Eggs got a bad rap as cholesterol-soaked death bombs. Researchers later realized that cholesterol wasn’t so bad for you after all, but the real problem was the greasy bacon and sausage often served with eggs. The eggs weren’t the issue; The pairing with fatty pork was.
HR arbitration policies have a bad rap, too. What should be a brutally efficient process can degenerate into runaway court-style discovery in far flung city. But don’t blame arbitration. Blame the way the policy was written.
Sharp discovery limits and venue in the company’s backyard can both be written into an arbitration policy. Those two things alone can cut a defense spend by tens of thousands — and secure a convenient venue. They’ll also get respect. One California plaintiff’s lawyer found out the hard way in the Ninth Circuit.
Here’s the play-by-play from Poublon v. C.H. Robinson Company (9th Cir. 2017). Plaintiff’s counsel first picked on the how the arbitration policy trimmed discovery. The employee could only get her personnel file, all relevant documents and three depositions. That’s so little, plaintiff’s counsel said, the whole arbitration policy is substantively unconscionable.
The Ninth Circuit didn’t bite. Instead, the court lectured that arbitration is meant to be “streamlined” and discovery limits are an “important component” of the efficiency. The plaintiff just needs “access” to the “essential documents and witnesses” to “adequately arbitrate” her claim. Otherwise: no blood, no foul. Because the arbitrator could order more discovery for good cause, the discovery limit got a pass.
Next, plaintiff’s counsel took a shot at the mandatory venue. It stuck the case in Minnesota where the employer had its corporate headquarters. Although plaintiff’s counsel made a big deal about traveling 1,000 miles, the Ninth Circuit didn’t care. “Inconvenience or expense” couldn’t get the plaintiff back to her home in California. Minnesota had to be “unavailable or unable” to settle the score. The company got its friendly venue.
Poublon didn’t say how far the Ninth Circuit would go. Would courts back HR arbitration with stiffer discovery limits or venue across the country?
Shaving discovery down to a single deposition was just fine with an Oregon district court. Check out Lovelace v. DEKRA North America, Inc. (D. Oregon 2017). A Pennsylvania district court pulled the same move in Golden Gate National Senior Care, LLC v. Newkam (M.D. Penn. 2017). So did a Florida district court in Bhim v. Rent-A-Center, Inc. (S.D. Fla. 2009). Courts don’t have a problem with discovery limits when the arbitrator can order more.
Here’s the best part. Arbitrators can keep discovery lean without much judicial second-guessing. The Fifth Circuit, where a Texas company will enforce an arbitration award, won’t toss out the award unless the plaintiff proves he got denied a “fair hearing.” And arbitrators can get creative. For example, document production wasn’t needed when the plaintiff could cross examine opposing witnesses at the arbitration hearing. That’s Karaha Bodas Co. v. Perusahaan Pertambangan (5th Cir. 2004). Then in Bain Cotton Co. v. Chestnutt Cotton Co. (5th Cir. 2013), the Fifth Circuit even confirmed an arbitration award when the court said it probably would have reversed had the same mistake been made by a district court.
Cross-country venue got so much respect from the courts that the California legislature took matters into its own hands. Last September, the California governor signed a bill that forces employers to come to the state to resolve disputes with employees who “primarily” reside and work there. No other state in the union has followed California’s lead.
Class action waivers make arbitration look even better. The waivers have all employment disputes go mano-a-mano — no more classes suing overtime pay or background check violations. Right now in Murphy Oil, SCOTUS is weighing if class waivers pass muster under the National Labor Relations Act. With a 5-4 conservative majority on the Court, there’s a good chance class waivers will get a nod.
Like eggs, HR arbitration policies got a bad rap. But they can be done right. Discovery limits and mandatory venue are only two examples of how employers can tweak an arbitration policy. Arbitration can indeed be served lean.
Alan Bush, posted on The Woodlands Waterway with the Bush Law Firm, represents companies in labor and employment matters. He speaks and writes extensively, breaking the law down into actionable business points.