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Who Says Arbitration Speeds Up Justice?

Katherine Neff

Last week the Wall Street Journal chronicled the 44-year battle Cleveland, Ohio railroad workers had with their former employer Pennsylvania Railroad.  After Pennsylvania Railroad merged with New York Central Railroad to form Penn Central Transportation Corp. in 1968, the 32 workers lost their jobs and seniority.  After initially filing in an Ohio federal district court, the workers were forced to go through arbitration, one case at a time, as a result of the court’s 1979 decision to enforce the arbitration agreement.

The 44-year battle included three arbitration panels, several courts and a review by the federal Surface Transportation Board.  By the time the lawsuit concluded, only two workers were alive.

Finally, after an appeal by Penn Central of the third arbitration panel’s 2009 decision to award $14.2 million, nearly all of which was interest, in August the United States Court of Appeals for the Third Circuit affirmed the award.

Although the chairman of the arbitration panel that awarded the workers $14.7 million in damages accused all parties involved in the proceedings of bearing some responsibility for the delay, he identified Penn Central, as “rarely miss[ing] an opportunity” to lengthen the dispute.

Although this case is certainly an extreme example of delayed justice, it is important to consider when entering into an arbitration agreement that arbitration may not result in a speedy resolution of your dispute or save you court costs.

View the decision here.



Who Stole The American Dream?

Randy Freking

If you ever wondered why real wages and income have stagnated since the 1970s, read “Who Stole the American Dream?” by Hedrick Smith (Random House).

According to Mr. Smith, a best selling author, one fundamental cause of wage stagflation is the difference between the early and mid-20th century industrialists, such as Henry Ford and Reginald Jones (Jack Welch’s predecessor at GE). They believed  that part of their mission was to benefit all of their constituents – workers, suppliers, the community, to name a few. In those times, the Chief Executive Officers pay was around 40 times the pay of the average worker according to the Federal Reserve.  So, if an average worker earned $30,000 a year, the person who began the operation or led the operation could expect to make 40 times that pay – or $1,200,000.  A nice incentive, but nothing like today.

Unfortunately, along came economists like Milton Friedman in the 1970s, who took the view that the mission of the CEO was to maximize shareholder profits rather than view employees as the Company’s greatest assets.  Maximizing shareholder profits leads to pressure on all costs, and most importantly in our opinion, the costs of labor. With that as the mission, CEO’s began taking stock options and stock shares as compensation. A nice incentive that motivated them to solely increase profits.

The result? The multiple today between average worker pay and the pay of the CEO has risen tenfold – to 400 times the average worker pay instead of 40 times. So, if the average worker earns $30,000, the CEO expects 12 million dollars in compensation.

By the way, at Wal-Mart – the “friend” of the struggling middle class and working poor – former CEO Lee Scott was paid $17.5 million in 2005 – 900 times the average pay and benefits of the typical Wal-Mart employee.


When is an accomodation too much?

Randy Freking

Under Title VII of the 1964 Civil Rights Act, an employer is obligated to accommodate the religious beliefs of employees.  Similarly, the Americans With Disabilities Act requires an employer to accommodate the needs of disabled workers.

Muslim employees in Greeley, Colorado and Grand Island, Nebraska meat packing plants claimed that the plants violated Title VII by failing to accommodate their need to pray periodically during the work day.  The employees believed that they should be allowed to take unscheduled breaks to pray or have a mass meal break at a time coinciding more closely with sunset prayer.

On October 11, 2013, a federal judge in Nebraska granted summary judgment for the employer, reasoning that the employee’s request would cause an undue hardship to the employer.

This case illustrates the employer’s obligation in response to an accommodation request for either religious or disability reasons.  When an employee claims that an employer failed to accommodate his or her religious beliefs or a disability, the employer has the burden of proving the affirmative defense that the granting of the proposed accommodation would have resulted in an “undue hardship.” Relevant case law defines “undue hardship” as more than a de minimis burden on the employer, and essentially requires larger employers to honor proposed accommodations more so than smaller employers.


Supreme Court Deals a Major Blow to Workers’ Rights

Elizabeth "Booka" Smith

On June 20, 2013, the United States Supreme Court issued its 5-3 decision in the case of American Express Co. v. Italian Colors Restaurant (Case No. 12-133).  The Court decided that corporations can force small businesses and individuals into arbitration even when it can be proven that they will not be able to vindicate their rights through arbitration.  The Court’s decision is a major blow to employees – from minimum wage workers to high level executives.  The American Association for Justice characterized the decision as giving corporations a “license” to “use the fine print in contracts” to “steal and violate the law” (see AAJ press release).

Justice Kagan, who dissented in the decision, blasted the majority’s interpretation of the Federal Arbitration Act (FAA), noting that “Congress never intended the FAA to be used against America’s workers or to invalidate their substantive legal rights.”  Worker advocate groups including the National Employment Lawyers Association (NELA) are calling upon Congress to enact the Arbitration Fairness Act (AFA) of 2013 (S. 878/H.R. 1844), which would curtail employers’ ability to force workers into arbitration. (Read NELA’s response to the Opinion.)



Colorado Legislature Enhances Remedies for Violations of Colorado’s Anti-Discrimination Act

Elizabeth "Booka" Smith

Despite considerable opposition from business groups, on May 6, 2013, Colorado Governor John Hickenlooper signed into law the Job Protection and Civil Rights Enforcement Act of 2013 (HB 13-1136)(“JPCREA”).  The JPCREA, which has been five years in the making, amends Colorado’s Anti-Discrimination Act (the “CADA”) to enhance remedies for employees of businesses who are subjected to illegal discrimination based on race, color, disability, gender, sexual orientation (excluding transgender status), national origin, ancestry, religion, creed, and age.  Before the JPCREA, Colorado was one of only eight states that did not enable employees of small businesses to recover attorney fees, or compensatory or punitive damages in discrimination or retaliation cases.

Prior to the JPCREA, a successful CADA plaintiff could only be awarded reinstatement, back pay, front pay and interest on back pay.  The JPCREA enhances remedies for CADA plaintiffs in several ways.  First, it allows the court discretion to award a prevailing CADA plaintiff recovery of his or her attorney’s fees (and only allows an employer to recover fees if the plaintiff’s claims were frivolous, groundless, or vexatious).  Second, the JPCREA allows awards of compensatory and punitive damages, subject to caps of $10,000 for employers with fewer than five employees, and $25,000 for employers with between 5 and 14 employees, and for employers with 15 or more employees, the sliding scale of damages caps under federal law will apply.  Third, the JPCREA allows a CADA plaintiff or defendant employer to demand a trial by jury.  Fourth, the JPCREA makes clear that CADA plaintiffs with age discrimination claims are entitled to the same remedies provided by the federal Age Discrimination in Employment Act.

Some of these changes, including the allowance for recovery of reasonable attorney’s fees, go into effect on August 7, 2013, whereas others, including the allowance for recovery of compensatory and punitive damages and the right to trial by jury, do not become effective until January 1, 2015.

Employees who work for smaller employers with fewer than 15 employees not covered by federal civil rights statutes will benefit most from the JPCREA.  With the enactment of the JPCREA, the number of CADA claims in Colorado is expected to increase dramatically.  Moreover, there is expected to be a rise in state court employment litigation, which historically has proved more dangerous for employers than litigation in federal court.