Earlier this week, Retired Judge R.A. “Sonny” Ferguson Jr. explained Alabama’s Private Judging process and discussed its potential to save clients time and money. Today, Partner David. B. Walston explores the alternative dispute resolution of employment claims, one avenue of which may include Private Judging in certain cases.
Litigation has become an inevitable cost of doing in business in Alabama. Attorneys constantly hear clients bemoan the cost, distraction and inconvenience of litigation. In the last decade, an alternative forum has emerged – arbitration. The Federal Arbitration Act was enacted in 1925 and requires the enforcement of legally-binding agreements to arbitrate disputes. However, many states, including Alabama, enacted prohibitions against mandatory arbitration. In two decisions, the U.S. Supreme Court ruled that the Federal Arbitration Act preempted Alabama’s bar against arbitration of disputes involving interstate commerce.
Arbitration provides businesses with many benefits, the primary one being the elimination of a jury trial. Juries are the large question mark in any litigation. You don’t know who will be deciding your dispute until the trial begins, and no one can predict with any degree of comfort what a jury may decide with respect to the claims at issue. Arbitration also provides the benefit of being a lower-cost alternative. Generally, arbitration proceedings are more efficient, whereas litigation in court can span years. Arbitrations are typically resolved in less than a year, which limits the expense of attorney fees and the other intangibles of litigation – such as the time litigation interferes with business and resources. Depositions, meetings with attorneys, and the trial take available time away from focus on the business operations and productive work.
There has been an exponential increase in employment litigation since the early 1990’s. The lion’s share of lawsuits filed in the federal courts in Alabama in this decade have been employment-related. Employment-related claims under Alabama law have increased as well. Once a disputed issue, the United States Supreme Court has established that arbitration agreements covering employment-related disputes are enforceable. The courts also have begun to enforce contractual restrictions regarding procedures available in arbitration. Courts have enforced agreements that restrict the scope and amount of written and deposition discovery. Courts also have allowed arbitration agreements to dictate the number witnesses called and the exhibits submitted in the proceeding. As a general statement, in Alabama, as long as the arbitration agreement does not preclude an employee’s rights of action, statutes of limitation, or the remedies and relief available under the law, a court should enforce it. [1]
With the ability to restrict discovery and the course of proceedings, employers immediately began requiring employees to execute arbitration agreements as a condition of employment. The requirement of execution and the procedural restrictions in such agreements have withstood attacks as being void as unconscionable, coerced, against public policy, for lack of consideration and for lack of mutuality.[2]
Employers have learned that there was a downside to arbitration. The Federal Arbitration Act severely restricts the scope of appellate review. An arbitration award only can be vacated:
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evidence partiality or corruption by the arbitrator;
(3) misconduct by the arbitrator prejudging the rights of any party; or
(4) where the arbitrator exceeded his or her powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
Significantly, “legal error” is not a ground for vacatur of an arbitration award. The U.S. Supreme Court has expressly held that arbitration agreements cannot expand the scope of review of an arbitration award.
Alabama’s recent enactment of the Private Judging Act may afford employers an alternative to arbitration. A Private Judge has the authority to hear and decide ccontract cases, tort cases, or a ccombination of contract and tort cases. Alabama is an employment-at-will state. However, Alabama recognizes claims for promissory fraud, assault and battery, invasion of privacy, and outrage in the employment context. Statutory exceptions – retaliation for the filing of a workers’ compensation claim or service on a jury – are deemed torts under Alabama law. Also, Alabama law holds that acts or omissions on the part of an employer may create an implied contract that alters the existing at-will relationship and creates a cause of action for breach of contract. All of these employment claims fall under the proper authority of a Private Judge.
A Private Judge rules without a jury and will cost approximately the same as an arbitrator – possibly less. A Private Judge can restrict discovery, with or without the parties’ agreement, and he or she can restrict hearing proceedings. A Private Judge may honor procedural restrictions set forth in an alternative dispute resolution agreement. Most significantly, the decision of a Private Judge is subject to full appellate review under the Alabama Rules of Appellate Procedure.
No jury. Lower cost. Full appellate review. Is there a downside?
[1] An arbitration agreement related to employment claims cannot increase the cost to an employee of asserting statutory rights, and the employer typically bears the entire cost of the arbitrator’s fee (through the terms of the arbitration agreement or settlement terms). However, the additional cost should not increase the cost of arbitration over the cost of a jury trial in court. Also, the primary goal of most employment arbitration agreements is the elimination of a jury. Cost and efficiency is secondary.
[2] Currently, arbitration agreements are under attack by federal agencies such as the Equal Employment Opportunity Commission and the National Labor Relations Board. While some district courts are agreeing with these agencies, federal appellate courts are rejecting these agency’s arguments.