispute Resolution or Coercive Dispute Suppression?, 17 BERKELEY J. EMP. & LAB. L. 131 (1996);
44. Jean R. Sternlight, Panacea or Corporate Tool?: Debunking the Supreme Court's Preference for Binding Arbitration, 74 WASH. U. L.Q. 637 (1996); Stone, supra note 9, at 1040;
45. Heidi M. Hellekson, Note, Taking the "Alternative" out of the Dispute Resolution of Title VII Claims: The Implications of a Mandatory Enforcement Scheme of Arbitration Agreements Arising out of Employment Contracts, 70 N.D. L. REV. 435 (1994);
46. Mark D. Klimek, Note, Discrimination Claims Under Title VII: Where Mandatory Arbitration Goes Too Far, 8 OHIO ST. J. ON DISP. RESOL. 425 (1993);
47. Judith P. Vladeck, "Yellow Dog Contracts" Revisited, N.Y. L.J., July 24, 1995, at 7.
48. Estreicher, Saturns for Rickshaws, supra note 3.
49. Lewis L. Maltby, Private Justice: Employment Arbitration and Civil Rights, 30 COLUM. HUM. RTS. L. REV. 29 (1998).
50. William M. Howard, Arbitrating Claims of Employment Discrimination: What Really Does Happen? What Really Should Happen?, DISP. RESOL. J., Oct.-Dec. 1995, at 40.
51. Elizabeth Hill, Due Process at Low Cost: An Empirical Study of Employment Arbitration Under the Auspices of the American Arbitration Association, 18 OHIO ST. J. ON DISP. RESOL. 777 (2003).
52. EISENBERG & HILL, supra note 26.
53. Lisa B. Bingham, Employment Arbitration: The Repeat Player Effect, 1 EMPLOYEE RTS. & EMP. POL'Y J. 189 (1997) [hereinafter Bingham, The Repeat Player Effect];
54. Lisa B. Bingham, Is There a Bias in Arbitration of Nonunion Employment Disputes? An Analysis of Actual Cases and Outcomes, 6 INT'L J. CONFLICT MGMT. 369 (1995) [hereinafter Bingham, Bias in Arbitration];
55. Lisa B. Bingham, On Repeat Players, Adhesive Contracts, and the Use of Statistics in Judicial Review of Employment Arbitration Awards, 29 MCGEORGE L. REV. 223 (1998) [hereinafter Bingham, On Repeat Players].
56. Estreicher, Saturns for Rickshaws, supra note 3.
57. Terminated cases include those cases decided by motions and those that are settled or withdrawn.
58. Estreicher, Saturns for Rickshaws, supra note 3, at 563 tbl.3.
59. Howard, supra note 35, at 41.
60. Id. at 42.
61. Id.
62. Id. at 43.
63. Id.
64. EISENBERG & HILL, supra note 26, at 6-8.
65. Id. at 8-12.
66. Id.
67. Id. at 13. It might be argued that these results reflect bias against lower-pay employees. It is not clear why in theory arbitrators would be more willing to rule against lower-pay employees than their higher-pay counterparts. In any event, we believe differences in substantive law offer the better explanation. Employers seeking to terminate a higher-pay employee with an express "cause" provision in his contract face a much higher hurdle than they do in cases where employees work under "at will" contracts but may have a plausible discrimination claim. Express "cause" provisions usually are interpreted to require a showing of malfeasance of some sort, whereas defendants can win discrimination cases if they can show any "legitimate" business reason. See Tex. Dept. of Cmty. Affairs v. Burdine, 450 U.S. 248 (1981). Even in California, the state with the most proemployee "implied contract" law, employers have been found to have "good cause" for terminating an employee as long as their decision is reasonable and made in good faith, whether or not they can establish cause in fact to the satisfaction of the trier of fact. See Cotran v. Rollins Hudig Hall Int'l Inc., 948 P.2d 412 (Cal. 1998).
68. EISENBERG & HILL, supra note 26, at 14.
69. Id. at 14-16.
70. Id. at 14. We should note that in their study Eisenberg and Hill separate civil rights arbitration into two categories: higher- and lower-pay employees. We collapsed these categories for two reasons. First, only five of the forty-two cases involved higher-pay employees. Second, collapsing these cells facilitated comparisons across studies.
71. Id.
72. Id. Because the distributions were not normal, the nonparametric Mann-Whitney test was used to compare the means for federal court, state court, and arbitrations.
73. Id. at 15.
74. Maltby, supra note 34, at 47.
75. Id.
76. Bingham, The Repeat Player Effect, supra note 38.
77. Id. at 213.
78. Id. at 213-14.
79. Id. at 214-16.
80. See, e.g., EEOC POLICY STATEMENT, supra note 22.
81. Lisa B. Bingham & Shimon Sarraf, Employment Arbitration Before and After the Due Process Protocol for Mediation and Arbitration of Statutory Disputes Arising out of Employment: Preliminary Evidence That Self-Regulation Makes a Difference, in PROCEEDINGS OF THE NYU 53RD ANNUAL CONFERENCE ON LABOR 303, 323 tbl.2 (Samuel Estreicher & David Sherwyn eds., 2004);
82. see also Bingham, On Repeat Players, supra note 38, at 238-39.
83. Bingham & Sarraf, supra note 64, at 323 tbl.2.
84. Hill, supra note 36, at 814-18.
85. Id. at 817.
86. Id.
87. Id.
88. Bingham & Sarraf, supra note 64. The due process protocol provides a mechanism through which the AAA, as a third-party administrator, may regulate an employer's otherwise unilateral structuring of employment arbitration.
89. Id. at 323 tbl.2.
90. Id.
91. Id.
92. Id. at 325.
93. For a general discussion about the relation between ADR policies and case disposition time, see Michael Heise, Justice Delayed?: An Empirical Analysis of Civil Case Disposition Time, 50 CASE W. RES. L. REV. 813, 844-47 (2000).
94. Maltby, supra note 34, at 55.
95. EISENBERG & HILL, supra note 26, at 19-20.
96. Id.
97. Support for the general assertion that juries tilt favorably toward employees over employers abounds. For example, in 1993, Dispute Dynamics Inc., a consulting firm, launched a five-year juror poll from numerous jurisdictions nationwide and found that 69% of the respondents agreed that for many company decisionmakers, an employee's age, gender, or race influences promotion decisions. Eighty-one percent agreed that discrimination remains a problem in the workplace, and 62% felt that employee rights are not well protected in our society. Similarly, the poll revealed that 67% of the respondents felt that too many employees are treated unfairly by their employers, and 53% felt that company executives would lie to increase profits. For a discussion of the poll and its results, see Sherwyn, supra note 13, at 140. In contrast, conventional wisdom surrounding arbitrators' decisions focuses on their inclination to "split the baby" when it comes to awards.
98. See generally FRANK ELKOURI & EDNA A. ELKOURI, HOW ARBITRATION WORKS 688-91 (1985);
99. Lucy T. France & Timothy C. Kelly, Mandatory Arbitration of Civil Rights Claims in the Workplace: No Enforceability Without Equivalency, 64 MONT. L. REV. 449 (2003).
100. 42 U.S.C. §§ 2000e to 2000e-17 (2000).
101. 29 U.S.C. §§ 621-634 (2000).
102. 42 U.S.C. §§ 12101-12213 (2000).
103. Section 1981 of the Civil Rights Act of 1866 prohibits discrimination against racial minorities in the making and enforcement of contracts. See Act of Apr. 9, 1866, ch. 31, 14 Stat. 27 (1866) (codified as amended at 42 U.S.C. § 1981 (2000)).
104. 29 U.S.C. § 626(b).
105. See 42 U.S.C. § 1981a(a)(1), (b)(3) (specifying the compensatory and punitive damages available under Title VII); id. § 12117 (providing that the remedies under the ADA are identical to those under Title VII).
106. For a discussion, see Christine Jolls, Accommodation Mandates, 53 STAN. L. REV. 223, 281 (2000) (noting that Title VII and the ADA permit an array of damages, with cap schedules geared to the defendant's size).
107. 42 U.S.C. § 1981a(b)(3).
108. Id. § 1981.
109. A "fees case," in our parlance, is a lawsuit in which the recoverable damages are so low, say, because the plaintiff is a modest-wage earner, that the attorneys' fees become the driving force in the case. An attorney may logically refrain from taking such cases due to the hostility that judges have toward those who litigate instead of settling low-damages cases. A plaintiffs attorney does not want to get a reputation as one who litigates fees cases. Telephone Interview with David Ritter, Chair of Labor and Employment Department, Altheimer & Grey (Mar. 12, 1998); Telephone Interview with Peter Albrecht, Partner, Godfrey & Kahn (Mar. 12, 1998). Additionally, plaintiffs' lawyers will not exceed their normal hourly rates by taking fees cases to trial, and this is the goal for lawyers working on a contingency basis. These actual and potential costs should convince plaintiffs' lawyers either to refuse to take, or not to actively pursue, cases involving low-wage earners unless the employer's liability is so clear to the lawyer, the defense, and the court that punitive and compensatory damages are available. This harsh reality results in the unlikelihood of low-wage earners ever seeing the inside of a courtroom.
110. See John J. Donohue III & Peter Siegelman, The Changing Nature of Employment Discrimination Litigation, 43 STAN. L. REV. 983, 1008 (1991) (finding that employees earning more than $450 per week would find a lawsuit worthwhile after a cost-benefit analysis).
111. Howard, supra note 35, at 44.
112. Lewis L. Maltby, Out of the Frying Pan, Into the Fire: The Feasibility of Post-Dispute Employment Arbitration Agreements, 30 WM. MITCHELL L. REV. 313,317 (2003).
113. Furthermore, lawyers can take a chance on a fees case because arbitration is a relatively quick process, arbitrators are not hostile to hearing such a case (unlike federal court judges), and arbitrators have no overcrowded docket to worry about.
114. See Herbert M. Kritzer, Investing in Cases: Can You Profit from Contingency Fee Work?, WIS. LAW., Aug. 1997, at 10.
115. EISENBERG & HILL, supra note 26, at 16-19.
116. Id. at 18.
117. Id.
118. Id.
119. Id.
120. Id.
121. Id.
122. Id.
123. Id.
124. Id.
125. Bingham, Bias in Arbitration, supra note 38.
126. Id. at 374-76.
127. Maltby, supra note 34.
128. Id. at 48.
129. Id. at 49.
130. Id.
131. Id. at 48-49.
132. Id.
133. Id. at 48.
134. See supra note 79 and accompanying text.
135. David Lipsky et al., An Uncertain Destination: On the Development of Conflict Management Systems in U.S. Corporations, in ALTERNATIVE DISPUTE RESOLUTION IN THE EMPLOYMENT ARENA 109, 110 n.3 (Samuel Estreicher & David Sherwyn eds., 2004).
136. See Sherwyn et al., supra note 13, at 80-83.
137. Id.
138. See id. at 82 (defining "de facto severance" as "a process whereby employees file baseless discrimination charges because they know that their former employers are willing to pay a nominal amount of money in order to avoid the aggravation, costs, and losses of time, resources, and productivity that inevitably arise in defending such allegations").
139. Telephone Interview with Gregg Gilman, Chair of Labor and Employment Department, Davis & Gilbert, LLP (Nov. 7, 2004) [hereinafter Gilman Interview]; Telephone Interview with Paul Wagner, Partner, Shea, Stokes, & Carter, LLP (Nov. 8, 2004) [hereinafter Wagner Interview].
140. Gilman Interview, supra note 118; Wagner Interview, supra note 118.
141. Alfred Blumrosen, Strangers No More: All Workers Are Entitled to Just Cause Protection Under Title VII, 2 INDUS. REL. L.J. 519 (1978).
142. Conversations with Clifford Penn, Partner, Laner, Muchin, Dombrow, Levin & Taminberg, LLP (Nov. 1994); Conversations with James Convery and Joseph Yastrow, Partners, Laner, Muchin, Dombrow, Levin & Taminberg, LLP (Dec. 2001); Conversations with David Ritten, Partner, Altheimer & Gray, LLP (Dec. 2001); Conversations with Paul Wagner, Partner, Stokes & Murphy, LLP (Dec. 2001).
143. Mandatory arbitration programs "are an effective means for employers to pool the risk of liability for being sued for unfounded claims and to resolve substantiated claims without fear of breaking the bank or incurring bad publicity that may drive them out of business." Sherwyn, supra note 26, at 21; see also id. ("Mandatory arbitration also simplifies the adjudication process. The parties know they must arbitrate, they know positives and negatives of such a forum vis-à-vis alternative [sic] and they, hopefully, will attempt to resolve the issue.").
144. Compare Stone, supra note 9, at 1037 (noting that the arbitrator's fees could easily exceed $1000), with Sherwyn et al., supra note 13, at 132-33 (arguing that $1000 may be a paltry sum in comparison with the legal fees accrued during litigation).
145. Some contend that mandatory arbitration policies are not necessary and that, instead, arbitration should be offered as a voluntary option after a dispute has arisen. Such an argument blinks at the reality of litigation. In litigation each party analyzes its case and develops a strategy that will allow it to achieve its objective. Arbitration and litigation are different with respect to motion practice, juries, costs of defense, rules of evidence, and discovery. Depending on the circumstances, one forum will be better for a particular side. In a prior article we tested the hypothesis that employees and employers will almost never both choose arbitration after a dispute has arisen. Based on the data from a voluntary arbitration program and survey results from a sample of over three hundred lawyers, we showed that postdispute voluntary arbitration will rarely be accepted by both sides. See Sherwyn, supra note 26.
146. We cannot - and, therefore, do not - make any claims about the representativeness of our employer. Moreover, at the Stanford Law Review Symposium at which this piece was initially presented, Jean Sternlight questioned the efficacy of comparing EEOC charges and "calls" made to the employer's internal ADR intake process. Many "employee calls," if filed with the EEOC, might be rejected for lack of subject matter jurisdiction. In addition, she noted that a number of EEOC claims could have initiated in an employer's nonbinding ADR system and ended up at the EEOC after the parties failed to resolve the dispute. Sternlight's concerns would give us greater pause if the differences in time and external resources were plausibly close. For example, under her analysis, the average award per EEOC claim should be much larger than average recovery per ADR call. As demonstrated below, we did not find significant differences in average recoveries, especially after discounting for differences in case disposition time.
147. U.S. Equal Employment Opportunity Comm'n, Charge Statistics: FY 1992 Through FY 2004, at http://www.eeoc.gov/stats/charges.html (last modified Jan. 27, 2005).
148. See generally Sherwyn et al., supra note 13, at 76 n. 19.
149. The EEOC resolution process can conclude in federal court.
150. EQUAL EMPLOYMENT OPPORTUNITY COMM'N, PRIORITY CHARGE HANDLING PROCEDURES 11 (1995) [hereinafter EEOC PROCEDURES].
151. See EEOC PROCEDURES, supra note 129, at 4 (explaining that category A also includes "other charges where further investigation will probably result in a cause finding" and that "[c]ases should also be classified as Category A if irreparable harm will result unless processing is expedited").
152. 345 F.3d 742 (9th Cir. 2003).
153. The EEOC describes these cases as follows: Many charges will initially appear to have some merit but will require additional evidence if one is to determine whether continued investigation is likely to result in a cause finding. In addition, in other cases it will simply not be possible to make an appropriate classification at the intake stage; additional investigation will be needed, as resources permit, to determine whether these charges should be moved into Category A and given priority status or moved into Category C and dismissed. EEOC PROCEDURES, supra note 129, at 4.
154. See id. at 5 ("A charge may be placed in Category C and dismissed when the office has sufficient information from which to conclude that it is not likely that further investigation will result in a cause finding."). The Priority Charge Handling Procedures list several examples of appropriate Category C labeling: (1) where the EEOC lacks jurisdiction over an employer with less than fifteen employees because employers with less than fifteen employees are not covered by Title VII or the ADA, see Employee Responsibilities and Conduct, 29 C.F.R. § 1601.18 (2004); (2) charges where the allegations are not credible, including cases filed by repetitive charge filers where, based on the large number of charges, the charging party is not credible; (3) charges unsupported by any direct or circumstantial evidence of discrimination, and in which the charging party was in a position to have access to such evidence, see id. § 1601.19; and (4) ADEA charges filed more than 180 days after the date of violation (or 300 days in states where there is a discrimination statute). Id.
155. See U.S. Equal Employment Opportunity Comm'n, All Statutes: FY 1992-FY 2004, at http://eeoc.gov/stats/all.html (last modified Jan. 27, 2005) [hereinafter EEOC, All Statutes].
156. Id.
157. The EEOC's website defines the classifications as follows: Administrative Closure Charge closed for administrative reasons, which include: failure to locate charging party, charging party failed to respond to EEOC communications, charging party refused to accept full relief, closed due to the outcome of related litigation which establishes a precedent that makes further processing of the charge futile, charging party requests withdrawal of a charge without receiving benefits or having resolved the issue, no statutory jurisdiction. Merit Resolutions Charges with outcomes favorable to charging parties and/or charges with meritorious allegations. These include negotiated settlements, withdrawals with benefits, successful conciliations, and unsuccessful conciliations. No Reasonable Cause EEOC's determination of no reasonable cause to believe that discrimination occurred based upon evidence obtained in investigation. The charging party may exercise the right to bring private court action. Reasonable Cause EEOC's determination of reasonable cause to believe that discrimination occurred based upon evidence obtained in investigation. Reasonable cause determinations are generally followed by efforts to conciliate the discriminatory issues which gave rise to the initial charge. NOTE: Some reasonable cause findings are resolved through negotiated settlements, withdrawals with benefits, and other types of resolutions, which are not characterized as either successful or unsuccessful conciliations. Settlements (Negotiated) Charges settled with benefits to the charging party as warranted by evidence of record. In such cases, EEOC and/or a FEPA [Fair Employment Practices Act] is a party to the settlement agreement between the charging party and the respondent (an employer, union, or other entity covered by EEOC-enforced statutes). Successful Conciliation Charge with reasonable cause determination closed after successful conciliation. Successful conciliations result in substantial relief to the charging party and all others adversely affected by the discrimination. Unsuccessful Conciliation Charge with reasonable cause determination closed after efforts to conciliate the charge are unsuccessful. Pursuant to Commission policy, the field office will close the charge and review it for litigation consideration. NOTE: Because "reasonable cause" has been found, this is considered a merit resolution. Withdrawal with Benefits Charge is withdrawn by charging party upon receipt of desired benefits. The withdrawal may take place after a settlement or after the respondent grants the appropriate benefit to the charging party. U.S. Equal Employment Opportunity Comm'n, Definitions of Terms, at http://www.eeoc.gov/epa/define.html (last modified May 11, 2000).
158. See supra note 136.
159. These include administrative closures and no-reasonable-cause findings.
160. See EEOC, All Statutes, supra note 134.
161. Id.
162. Id.
163. Id. "Remunerated resolutions" was computed by dividing the number of remunerated cases by the total number of cases.
164. Id. The "per-claim figure" was derived by dividing the total number of dollars awarded by the total number of charges resolved.
165. Id. Average "remunerated resolution" is the total dollars awarded divided by the number of remunerated resolutions.
166. For example, in 1999 the EEOC settled an ADEA case with Thompson Consumer Electronics, Inc., for $7.1 million. See Press Release, Equal Employment Opportunity Comm'n, EEOC Settles Major Age Bias Lawsuit for $7.1 Million with Thompson Consumer Electronics and Local Unions, at http://www.eeoc.gov/press/8-17-99.html (Aug. 17, 1999). The press release stated that "over 800" employees would benefit. There is no evidence to suggest that each plaintiff filed a charge or that the EEOC added "over 800" charges to its intake numbers for the year. See id.
167. Admin. Office of the U.S. Courts, U.S. District Courts - Cases Terminated, by Nature of Suit and Action Taken, During the 12-Month Period Ending September 30, 2003, at http://www.uscourts.gov/judbus2003/appendices/c4.pdf (last visited Apr. 7, 2005) [hereinafter Admin. Office of the U.S. Courts, Cases Terminated];
168. Admin. Office of the U.S. Courts, U.S. District Courts - Civil Cases Commenced, by Nature of Suit, During the 12-Month Periods Ending September 30, 1999 through 2003, at http://www.uscourts.gov/judbus2003/appendices/c2a.pdf (last visited Apr. 7, 2005) [hereinafter Admin. Office of the U.S. Courts, Civil Cases Commenced].
169. Admin. Office of the U.S. Courts, Cases Terminated.
170. Id.
171. EISENBERG & HILL, supra note 26, at 16-19 (adjusted for coding errors).
172. Id. at 18.
173. Although we do not attempt in this Article to address the claim that widespread resort to mandatory arbitration will stymie the development of precedent necessary to provide guidance to employers and employees about their rights and obligations under public law, it is tempting to note that even under the EEOC's case handling protocol, only a small number of charges filed with the agency are likely to be resolved in a public fashion and provide formal legal precedent.
174. Admin. Office of the U.S. Courts, Civil Cases Commenced, supra note 146.
175. This is highly unlikely because many state cases are those in which there is no federal jurisdiction or are filed in states with internal adjudication systems.
176. The data available for EEOC-Fed Ct. are for 1999-2003; the data available for ADR Employer 1 are from June 15, 1993 through June 30, 2004.
177. EEOC case-processing data comes from Maltby, supra note 34, at 61. ADR Employer 1 case-processing data is available for January 1, 2004 to June 30, 2004, and reflects the total number of days necessary to fully resolve a case.
178. EEOC data are available for 1992 through 2004. See EEOC, All Statutes, supra note 134. EEOC figures reflect total amount of monetary benefits generated divided by total number of receipts. Data are available for ADR Employer 1 for June 15, 1993 through June 30, 2004. The figures here are derived by dividing the total amount of settlements and awards by the total number of cases.