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Like many in-house lawyers, Marc Gary used to think his company could benefit from mandatory arbitration for its employment disputes. Last year Gary, the litigation chief at BellSouth Corporation, looked into adopting the procedure for 20,000 nonunion employees at the Atlanta-based telecom. He assembled a team of attorneys and human resources staffers to analyze the issues. He also hired a law firm � Nixon Peabody � to help the company draw up its program. “But once we had all the data, we pulled the plug on it,” says Gary (who serves on Corporate Counsel‘s editorial advisory board). He was concerned that putting a plan in place might encourage employees to file unwarranted claims. Gary also notes, “Historically, we have tended to do rather well on summary judgment in employment cases. So it’s a weapon we didn’t want to give up.” BellSouth isn’t the only company to have second thoughts about mandatory arbitration for employment matters. Corporate America’s zeal for the practice has dropped sharply, according to several in-house lawyers, outside employment counsel, and arbitration experts. Merrill Lynch & Co., Inc.; Southern California Edison Company; and MCI (formerly WorldCom, Inc.) are among the big-name businesses that have rejected it. Companies have a number of beefs with the process. Businesses typically lose their right to file dispositive motions or appeals. Arbitrations have become increasingly expensive as courts have expanded plaintiffs’ rights. And some companies have decided that they don’t want to alienate their employees by requiring them to sign mandatory arbitration clauses. As a result, “we’re not seeing the enthusiasm for [mandatory employment arbitration] today that we were in the mid-to late 1990s,” says Robert Meade, senior vice president of the American Arbitration Association. The AAA is one of the nation’s biggest providers of dispute resolution services. Robert Nobile, a partner in Seyfarth Shaw’s New York office, says that whenever he speaks at conferences devoted to alternative dispute resolution, he canvasses in-house lawyers on arbitration. “These days, not a lot of hands go up when I ask how many are using mandatory arbitration,” he says. “It’s not like it used to be.” Mandatory arbitration once looked like it had a bright future. After a 1991 federal law said the practice could be used in employment discrimination cases, businesses initially thought they would benefit from avoiding court. By taking juries and the punitive damage threat out of the picture, companies could minimize their liability risk. Plus, because arbitrations weren’t governed by formal rules of evidence or civil procedure, plaintiffs lawyers couldn’t use those rules to go on evidentiary fishing expeditions. But in the last decade, courts have steadily expanded the rights of plaintiffs in employment arbitrations so that they can have the same remedies and discovery access they’re afforded in litigation. “So many of arbitration’s benefits have been eviscerated by the [judicial] process,” says William Harn, a senior attorney at Southern California Edison. The Rosemead, California-based utility looked into adopting mandatory employment arbitration, but in the end decided against it. “Arbitration often just isn’t worth the risk,” Harn says. A 2000 study in Rutgers University Law Journal seems to prove Harn’s point. According to the survey, plaintiffs in all forms of arbitration win more than 60 percent of the time, as compared to 15 percent of the time in litigation. Employment arbitration has also become more expensive. Courts have held that companies must bear the expenses of arbitration, regardless of whether they win or lose. The most sought-after arbitrators, often retired judges and experienced practitioners, routinely charge as much as $500 an hour. And that doesn’t include a company’s own legal fees, which, given the ever-growing scope of arbitration proceedings, can be exorbitant. Businesses have also gotten worried about how mandatory employment arbitration is perceived by their workforce. In 1998 Merrill Lynch became one of the first large companies to abandon the practice. According to assistant GC Allan Dinkoff, the financial services firm didn’t like the cultural tone set by forcing its employees into arbitration. “We [thought] that giving employees the choice of forums would allow for a more equitable process of resolving disputes,” he says. Dinkoff’s cultural rationale resonates with Anastasia Kelly, formerly the GC at both Fannie Mae and Sears, Roebuck and Co. Kelly says she “thought hard” about adopting mandatory employment arbitration at both companies, but ultimately decided she “just didn’t feel right about asking our employees to give up a constitutional right [to appeal].” Kelly, now the general counsel at MCI, says she has no intention of introducing arbitration clauses at her new employer. Not everybody is giving up on arbitration. Blue Cross and Blue Shield Association, Halliburton Company, and Philip Morris USA Inc., among others, all say they remain committed to the mandatory employment arbitration policies they’ve introduced in the past decade. “It’s my belief that arbitration typically gives us quicker and fairer decisions,” says Frank Jackson, a senior attorney at Blue Cross Blue Shield of Michigan. “I mean, we’re avoiding jury trials,” he says. Perhaps. But increasingly, lawyers are showing their clients other ways to achieve the same end. Arthur Silbergeld, a labor and employment partner in the Los Angeles office of Proskauer Rose, suggests that a company ask its workers to waive their right to a jury trial in employment disagreements. Other attorneys advise employers to adopt programs in which all job-related disputes are initially sent to mediation. If that doesn’t work, then the parties can go to court. “I often tell my clients that if you can’t settle [a claim through mediation] and it winds up in court, then we’ve got a pretty good case,” says Mark Dichter, a labor and employment partner at Morgan, Lewis & Bockius. “And if we happen to lose, at least we get another bite at the apple with an appeal.”

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