Preserving Collective-Action Rights in Employment Arbitration

Arbitration has great promise as a vehicle for efficiently and cost-effectively resolving work-related disputes on the merits—and doing so in a way that is more likely than litigation to satisfy all concerned parties. To preserve this promise, judges and policymakers must be vigilant in monitoring the use of arbitration by nonunion employers, lest it become a tool for exacerbating the imbalances of power between workers and management, and, thus, ultimately discredited. Of particular concern are attempts by employers to use predispute arbitration agreements as a means of class-action avoidance. Indeed, the prospect of limiting exposure to large-scale employment litigation through arbitration has given companies a substantial incentive to require their workers, as a condition of employment, to waive the right to sue in court and instead submit claims to binding arbitration.

The proliferation of employer-promulgated arbitration pacts that explicitly or implicitly prohibit multiparty actions likely will bring to the fore a question which courts have yet to confront directly: whether such an agreement, entered into as a precondition of employment, constitutes an unfair labor practice by interfering with the rights of employees to engage in “concerted activities for the purpose . . . of mutual aid or protection,” as guaranteed by Section 7 of the National Labor Relations Act.

Precedent indicates that many employment arbitration agreements are, in fact, vulnerable to unfair-labor-practice charges to the extent that they require employees to surrender their rights to collaborate in dispute resolution as a condition of employment. This Note suggests, however, that employers can preserve a form of mandatory individual arbitration without undermining the policies behind Section 7, offering a solution through which employers and employees can retain the practical benefits of arbitration within a system that allows employees to work in conjunction with one another to resolve claims of mutual concern. Specifically, it advocates that employers embrace transparency in their arbitration systems by instituting procedures that provide for public disclosure of outcomes and the right of participants to present relevant prior awards as persuasive precedent.

Such an approach—which this Note terms “open arbitration”—not only would allow courts to reconcile the “liberal federal policy favoring arbitration agreements” with the objectives of Section 7, but it also would mute many of the criticisms that have led courts to invalidate mandatory ADR agreements.