The Arbitration Fairness Act: Performing Surgery with a Hatchet Instead of a Scalpel?

Arbitration of employment disputes has become an increasingly controversial issue in recent years. Many plaintiff-side employment lawyers and other commentators have been intensely critical of predispute arbitration agreements. This groundswell of criticism has crested with the introduction in Congress of the Arbitration Fairness Act ("AFA"). (1) The AFA was proposed to combat perceived injustice arising from "mandatory" employment arbitration, meaning arbitration pursuant to a pre-dispute agreement. (2) The AFA's supporters assert that such agreements too frequently are entered into unwillingly or unwittingly on the part of employees; moreover, having waived their right to a judicial forum, employees suffer further injustice due to features of the arbitration process that tilt the playing field against them. (3) The AFA seeks to remedy these perceived problems by providing that "no [pre-dispute] arbitration agreement shall be valid or enforceable if it requires arbitration of an employment, consumer, franchise, or civil rights dispute." (4) The assurance of fair procedures for the resolution of employment disputes is of paramount importance, and, as a prevalent means of dispute resolution, arbitration warrants close examination to ensure that justice is being served. Such examination reveals that, while employment arbitration is controversial, the issues involved are complex. Criticisms of arbitration that may have force with respect to certain categories of employees or employment claims, may have less or no application as to other categories. But, rather than address this complexity, the AFA would prohibit pre-dispute employment arbitration agreements for all employees and any employment claims. (5) This article suggests a more nuanced approach. Part I offers a brief history of how employment arbitration has been regarded by courts in New York and the U.S. Supreme Court. Part II considers the AFA by examining the perceived advantages and disadvantages of arbitration and, in that context, the shortcomings of the AFA. It proposes that the AFA be more narrowly targeted to address more directly the perceived inequities it is intended to correct. I. A BRIEF HISTORY OF EMPLOYMENT ARBITRATION IN THE COURTS Over the past few decades, New York and federal law regarding employment arbitration has undergone a dramatic change, from suspicion and hostility, to affirmation and support. The roots of this change lie in the Federal Arbitration Act ("FAA"), (6) first enacted in 1925. (7) The purpose of the FAA was "to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." (8) Under the FAA, an agreement to arbitrate is "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." (9) The FAA preempts state law on the subject of the enforceability of arbitration clauses, and is controlling even though the dispute itself may arise under state law. (10) Thus, the New York Court of Appeals has recognized that "regardless of what our own State's policies or case law might dictate in other circumstances, we are bound by the policies embodied in the Federal statute and the accompanying case law." (11) The U.S. Supreme Court has taken the lead in shaping law in this area, and the New York Court of Appeals has followed. The U.S. Supreme Court's early resistance to employment arbitration was reflected in Alexander v. Gardner-Denver Co., (12) in which the Court allowed an employee to pursue an employment discrimination claim in court despite the fact that a related arbitration had already been conducted. (13) When his employment was terminated, Alexander filed a grievance under a collective bargaining agreement, according to which disputes went to arbitration if they were not resolved in negotiations. …