Janeiro, Gina K.

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Journal of Gender, Social Policy & the LawVolume 7 | Issue 1 Article 41999Balancing Efficiency and Justice: In Support of theEqual Employment Opportunity Commission'sPolicy Statement Regarding Mandatory Arbitrationand Employment ContractsGina K. JaneiroFollow this and additional works at: http://digitalcommons.wcl.american.edu/jgsplPart of the Civil Rights and Discrimination Commons, Constitutional Law Commons, and theLabor and Employment Law CommonsThis Article is brought to you for free and open access by the Washington College of Law Journals & Law Reviews at Digital Commons @ AmericanUniversity Washington College of Law. It has been accepted for inclusion in Journal of Gender, Social Policy & the Law by an authorized administratorof Digital Commons @ American University Washington College of Law. For more information, please contact fbrown@wcl.american.edu.Recommended CitationJaneiro, Gina K. “Balancing Efficiency and Justice: In Support of the Equal Employment Opportunity Commission's Policy StatementRegarding Mandatory Arbitration and Employment Contracts.” The American University Journal of Gender, Social Policy & the Law7, no.1 (1998-1999): 125-147.125BALANCING EFFICIENCY ANDJUSTICE: IN SUPPORT OF THE EQUALEMPLOYMENT OPPORTUNITYCOMMISSION’S POLICY STATEMENTREGARDING MANDATORYARBITRATION AND EMPLOYMENTCONTRACTSGINA K. JANEIRO*INTRODUCTION ................................................................................ 125I. THE SCOPE AND PURPOSE OF TITLE VII OF THE CIVIL RIGHTS ACT OF1964 ................................................................................................ 129II. THE SUPREME COURT'S POSITION ON THE USE OF ARBITRATIONAGREEMENTS IN EMPLOYMENT CONTRACTS ...................................... 133A. The Arbitral Process .................................................................... 133B. The Federal Arbitration Act and Employment Contracts .................. 133C. How the Supreme Court Interprets Arbitration Agreements and theFAA in the Context of  Employment Contracts…………………………134D. Aftermath of Gilmer.................................................................... 137III. THE EEOC’S 1997 POLICY STATEMENT OPPOSING PRE-DISPUTE,MANDATORY ARBITRATION AGREEMENTS AS A CONDITION OFEMPLOYMENT ................................................................................... 138IV. RECOMMENDATIONS................................................................... 143A. The Supreme Court Should Adopt the EEOC’s Policy StatementAdvocating for Only Post-Dispute, Voluntary Arbitration of StatutoryClaims…………………………………………………………………143B. Structural or Procedural Changes in Arbitration ............................ 145CONCLUSION.................................................................................... 147INTRODUCTIONA woman applies for a job.1  A condition stipulated on the applica-                                                                *   J.D. Candidate, Washington College of Law at American University, 1999; B.S. Univer-1Janeiro: Balancing Efficiency and Justice: In Support of the Equal EmploymPublished by Digital Commons @ American University Washington College of Law, 1998126 JOURNAL OF GENDER, SOCIAL POLICY & THE LAW [Vol. 7:125tion for employment states that as an employee of the company, shemust,submit any dispute related to my employment, or the terminationof my employment, to final and binding arbitration (thus waivingany right to pursue any other administrative and/or legal proceed-ing), and, as a condition of my employment, I agree to sign [this]Arbitration Agreement upon commencement of my employment,and to abide by the Arbitration Agreement and . . . Binding Arbi-tration Policy and Procedures.2She signs the application.3  A few weeks after the company hiresher, it requires her signature on an additional “Arbitration Agree-ment,” described in the aforementioned application.4  The “Arbitra-tion Agreement” requires her to resolve all employment discrimina-tion claims, including statutory claims based on sex, through bindingarbitration.5  She again signs the agreement.6  Regretfully, however, aswith many employees, she signs the agreement without a completeunderstanding of the rights she is waiving under Title VII of the CivilRights Act of 1964 (“Title VII”).7Soon after beginning work, and signing the agreement, her super-visor begins to sexually harass her.8  The branch manager is aware ofthe harassment, but does nothing to stop it.9  She retains counsel andfiles an action in state court pursuant to the state employment anti-discrimination law.10  The district court grants the employer’s motionto compel arbitration, based on her signed “Arbitration Agree-ment.”11  She is left with only one option: to arbitrate her sexual har-                                                                                                                                                     sity of Wisconsin-La Crosse, highest honors, 1996.  I would like to thank my family, friends and thestaff of the American University Journal of Gender, Social Policy & the Law for their assistance andsupport.1. Great W. Mortgage Corp. v. Peacock, 110 F.3d 222, 224 (3d Cir. 1997), cert. denied, 118S. Ct. 299 (1997).  The facts described in the introduction are the facts found by the court inPeacock. See also infra Part IV.A.2. Id.3. Id.4. Id.5. Id.6. Great W. Mortgage Corp. v. Peacock, 110 F.3d 222, 224 (3d Cir. 1997).7. See 42 U.S.C. §§ 2000e-1-17 (1994) (protecting employees against discrimination byproviding remedial measures).8. See Peacock, 110 F.3d at 225 (including making unwanted sexual advances and threaten-ing revenge should she report his behavior).9. See id. (noting that the manager engaged in questionable sexual behavior herself bysuggesting that Peacock use sexual advances to improve business results).10. See Peacock, 110 F.3d at 225 (relying on New Jersey anti-discrimination law, N.J. STAT.ANN. § 10:5-1 (West  1993)).11. Id.2Journal of Gender, Social Policy & the Law, Vol. 7, Iss. 1 [1998], Art. 4http://digitalcommons.wcl.american.edu/jgspl/vol7/iss1/41998-1999] BALANCING EFFICIENCY & JUSTICE 127assment charge in front of an arbitrator who may be biased12 and whomay have little or no training or practice in arbitrating Title VII sex-ual harassment claims.13The aforementioned situation is not uncommon.  An increasingnumber of employers require their employees to sign pre-disputeagreements14 mandating that all employment disputes be resolvedthrough binding arbitration.15  As a result, employers win suits moreoften than employees through the use of arbitration procedures.16                                                                12. See William M. Howard, Arbitrating Employment Discrimination Claims: Do You Really HaveTo?  Do You Really Want To?, 43 DRAKE L. REV. 255, 287 (1994) (stating that employees who usemandatory arbitration may be hampered by the lack of diversity among arbitrators in regards toethnicity, gender, educational background, financial resources, and social status, where arbitra-tors are typically chosen from a panel composed of 97% white males with an average age of 60).13. See Deborah Masucci & Robert S. Clemente, Securities Arbitration at Self Regulatory Or-ganizations: New York Stock Exchange, Inc., and National Association of Securities Dealers, Inc.—Ad-ministration and Procedure, in 1 SECURITIES ARBITRATION 1994, 44, 66-70 (PLI Corp. Law & Prac-tice Course Handbook Series No. B-851, 1994) (indicating that arbitrators are not required tohave knowledge of civil rights law); see also Helen R. Neuborne, Arbitration of Sexual Harassment,in ARBITRATING SEXUAL HARASSMENT CASES, 1-49 (Vern E. Hauck ed., 1995) (arguing that arbi-trators need to take responsibility for understanding workplace dynamics and the problemswomen face regarding sexual harassment).14. For example, Michael F. Hoellering, General Counsel of the American Arbitration As-sociation (“AAA”), the country’s largest provider of alternative dispute resolution (“ADR”) serv-ices, stated that,“95% of the arbitrations handled by the AAA are submitted by parties who haveagreed on arbitration before a dispute arose.” AAA General Counsel Discusses Nonunion Employ-ment Disputes, EMPL. POL. & L. DAILY (BNA) at D9 (Feb. 17, 1995).  See also R. Gaull Silberman,Susan E. Murphy, & Susan P. Adams, Alternative Dispute Resolution of Employment DiscriminationClaims, 54 LA. L. REV. 1533, 1536 (1994) (noting that employers are increasingly adopting in-ternal ADR methods, and stating “[a]s ADR procedures [such as arbitration] have improvedand litigation grown more time-consuming and costly, doubts about whether ADR should playany role in civil rights enforcement have significantly diminished”).15. See EEOC Policy Statement on Mandatory Arbitration, 133 Daily Lab. Rep. (BNA) at E-4(July 11, 1997) [hereinafter EEOC Policy] (taking the position that agreements mandating bind-ing arbitration of discrimination claims as a condition of employment are contrary to the policyof employment discrimination laws, yet the number of these agreements continues to increase);see also Ronald Turner, Compulsory Arbitration of Employment Discrimination Claims With Special Ref-erence to the Three As -–Access, Adjudication, and Acceptability, 31 WAKE FOREST L. REV. 231 (1996)(observing that more and more companies are using mandatory arbitration); John Finotti,Locked Out: Many Employers Require Workers to Sign Away Their Right To Sue, THE FLA. TIMES-UNION(Jacksonville), Aug. 31, 1997, at  G1, available in 1996 WL 11325012, at *1 (stating that over thepast few years, 300 companies, employing three million people nationwide, have implementedvarious alternative dispute employment programs, and the number is estimated to continue togrow); Roy Furchgott, Binding Arbitration Contracts Putting Employees in Bind, AUSTIN AM.STATESMAN, Aug. 4, 1996, at H5, available in 1996 WL 3439510, at *1 (discussing a study con-ducted by the head hunting firm of Robert Half International, which concluded that “30% ofU.S. companies with 20 or more employees planned to increase their use of employment con-tracts, compared with 17% that said they would decrease the use of the contracts”); Barry S.Shanoff, Arbitration Stacks the Deck Against Employee Rights, WORLD WASTES, Dec. 1, 1996, at 15,available in 1996 WL 9605439, at *1 (mentioning the results of a poll commissioned by an ex-ecutive search firm in which it was found that one-third of American companies with twentyplus employees intended to expand their use of employment contracts restricting the right totake discrimination claims to federal court).16. In reviewing different sources of arbitral awards, including published awards of:American Arbitration Association (AAA), Arbitration in Schools (AIS), Federal Labor RelationsReport (FLRR), Government Employee Relations Reporter (GERR), Industrial Relations Re-3Janeiro: Balancing Efficiency and Justice: In Support of the Equal EmploymPublished by Digital Commons @ American University Washington College of Law, 1998128 JOURNAL OF GENDER, SOCIAL POLICY & THE LAW [Vol. 7:125The result leaves the employee/victim with little avenue for appeal,17because Congress limited the grounds on which federal courts mayvacate an arbitral award.18All types of employment settings use arbitration agreements.19  Thepractice is problematic, given the rise of employment discriminationclaims.20  Arbitration agreements destroy the right of a victim to bringan action for sexual harassment in federal district court pursuant to                                                                                                                                                     port (Indus. Rel. Rep.), Labor Arbitration Awards (ARB), Labor Arbitration in Government(LAIG), Labor Arbitration Information System (LAIS), and Labor Arbitration Reports (LAR), itappears that arbitrators considering sexual harassment claims regularly find in favor of man-agement.  However, more than half of the time, discharge is overturned or reduced to suspen-sions, illustrating the flexibility in arbitral awards. Vern E. Hauck, Introduction, in ARBITRATINGSEXUAL HARASSMENT CASES 1-1, 1-5 (Vern E. Hauck ed., 1995).  Termination of an employeewill undoubtedly stand only when there is a finding of excessive harassment that significantlyimpacts the working environment.  Id.17. Arbitratiors issue thousands of arbitration decisions every year and very few judicialforums elect to review arbitral decisions.  See Hauck, supra note 16, at 1-1.  In the SteelworkersTrilogy (United Steelworkers of America v. American Mfg. Co., 363 U.S. 564 (1960); Steelwork-ers v. Enterprise Wheel & Car Corp., 363 U.S. 593 (1960); Steelworkers v. Warrior & Gulf Navi-gation Co., 363 U.S. 574 (1960)), the Supreme Court held that a reviewing court should notchange a judgment based on an agreement of bargained rights unless there was a “serious mis-carriage of justice.”  Id. at 1-4.  But see id. at 1-3 (stating that some courts have ignored the final,binding nature of the decision and instead, reversed the decision because the remedy violatedpublic policy).18. Congress has limited a federal court’s right to vacate an arbitral award to the followingsituations:“(1) where the award was procured by corruption, fraud or undue means; (2) wherethere was evident partiality or corruption in the arbitrators; (3) where the arbitratorswere guilty of misconduct in refusing to postpone the hearing upon sufficient causeshown, or in refusing to hear evidence pertinent and material to the controversy; or ofany other misbehavior by which the rights of the parties have been prejudiced; or (4)where the arbitrators exceeded their powers, or so imperfectly executed them thatthey made no mutual, final and definite award upon the subject matter submitted.” 9 U.S.C. § 10(a) (1994).  See also Jennifer N. Manuszak, Pre-Dispute Civil Rights Arbitration in theNon-Union Sector: The Need for a Tandem Reform Effort at the Contracting, Procedural and Judicial Re-view Stages, 12 OHIO ST. J. ON DISP. RESOL. 387, 400 (1997) (discussing how federal courts arenot using what limited power they have for reviewing issues regarding procedural fairness inarbitral decisions). But see Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 232(1987) (stating that “although judicial scrutiny of arbitration awards necessarily is limited, suchreview is sufficient to ensure that arbitrators comply with the requirements of the statute.”).19. See Employment Discrimination - Most Private-Sector Employers Use Alternative Dispute Resolu-tion, GAO/HEHS 95-150 (July 5, 1995) (indicating that almost all employers with over 100 em-ployees use ADR resources in one or more avenues including: 80% for fact finding; 90% formediation; and 10% for mandatory arbitration); see also EEOC Policy, supra note 15, at E-4 (offer-ing some examples of industries in which such agreements are employed including: securities,retail, restaurant, hotel chains, health care, broadcasting, and security services); Turner, supranote 15, at 264-65 (discussing the different types of employers who utilize the arbitration sys-tem).20. See Carrie A. Bond, Note, Shattering the Myth: Mediating Sexual Harassment Disputes in theWorkplace, 65 FORDHAM L. REV. 2489, 2489 (1997) (discussing a study claiming that 50-85% ofwomen in the workplace are victims of sexual harassment). Despite the low numbers of reportsand claims made each year by victims of sexual harassment, the EEOC has a backlog of over80,000 cases.  Id. at  2490.4Journal of Gender, Social Policy & the Law, Vol. 7, Iss. 1 [1998], Art. 4http://digitalcommons.wcl.american.edu/jgspl/vol7/iss1/41998-1999] BALANCING EFFICIENCY & JUSTICE 129Title VII.21  The Supreme Court currently allows employers to imple-ment pre-dispute agreements requiring mandatory binding arbitra-tion.  However, the Court has not yet clarified whether the FederalArbitration Act22 applies to all employment settings and disputes.23This Comment advocates the adoption of the Equal EmploymentOpportunity Commission’s (“EEOC”) 1997 policy opposing pre-dispute, mandatory binding arbitration agreements for employee’sstatutory rights, as a condition of employment.  Part I explains thescope and purpose behind Title VII of the Civil Rights Act of 1964.Part II demonstrates how employers use and the Supreme Courttreats arbitration and employment contracts.  Part III explains theEEOC’s position and policy statement concerning mandatory arbitra-tion, and the effect that pre-dispute, mandatory arbitration agree-ments have on Title VII sexual harassment claims.  Part IV recom-mends that courts adopt the EEOC’s policy statement.  ThisComment ultimately argues that at a minimum, procedural changesmust be made to the arbitration process in order to make arbitrationof Title VII rights more equitable for the victims of sexual harass-ment.I. THE SCOPE AND PURPOSE OF TITLE VII OF THE CIVIL RIGHTS ACT OF1964Congress enacted Title VII of the Civil Rights Act of 196424 to endemployment discrimination25 based on “race, color, religion, sex, ornational origin.”26  Title VII grants employees three options for en-                                                                21. See 42 U.S.C. §§ 2000e-1-17 (1994) (establishing the right as part of Title VII of the1964 Civil Rights Act); see also infra Part I.22. See 9 U.S.C. § 10 (1997) (encouraging and enforcing the use of arbitration in certaincircumstances); see also infra Part II.B.23. The question is whether this exclusion applies to all employment contracts, or whetherit should be narrowly construed to apply only to workers engaged directly in interstate com-merce.  See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 35 (1991) (holding that thestatutory rights established by the Age Discrimination in Employment Act of 1967 can be sub-jected to compulsory arbitration pursuant to a securities regulation agreement).  This decisionleft many questions unanswered regarding compulsory arbitration of employment agreements.See also  Wright v. Universal Maritine Serv. Corp., No. 97-889, 1998 U.S. LEXIS 7270 (U.S. Nov.16, 1998) (holding a collective bargaining agreement containing an arbitration clause does notrequire the employee to use the arbitration procedure provided in the collective bargainingagreement, because the agreement itself did not specifically preclude the employee from usingthe judicial forum provided under the Americans with Disabilities Act); infra Part II.C-D.24. 42 U.S.C. §§ 2000e-1-17 (1994).25. See 42 U.S.C. § 2000e-2 (1994) (mandating that no employer shall hire or fire, or oth-erwise discriminate against an individual in any way, to adversely affect their employment underTitle VII).26. Id.  See H.R. REP. NO. 88-914, pt. 2, at 15 (1964) reprinted in 1964 U.S.C.C.A.N. 2391,2401 (stating that “[t]he purpose of this title is to eliminate, through the utilization of formaland informal remedial procedures, discrimination in employment based on race, color, relig-5Janeiro: Balancing Efficiency and Justice: In Support of the Equal EmploymPublished by Digital Commons @ American University Washington College of Law, 1998

Balancing Efficiency and Justice: In Support of the Equal Employment Opportunity Commission\u27s Policy Statement Regarding Mandatory Arbitration and Employment Contracts

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Balancing Efficiency and Justice: In Support of the Equal Employment Opportunity Commission\u27s Policy Statement Regarding Mandatory Arbitration and Employment Contracts

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