Employers are increasingly turning to arbitration to reduce the costs and burdens of employment-related litigation. Proponents of arbitration contend it is often less expensive than litigation, frequently quicker, but just as fair. Moreover, proponents argue that employer programs utilizing various alternative dispute resolution techniques may resolve employment disputes early and entirely avoid the need for litigation or even arbitration proceedings.
In the wake of the #MeToo movement, however, employment arbitration has come under sustained attack in some quarters of the popular media. According to some, employment arbitration silences victims of unlawful workplace conduct and deprives employees of the opportunity to vindicate their rights. Even before the #MeToo movement turned its focus on arbitration, several recent academic surveys concluded that employment arbitration systematically disfavors employees compared to litigation. In apparent response to such criticisms, legislation has been proposed at the state and federal level in the last year seeking to restrict the use of employment arbitration. How persuasive are these criticisms and how informative are these studies?
Prof. William H. J. Hubbard, Professor of Law University of Chicago Law School
Christopher C. Murray, Shareholder, Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
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Operator: Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Labor & Employment Law Practice Group, was recorded on Monday, July 23, 2018 during a live teleforum conference call held exclusively for Federalist Society members.
Dean Reuter: Welcome to the Practice Group Teleforum Conference Call as today we discuss Arbitration in the #MeToo Era. I'm Dean Reuter, Vice President, General Counsel, and Director of Practice Groups here at The Federalist Society.
Please note that all expressions of opinion are those of the experts on today's call. Also, this call is being recorded for use as a podcast in the future and will likely be transcribed.
We're very pleased to welcome today two guests to teleforum. Christopher C. Murray is a Shareholder at Ogletree, Deakins, Nash, Smoak & Stewart, and Professor William H. J. Hubbard is a Professor of Law at the University of Chicago Law School.
We're going to get some opening remarks from each of about 15 minutes or so. But, as always, we'll be looking to the audience for questions. So please have those in mind for when we get to that portion of the program. With that, Chris Murray, the floor is yours.
Christopher C. Murray: All right. Thank you. Good afternoon. Well, I'm pleased to be here this afternoon with Professor Hubbard to talk about employment arbitration in the #MeToo era. Employment arbitration has been receiving a lot of attention recently. First, on May 21, 2018, the Supreme Court issued its long-awaited decision in Epic Systems. In that blockbuster case, the Supreme Court held that employment arbitration agreements may lawfully contain class, collective, and joint-action waivers. In short, under that decision, employers can now require that arbitration be conducted on an individual basis. The Supreme Court's decision received significant coverage in the media and will almost certainly increase employer's interest in adopting employment arbitration programs. Although there have always been a variety of pros and cons to employment arbitration, certainly, the ability now to include class action waivers may tip the balance in favor of arbitration for many employers who had previously been on the fence about it.
But employment arbitration has also received significant attention over the last seven months for another reason as well. The Supreme Court heard argument in the Epic Systems case on October 2nd, and coincidentally just three days later on October 5, 2017, the Harvey Weinstein scandal broke in a story published in the New York Times. And then, on October 15th, actress Alyssa Milano posted her famous #MeToo tweet, which has kicked off what is now known as the #MeToo movement. And that movement has brought renewed attention to the issue of sexual harassment in the work place.
So what does employment arbitration have to do with the #MeToo movement? Well, some voices within that movement have contended that employment arbitration is part of the problem. A number of editorials and stories in the national media over the past seven months have suggested that employment arbitration is used by employers to silence victims of sexual harassment and other unlawful workplace conduct and to protect those who engage in such misconduct.
Also over the past seven months, likely as a results of much of this media attention, legislation has been proposed at the federal and state levels to restrict or entirely bar the use of employment arbitration. In recent months, Vermont, New York, Washington, and Maryland have all adopted new laws that, in one way or another, bar the use of employment arbitration agreements, and many other states are considering similar laws. In addition, legislation has been proposed at the federal level to amend the Federal Arbitration Act to exclude coverage for sex discrimination claims.
So whether the use of employment arbitration should be banned, obviously, raises significant policy questions. So in today's teleforum, Professor Hubbard and I want to look at some of the assertions that are being made regarding the use of employment arbitration in these discussions. First, I'll review a little more closely some of the criticisms, particularly in light of existing legal requirements and based on what appear to be current employer practices. And then, Professor Hubbard will discuss some of the empirical studies that are regularly being cited in recent criticisms and consider how they're being represented and used.
Well before Epic Systems and the #MeToo movement, employment and consumer arbitration had received attention and criticism in the popular media, in particular in the fall of 2015. The New York Times ran a series of articles generally criticizing the use of arbitration, and in November 2015, the Times Editorial Board declared that, essentially, quote, "corporations effectively control the arbitration process," which it contended is "a stacked deck if ever there was one." The Board lamented at that time, however, that reversing what it saw as a broader trend towards, quote, "forced arbitration," would "require public outcry loud and long enough to stir the White House and Congress to action." It's that outcry that now appears to be occurring.
On October 10th, last fall, just five days after the Weinstein scandal broke, the Times published an op-ed piece by the former Fox News anchor Gretchen Carlson titled "How to Encourage More Women to Report Sexual Harassment." Ms. Carlson argued that employment arbitration is partly to blame for the continued problem of harassment. She argued that the law is not on every woman's side because if she has entered an employment arbitration agreement, she has, quote, "likely to have signed away her right to a jury trial."
Ms. Carlson also argued that many employment contracts now include arbitration clauses because they, quote, "benefit employers" and her op-ed piece continued that, quote, "when employees do prevail [in arbitration], they're often prohibited from discussing the case." And finally, her op-ed declared that this, quote, "veil of secrecy protects serial harassers by keeping other potential victims in the dark and minimizing pressure on companies to fire predators." Her piece concluded that, quote, "reforming arbitration laws is key to stopping sexual harassment." Ms. Carlson herself vowed that she would work to support bipartisan legislation that she contented would "keep mandatory arbitration clauses out of employment" agreements, quote, "giving harassed workers the choice to go to court."
Her Times piece launched a wave of protests in the popular media linking employment arbitration with sexual harassment. Her piece was followed pretty closely by similar coverage on national public radio, in the Wall Street Journal, USA Today, Newsweek, LA Times, and National Law Journal, and even made an appearance on late night television on the Samantha Bee Show.
In the midst of this criticism, federal legislation was proposed in December of 2017 called the Ending Forced Arbitration of Sexual Harassment Act of 2017. That act would exclude all sex discrimination disputes, not just harassment, from employment arbitration. Perhaps the most alarming allegation in all of this recent criticism is that employment arbitration silences victims of harassment, discrimination, and other violations of employment law. In an interview on Samantha Bee's show, for example, Ms. Carlson described arbitration as creating, quote, "a secret chamber [for harassment claims] so that women can never tell what happened."
In another recent New York Times op-ed piece has argued that, quote, "secrecy silences women," and arbitration "leaves harassers free from accountability." Senator Kirsten Gillibrand referred to these types of concerns in proposing the Ending Forced Arbitration Act last December, and she noted that when employees with arbitration agreements are harassed at work, quote, "they are forbidden from talking about what happened," and instead, quote, "go into a secret meeting with their employer and try to work out some kind of deal that really only protects the predator."
These are clearly worrisome criticisms, but the question is how well-founded are they? Turning first to existing federal law, it's important to note that federal law already bans agreements that would prevent victims of discrimination or harassment from disclosing their claims to federal agencies or assisting federal authorities in investigating those claims. For example, the EEOC in its enforcement guidance has declared that an employer may not interfere with the protected right of an employee to file a charge or support or participate in investigations, hearings, or proceedings under various anti-discrimination statutes. And when employers attempt to use an arbitration agreement to interfere with the right to report unlawful harassment or other misconduct that would actually constitute retaliation under existing law. And the Supreme Court itself has already made clear in a case in 1991 called Gilmer v. Interstate/Johnson that an employer who enters an arbitration agreement remains free to file a charge of harassment or discrimination with the EEOC and to assist in the investigation of that charge.
And finally, it's important to note the EEOC in recent years, as a matter of policy, has declared that it will focus its investigations on allegations of systematic violations, which would appear to cover any allegation that an employer wrongly protects serial harassers or other violators of federal law. In 2016, for example, the EEOC declared that addressing systematic harassment through systematic enforcement and targeted outreach was a national priority for the agency. And finally, the EEOC can always bring class litigation seeking relief for groups of employees regardless of employee's arbitration agreements. The Supreme Court made this clear in 2002 in its decision in EEOC v. Waffle House.
So the non-waivable federal right to file a discrimination charge with the EEOC would appear to prevent employers under existing law from using arbitration agreements to build a wall of silence around victims of harassment or other conduct prohibited by Title VII or other federal antidiscrimination statutes.
And other current laws at the federal level also appear to provide employees protection from the misuse of arbitration agreements for that purpose. For example, the National Labor Relations Act give employees the right to engage in concerted activities for the purpose of mutual aid or protection. And the Supreme Court's recent decision in Epic Systems, although it permits the use of class action waivers in arbitration, does nothing to limit the ways in which employees can join together to identify and protest what they view as unlawful workplace conduct.
The National Labor Relations Board, for example, as well as courts that have enforced its decisions, have held that the NLRA grants employees a right to discuss issues involving sexual harassment complaints among themselves irrespective of any agreements to the contrary. For example, the Board and the D.C. Circuit have found that an employer violated the NLRA by, quote, "maintaining a confidentiality rule prohibiting employees from discussing their sexual harassment complaints amongst themselves." That was a decision from the D.C. Circuit Court in 2003.
Epic Systems did not change that law. Under Epic Systems, multiple employees who believe that the victims of, whether it's sexual harassment or other common workplace misconduct, can still join together, even if they're covered by an individual arbitration agreement, to protest and publicize any such misconduct. They can also join together to retain the same attorney to represent them or file the same claims in separate arbitrations. They can coordinate their theories, work together to investigate their claims, and even make joint settlement demands.
In addition to this existing federal law, it's also important to note that state law can also deem unconscionable and unenforceable arbitration agreements that attempt to prevent employees from sharing information about allegations of it's whether sexual harassment or other conduct. To give just one example, in 2007 the Ninth Circuit found unenforceable an employment arbitration agreement that, quote, "precluded even mention to anyone not directly involved in the mediation or arbitration the content of pleadings, papers, orders, hearings, trials, orders in an arbitration." The court found that that attempt to impose such broad confidentiality was unconscionable and unenforceable, and such decisions would not appear to the preempted by the Federal Arbitration Act.
So the next question is if existing federal and state law already provide such protections are employers, nevertheless, attempting to use arbitration to silence employees? To answer this question, we might first look at the typical rules that govern employment arbitrations. Leading arbitration providers, such as the American Arbitration Association and JAMS, have adopted default rules for administering their arbitrations. These rules do provide that an arbitration proceeding will be handled confidentially. For example, AAA's Rule 23 provides that an arbitrator shall maintain the confidentiality of the arbitration unless the parties agree otherwise. And JAMS rule is very similar. But these rules do not bar employees who are participating in such arbitrations from disclosing or publicizing, discussing, or protesting any workplace grievances that happened to be litigated in those proceedings. They don’t impose any generalized nondisclosure obligations. Employees remain free under these rules. Even though they provide confidentiality covering the arbitrator, they remain free to discuss their experiences with coworkers and in public and do publicize their complaints.
Employment arbitrations may incorporate these rules, but they don’t have to. Many arbitration agreements, if the parties intend, can, except for their own terms, govern confidentiality regardless of these rules. To test whether employers are attempting to impose widespread confidentiality on employees, it's easy to find examples of employment arbitration agreements out there to review. Arbitration agreements are widely available. Actual as well as model agreements can easily be found online. And court dockets, including federal court dockets, are filled with publicly accessible motions to compel arbitration most of which attach arbitration agreements. Despite the wide availability of example arbitration agreements, it's interesting to note that the recent critics of arbitration have not pointed to any examples or any evidence that employment arbitration agreements are commonly being used to impose general nondisclosure requirements on employees.
As I noted earlier, any such agreements would almost certainly be subject to challenge under Title VII or state unconscionability law or the NLRA. But the critics have not pointed to examples of even attempts to impose such general nondisclosure on employees. Arbitration awards themselves are often deemed confidential, whether it's under one of the provider's rules or under an arbitration agreement. So it is important to assess the potential impact of that confidentiality. And to do that, we might compare typical outcomes of employment cases in court for comparisons sake.
There it's important to note that jury trials resulting in public verdicts for employees are extremely rare in federal court. According to one 2010 survey, about 37 percent of employment discrimination cases were dismissed at the outset or on summary judgment. About 58 percent settled, and less than 6 percent made it to trial. And then of that 6 percent, approximately 6 percent that made it to trial; employees won somewhere around 33 percent of those trials. So overall, employees won employment discrimination claims in a public trial, in federal court, in only about 2 percent of all cases filed. I think it's also safe to assume that all of those cases that resulted in settlements are covered by confidential settlement agreements. As noted, about 58 percent of those cases in federal court do settle, meaning that it's very likely that the majority of federal court cases are resolved on confidential terms shielded from public view. And that would make them no different from settlements or awards in arbitration.
So I think in summary when considering all the court cases that are dismissed, settled, or lost by plaintiffs at trial, about 98 percent of discrimination cases in federal court do not produce public wins for employees. In light of those numbers, it would appear that the absence of publicly available arbitration awards in favor of employees would not be a significant practical difference from the outcomes of most cases as they are currently litigated. It's also interesting to note that AAA arbitration awards, actually, are currently available through services such as Westlaw, even though the decisions redact the parties' names.
I think it's also important to note that anecdotal evidence does not appear to support these recent allegations or criticisms of arbitration. In fact, there are some important examples to the contrary. There was a story widely covered in the media last year that involved an individual named Susan Fowler, and her allegations of alleged misconduct, sexual harassment, and discrimination in her workplace. Ms. Fowler worked for Uber and on February 19, 2017, Ms. Fowler published a blog post titled "Reflecting On One Very, Very Strange Year at Uber."
Her blog detailed her experiences working at the company, including what she considered to be her, quote, "futile efforts to address workplace harassment, discrimination, or retaliation on the job." Ms. Fowler's blog post received wide attention and led the company to conduct an investigation that was led by former U.S. Attorney General Eric Holder. That investigation reportedly resulted in more than 200 employee complaints, at least 20 terminations, and the eventual resignation of the company's CEO. Ms. Fowler's account of her experiences and her public complaints about working conditions also received significant media coverage in outlets such as the New York Times, where columnist Maureen Dowd published a profile of her and her complaints titled, "She is 26, and Brought Down Uber's C.E.O. What's Next? That was published on October 21, 2017.
What's interesting about this case is that Ms. Fowler happens to be a party to an employment arbitration agreement. It would appear that her example would demonstrate that employment arbitration agreements do not, in fact, create a secret chamber for workplace claims so that victims can't ever tell you what happened. And she did exactly that. She recounted her experiences in a public blog and participated in numerous interviews, and her allegations of improper conduct became well-known and widely shared and resulted in significant change in that workplace.
So it would appear that existing federal and state law, model arbitration agreements, and current employer practices and other experiences don’t support many of the recent assertions about employment arbitration being made in recent media coverage, in particular that arbitration silences victims of unlawful workplace conduct. So the question is what's the origin of this claim, which is being so often made in recent commentary? It would appear just to be a single case and that's Gretchen Carlson's. But her case really is not very typical. It is interesting to look at the specific arbitration agreement that was contained in Ms. Carlson's own agreement. Embedded in her arbitration agreement was a general pre-dispute nondisclosure clause. For those of you who are interested, that agreement, like many other arbitration agreements, was included in a public filing in federal court. It was attached to a motion to compel and is available to anyone who's interested on the docket of the New Jersey U.S. District Court.
The clause in Ms. Carlson's agreement provided, quote, "all relevant allegations and events leading up to the arbitration [would] be held in strict confidence." That language apparently purported to bar her from discussing even the facts underlying any claims she might make in arbitration. But her agreement in its highly restrictive nondisclosure clause did not appear to be typical of arbitration agreements. Even the New York Times noted this. The New York Times published an article about her case on July 13, 2016, and in that article Paul Bland, who is the Executive Director of the advocacy group, Public Justice, was quoted as observing that Ms. Carlson's arbitration clause had, quote, "much broader secrecy…than is common in arbitration." And that New York Times article itself noted that, quote, "only a small minority of employers," end quote, include similarly, quote, "strict confidentiality provisions in their agreements."
Nevertheless, despite the admitted uniqueness of Ms. Carlson's arbitration agreement, much of the recent popular criticism of employment arbitration treats her agreement as though it's representative of employment arbitration agreements generally. This commentary really conflates ordinary arbitration agreements with general pre-dispute, nondisclosure agreements, and there's no evidence that most or even many arbitration agreements include such clauses.
And finally, one might note that even that unusually restrictive clause was ineffective in imposing secrecy. Any news organization -- or her allegations were included -- actually, they were actually filed in court before she went to arbitration and any news organization, government agency, or curious member of the public can find her allegations easily. Copies of her court complaint are now easily accessible online. All one needs to do is Google Gretchen Carlson complaint harassment and find a copy of her complaint.
So although recent commentary makes a claim that employment arbitration generally silences employees, that claim does not appear to be substantiated by experience or by existing law. And with that, William, I'll turn it over to you. Thank you.
Prof. William H.J. Hubbard: Thank you very much, Chris. I think my comments are going to more focused on the data side of things. But I think it's going to compliment a lot of what Chris has already said. But before I get to that, I'd just like to thank Dean and Chris for this opportunity to speak on this call and to share some time with all of you.
So Chris in his remarks noted some of the questions that are being posed in the public discussion about employment arbitration and the #MeToo movement. Does employment arbitration silence victims? Chris talked about several reasons why this may not be so. One of the reasons that he gave talked about the rates of settlement and of trial in federal court. And that same data that Chris leveraged is data that I'm going to return to in addressing another one of the questions that's come up in these discussions, which is this idea that employment arbitration presents employees with a deck that's stacked against them. The notion that there is a bias in arbitration against employees.
Now, I'll note that, of course, there are many criticisms of employment arbitration that have been made including the point about secrecy that Chris emphasized. There are, of course, also claims about the extent to which these agreements reflect genuine agreement and awareness by the parties to the agreements. There are concerns about the lack of availability of class arbitration and so on. But the one criticism that I think is rounded in empirical data is the criticisms that arbitration is biased against employees, and that's the one I'm going to focus on in my comments.
Where does this notion that arbitration is biased against employees come from? Well, in terms of the data, news articles and scholarly articles as well will often cite the fact that employees win less often in arbitration than in litigation. The claim is that the win rate of plaintiffs is higher in litigation than in arbitration, and therefore this is evidence that arbitration is biased against employees. So that's the fundamental claim and there're a number of articles that are cited for this, and I want to try to take a closer look at that claim.
This claim is based on a series of articles by a researcher names Alexander Colvin, Professor of Industrial and Labor Relations at Cornell University, and he has a series of articles that all basically use the same data and address the same result. And these are widely cited by critics of employment arbitration. I'll just talk about one of the studies since the results of all of these studies are largely the same. He has a paper that was published in 2011 in the Journal of Empirical Legal Studies, and it's called "An Empirical Study of Employment Arbitration." Now, the main result from this study is that employees are less likely to win arbitration cases than cases that go to trial. And that's the basic claim that is so often repeated in the media and in scholarship as well.
Now, where does this claim come from? Well, he was able to get data on arbitration because California requires the reporting of certain data by arbitration providers. And so, the American Arbitration Association has made data from its employment arbitration cases available, and he looked at that data from the AAA. In the study, there were about 4,000 employment arbitration. These took place in 2003 through 2007. There's some more recent studies that have looked at more recent data, but the results are basically the same, so I'll just focus on this one study.
Now, what did this study find? Well, out of these 4,000 or so arbitrations, 69 percent of them ended in settlement or in withdrawal of the claim, while 31 percent of them ended in an arbitral award by the arbitrator. And of those that ended in an arbitral award, the plaintiff won 21 percent of them. Now by comparison and, in fact, Chris mentioned this statistic in his remarks as well, if you look at studies of federal courts or state court trials, what you see is that plaintiffs tend to win 30 percent or higher—some studies report numbers in the 40's or 50's—but more than 30 percent of trials are won by plaintiffs. And so this juxtaposition of the plaintiff win rate in arbitration versus trial is the basis for this idea that arbitration is biased against employees.
Now, there's two comments, basically, that I want to make about this claim. The first comment is that the claim that plaintiffs win less often in arbitration than in litigation, that claim is actually not correct really on its own terms. As the Colvin study was careful to point out, but as many of the people who cite this study don’t notice, to say that plaintiff win rates in arbitration are lower than plaintiff win rates at trial is not the same as to say that win rates in arbitration are lower than win rates in litigation as whole. Now, as any employment lawyer knows, there's a very big distinction between a plaintiff success rate at trial and a plaintiff success rate in litigation as a whole.
So what I did was I went back and I looked at some data on federal courts during the same period, and what we see, as I mentioned before, is a win rate of about 30-some percent for plaintiffs at trial in federal court. But trials only make up about 6 percent of all case dispositions in federal court. Another 20 percent of cases on top of those are resolved by the court just not at trial. These are motions to dismiss, motions for summary judgement, post-trial motions and so on. If you look at the plaintiff win rate among those kinds of resolutions, the plaintiff win rate is extremely low, about 6 percent, and that's because most of these motions are motions that are being filed by the defendant. When they're successful of course, that disposes of the case in favor of the defendant.
So when you combine all of the different ways that a court can resolve a case for the plaintiff or against the plaintiff, the overall plaintiff win rate is only about 10 percent, about 10 percent of all court decisions. So if you want to compare how often arbitrators decide in favor of plaintiffs versus how often judges, or juries, decide in favor of plaintiffs, the more natural comparison is between 21 percent for arbitrators and 10 percent for judges in court. And that comparison, of course, reverses the difference. It's actually higher in arbitration than in court. So this claim that the plaintiff's win rates are higher in court than arbitration, I think, is actually a very misleading one and, in fact, inaccurate.
But there's a deeper point here, and I do want to make this point as well before we start concluding that arbitration is actually biased in favor of employees. The deeper point is that we shouldn’t really be drawing any conclusions about bias one way or the other from this kind of evidence. And I'll note that the Colvin study itself does not claim that it's proved any kind of bias. The study is very careful about its implications and actually warns the reader that comparing litigation and arbitration is a bit like comparing apples and oranges. And I think that's exactly right.
Because there are different procedures in court and in arbitration, I think it's only natural to expect, and I'm sure for those of you who practice in this area this has been your experience as well, different cases will tend to settle in arbitration versus those that settle in court. So it could be that the cases that are being decided by the arbitrator and decided by a judge aren't the same types of cases. Maybe there's stronger cases in arbitration or stronger cases in litigation. Either way, we don’t know what the cases that are actually going to the arbitrator or the court look like relative to the cases that are settling. And for this reason, the win rate that we see in arbitration is a win rate for a different set of cases than the cases that are going to the judge in the courtroom. And so, these two win rates are not comparable numbers and as a consequence, I think it would be unwise to conclude that there is a bias one way or the other based on the win rates that people observe in arbitration or in litigation.
And I guess that, maybe, the even deeper point here is the majority of all cases, and this is true whether we're talking about arbitration or we're talking about litigation, are going to end in settlement. And in a settlement what we see is some sort of resolution in which the plaintiff gets something but not everything. And how we even think about whether that counts as something that favors the plaintiff or favors the defendant is really beyond the ability of empirical researchers to tell, given that the details of the settlement are almost never disclosed. So this is just kind of a cautionary note about some of the claims that are being made based on the data.
Now, there's a few other claims in the literature, and I'll just mention those a little bit more briefly. One is the observation that if you look at the amount that plaintiffs are awarded in arbitration, those numbers tend to be lower than the amounts that plaintiffs are awarded after trial, after jury trials, in court. And that, again, is a true fact, but one has to be careful about the interpretation of these numbers. It certainly is possible, one could imagine the possibility that these numbers are smaller in arbitration because of bias against employees. But there are other explanations, as well, that I think are better supported, or at least more consistent, with the data.
So, for example, because more employees get awards from arbitrators in arbitration than employees get at jury trials in court, what we see is a wide range of employee claims reaching an arbitral award, both strong ones and weak ones, both ones where there's a lot at stake and a little bit at stake. On the other hand, when you're looking at what's happening in court, what do we know about court? Why do parties often seek arbitration? Well, one of the reasons they seek arbitration is because trial is very expensive. The only kinds of cases that are going to go to a trial in court are going to be ones where there's enough at stake to justify the time and expense of trial. And so, it shouldn't at all be surprising that the cases that actually go to trial in court are those cases that have a lot of money being awarded to the plaintiff when the plaintiff wins.
That same selection effect, as economists like to call it, that same selection effect that leaves only the highest value cases to go to trial isn't is as strong in arbitration. And so, we would expect on average awards in arbitration to be lower without there being any sort of bias against employees in arbitration.
Another result that comes out of this same set of studies is that arbitration is faster than litigation. Now, of course, this is a point in favor of arbitration so it's not one that gets as much attention in the media, unfortunately, but it's worth noting as well. And then, there's some claims that are made in other studies that I'll note, again, just more briefly. The first is this idea that a lot of claims simply disappear. Claims that should be brought are simply not being brought at all when they're subject to an arbitration agreement. These claims would have been brought, the argument goes, if they were not subject to an arbitration agreement. And there've been some studies published that estimate huge number of claims, thousands upon thousands of claims, simply disappearing into what some scholars call the "black hole of mandatory arbitration."
Now, it's hard to know. I'll just begin by saying it's hard to know how many cases really do go away. And it's even harder to know whether the cases that are going away are cases that should go away. After all, not every case that's brought in court is necessarily a meritorious claim. So how to think about this. Well, for one thing, companies that have mandatory arbitration agreements tend to be larger companies. These tend to be companies that have -- are more devoted to human resources. They have more extensive internal dispute resolution processes. So when we see data indicating that companies with employment arbitration agreements generate less disputes that go to court or arbitration, that's probably partly a function of the fact that these are the same companies that are investing very heavily in resolving employee disputes without the need for arbitration or litigation, simply through their internal processes.
And secondly, I'll note that it's ambiguous whether more or fewer filings are a good thing. I think that a lot of the commentary on arbitration just assumes that we want as many claims as are filed in court to get filed in arbitration. That may be true, but it's certainly not obvious that it's true. If some of the claims that are filed in court are filed because litigation is expensive, and they're filed in order to attract some kind of a nuisance settlement, then it's a good thing those claims aren't being filed in arbitration. On the other hand, of course, if it's that the high cost of litigation is discouraging legitimate plaintiffs, plaintiffs with strong claims, from bringing their suits, then certainly we would think that arbitration might actually be a way to encourage them to file their claims.
But in any event, any data that suggests that there are fewer claims being filed in arbitration than in court certainly need to be interpreted with that note of caution.
And finally, I'll just note one other claim that appears in some of the commentary that I think is relevant, and that is this idea that because employers are repeat players in arbitration they'll have an advantage over employees who rarely are repeat players. And that certainly is a plausible claim. I will note, however, that although big businesses are repeat players, attorneys are repeat players as well. And there are, of course, both repeat player defense attorneys and repeat player plaintiffs. So it's not necessarily the case that employers or employees would have any advantage in arbitration so long as the arbitration process itself gives both sides the ability to affect which arbitrator is selected.
And, of course, litigation has the same concerns raised about it. Famously, the potential advantage that repeat players have in litigation has been a longstanding concern about court. So if one really is concerned about relative advantage versus disadvantage of a stacked deck in favor of employers or employees, it's not obvious that the repeat player advantage is necessarily bigger or smaller in arbitration relative to litigation. And, in fact, the one study that I know about it wasn’t done in the context of employment arbitration, but it was in a different arbitration context involving international arbitration. The one study that's looked at the extent to which there may be this kind of bias, where arbitrators attempt to cater to the interest of a particular side of the litigation actually found no evidence of any sort of systemic bias arising out of the arbitral selection process. So I think there are reasons to at least be skeptical of any larger repeat play advantage that some may claim to exist. But at this point, at least, that the empirical evidence that's available really does not strongly support any of the claims being made. That doesn't mean these claims are false; it just means these claims are speculative and don’t have a lot of data to support the conclusions that they make. So that's all I have at the moment. Again, Chris and Dean, thank you very much for this opportunity to talk and I'll turn it back to you, Dean.
Dean Reuter: Well, thank you both. Let's open the floor to questions.
Bob Fitzpatrick: Hi, this is Bob Fitzpatrick from D.C. I listened to what both of you had to say, and I'm a 50-year veteran practicing employment law so I've been around the block just a wee bit. And I think there's a point that really hasn't been addressed, and I'd just put it in two words, and it's free choice. And if one has a free choice and doesn't have imposed by the Congress or the employer or the administrative state, a free choice to contemporaneously and voluntarily decide whether you want to take, frankly, any claim, but what's the soup de jour is the #MeToo movement and sex harassment claims. Whether you want to take or you don’t want to take your claim to mediation or arbitration and make it voluntarily and then free choice when it comes to the terms of the settlement, whether it's before, during, or after mediation/arbitration. And if the alleged victim has a voluntary free choice whether or not they want to, and let's just tell them like it is, sell their silence.
I don’t have a problem with that. Frankly, selling the silence is a tax consideration. It doesn't get treated as W-2 money under the Dennis Rodman case. And if you sell your silence voluntarily, you ought to be held to your bargain and you can't post, you can't blog, you can't anonymously post and so on. I think there is a difficult—and I can't sort it out—I think there is a difficult issue when it comes to the cooperation clauses in these deals, where the settler—the lady—agrees I will not voluntarily cooperate with some other woman, typically, who's lawyer calls me and says, "Hey, I understand you had a sex harassment claim. Can you tell me about it?" And I think that's disturbing and difficult for the judges because it's hiding evidence and is impeding another person.
But put that issue aside. I think that's a really hard one. But the rest of it to me just comes down to freedom of choice. And freedom of choice whether you want to mediate, arbitrate, sell your silence, and if that exists, I think you'd be surprised at the number of people who would gladly agree to arbitrate. I don't think -- yes, there is a lot of garbage talk out there about how bad for people arbitration is and how wonderful court is, and I agree with what I think the thesis of both of you is that that's a lot of hooey. And I think there're a lot of people out there who agree, but they're not given freedom of choice. It's being imposed upon them, and now, criminy, New Jersey, California, whatever, are talking about banning arbitration of sex harassment cases, which is just nuts. As long as people have a free choice in New Jersey and California, let them have their free choice. So I'll step down off my soap box and shut up.
Christopher Murray: Thanks a lot, Bob. This is Chris, and I think you raised a lot of really good points, and I'd just add to what you observed is that when employees agree to settle a case that includes a confidentiality provision. They're typically, I would assume in most cases, are represented by counsel, and I think it would make sense to leave what the current situation is and I'd leave it to those employees and their counsel whether or not they think it's in that individual's best interest to agree to a confidentiality provision in settling a case. These are not contracts of adhesion. These are settlement agreements in litigation. So someone is receiving the advice of counsel, and I think we should defer to that.
And I'd observe that with respect to confidentiality in arbitration, such confidentiality can, often times, benefit someone who's bringing a claim. They may prefer confidentiality, and I think there is an argument that granting potential confidentiality if it's at the employees choice, for example, in arbitration could potentially even increase the number of claims that are brought if there is concern from employees that having public disclosure of their allegations could somehow be negative for them. Maybe it's personal information, personal details that they don't want to disclose about their allegations. Or maybe, there is also the thought that some people don’t come forward with claims out of fear that maybe future employees would know about them and not look favorably on that. Being able to bring your claim in a confidential arbitration could be a benefit to such employees. So I would just add those observations to what you've already said, Bob.
Bob Fitzpatrick: I totally with you, Chris.
Dean Reuter: Once again, if you have a question, we've got about 10 minutes left. We've got one question.
John Shu: Hello. This is John Shu is California. Thanks to both of you today. I have two questions. The first question is do you foresee this movement against arbitration to go into areas like racial discrimination or discrimination against LGBTQ? And then, the second question is because settlements that come in litigation, not arbitration but litigation, often have confidentiality provisions in the settlement agreement, do you foresee this movement going into that area and affecting settlements that come as a result of litigation? Thanks.
Christopher Murray: Well, again, this is Chris, and with regard to your first question about this movement maybe going to other types of claims, I think that's a fair assumption that it could. And I think the question would be what would be logic that would limit the arguments made against arbitration of sexual harassment claims? What would be the logic that would not equally apply to, whether it's racial harassment claims or other types of discrimination claims, or really all types of employment claims? So we're regularly having discussions with our clients who are addressing these issues. One of the topics of discussion is if you voluntarily exclude sexual harassment claims from your arbitration agreement as several employees have done in a couple of high profile examples, if you do that, what would be the principled reason the next time you have a claim in a different area for applying your arbitration program to those types of claims outside sexual harassment? So it does seem to me that there is, whether you call it the logical progression or a slippery slope, that the same arguments now being made on sexual harassment claims would apply to all other types of employment claims. So that would be my observation on that.
And your second question about confidentiality in settlements, I believe that is some of the recent litigation or proposed legislation at the state level, I think, does address confidentiality outside of arbitration. And I believe that, in fact, the recent change to federal tax law on the settlement of sexual harassment claims, also somewhat, effectively, penalizes using confidentiality in settling those claims. So I do think the movement is also heading, or could potentially head, in that direction as well.
Dean Reuter: It seems like we've had our final question. Let me, in the order that we started out with, let me give each of our speakers a chance to express a final thought or wrap up. Chris Murray.
Christopher Murray: Thanks. Well, thank you very much for the opportunity to join you this afternoon and to join you, William, on these discussions. I really appreciate it. Thanks a lot.
Prof. William H.J. Hubbard: This is William. Thank you, Dean, for hosting this, and thank you, Chris, for all of your thoughts and insights that you've shared today. It's been a real pleasure to share this forum with you. And I look forward to seeing how this field develops over time. I think this is a very interesting and exciting area of the law.
Dean Reuter: And this is Dean. Let me thank both of you, Christopher Murray and Professor William Hubbard. This has been an entertaining and interesting discussion. And we will check back with you as future developments warrant. I want to thank our audience, also, for dialing in as well and for your questions.
A reminder to our audience to check The Federalist Society's website and monitor your emails for a schedule of upcoming calls. But until that next teleforum conference call, we are adjourned. Thank you very much, everyone.
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