In employment disputes, arbitration is increasingly common, especially since the U.S. Supreme Court recently ruled in Epic Systems Corp v. Lewis that employment contracts can lawfully include mandatory arbitration clauses.
Unfortunately, these clauses are usually the result of a substantial imbalance in bargaining power. Plus, the contract clauses outsource civil justice to private organizations that resolve these disputes confidentially, instead of in a public forum.
Arbitration is supposed to be done by a neutral, meaning unbiased, arbitrator, but in employment law the potential for conflicts of interest is enormous. In employment matters before an arbitrator, the employer is the one footing the arbitrator’s hefty bill. While workers typically only engage in a single arbitration, large employers are often involved in numerous cases before the same arbitrator, who relies on the company for continued employment and business. Lawyers call this the “repeat player effect,” and it provides material advantages to the employer even if there appears to be no initial bias on the part of the arbitrator. However, it may lead to actual bias.
Arbitrator failed to follow the rules, appellate court says
Recently, Attorney Twila S. White succeeded in having an arbitration award vacated after it was shown that the arbitrator, Candace Cooper, had failed to make disclosures required by her ethics standards.
The case arose in late 2013, when Patrice Honeycutt, represented by Attorney White, filed suit against her former employer, JP Morgan Chase Bank. She alleged that Chase had engaged in discrimination, retaliation and wrongful termination. In 2014, the trial court granted Chase’s petition to compel arbitration of the complaint.
The arbitrator was required to swear to disclose any seeming conflicts of interest to the parties. When the plaintiff lost before the arbitrator, Attorney White investigated whether the arbitrator had any undisclosed conflicts of interest. She learned that, while her client’s case was ongoing, the arbitrator had been appointed to arbitrate 10 other cases involving Chase or its counsel. The arbitrator had not disclosed all of these potential conflicts.
Attorney White began working to disqualify the arbitrator and vacate the ruling for Chase. Ultimately, she appealed the case to the Court of Appeal for the State of California. That court found that the arbitrator had violated the disclosure requirements of the arbitrator ethics standards, and the Code of Civil Procedure, by allowing the appearance of bias into the proceedings. These were grounds for disqualification of the arbitrator. In situations where an arbitrator fails to make timely disclosures of possible grounds for disqualification, courts are to vacate the awards.
“The arbitrator disclosure rules are strict and unforgiving. And for good reason,” wrote the appellate judge. “Although dispute resolution provider organizations may be in the business of justice, they are still in business. The public deserves and needs to know that the system of private justice that has taken over large portions of California law produces fair and just results from neutral decisionmakers.”