Dive Brief:
- An employer must comply with an arbitration award finding that it constructively discharged a sales employee in her 60s because of her age, the 10th U.S. Circuit Court of Appeals held (Cox v. Dex Media, Inc., No. 21-1156 (10th Cir. Aug. 3, 2022)).
- The employee worked for the company for 14 years until she resigned after being demoted from sales director to sales representative, court documents said. She claimed the company forced her to quit because of her age and disability (an earlier heart attack) and sued under the Age Discrimination in Employment Act and Americans with Disabilities Act. She later agreed to arbitrate the claims pursuant to a previous arbitration agreement.
- An arbitrator found in her favor on the ADEA claim, and the company asked a federal district court to vacate the award. It argued that the arbitrator applied the wrong legal standard and didn’t sufficiently explain her findings. The lower court rejected the argument and ordered the company to comply with the award. The 10th Circuit affirmed.
Dive Insight:
Since 1991, when the U.S. Supreme Court held that employment arbitration agreements are enforceable under the Federal Arbitration Act, arbitration has become many employers’ favored method of resolving employee-related disputes.
The pros are many: Arbitration is designed to be cheaper and faster than going to court. It’s private, so it can keep sensitive details from being made public. Although it allows for some discovery, the discovery process is streamlined. Also, under the FAA, employers can restrict workers from bringing class-action disputes and require them to pursue a claim individually through arbitration.
Arbitration agreements also have a downside: They’re unpopular with many workers, in large part because employers conventionally hold negotiating power over an agreement’s terms. The unpopularity of arbitration agreements — particularly for mandatory agreements, which require employees to waive their right to sue in court and arbitrate their claims instead — can turn away skilled talent. To address concerns of fairness, employee retention, DEI and reputation, Google ended its practice of mandatory arbitration in 2019 in favor of giving employees a choice in how they manage complaints.
Congress recently clamped down on the controversial practice of mandatory arbitration, too. The #MeToo bill, signed into law in March, invalidates arbitration agreements that prevent a claimant from seeking redress in court for sexual assault and sexual harassment.
Because of “the strong federal policy favoring arbitration,” courts will vacate an award only in extraordinary circumstances, the 10th Circuit explained. This favors employers when they win. But not when they don’t.
For example, the 4th Circuit recently reinstated a $1 million award for a fired securities wholesaler after the lower court threw it out. The employer failed to meet the “heavy burden” of showing the arbitrator ignored state law and federal court precedent, the 4th Circuit said.
In May, the Supreme Court reminded federal courts that the FAA’s policy of favoring arbitration prohibits them from overturning arbitration awards based on invented rules. A lower court found the employer waived its right to arbitrate a wage and hour dispute by waiting months to compel arbitration. The 8th Circuit determined that the employee failed to show she was prejudiced by the delay and reversed. The justices said the 8th Circuit improperly invented the prejudice rule and vacated the holding.
Here, the arbitration award met the “highly deferential” standard for court approval, the 10th Circuit said. The arbitrator correctly applied the law to find an ADEA violation. She pointed to the company’s goal of “get[ting] rid of older employees,” the sales director’s age, and the company’s inability to offer a legitimate explanation for demoting the sales director given her stellar performance, the appeals panel said.
The arbitrator also sufficiently detailed why she didn’t buy into the company’s explanation: She found that it had manipulated job assessment data to justify demoting the sales director and “move out an aged employee,” the 10th Circuit noted.
