[Congressional Record Volume 142, Number 117 (Friday, August 2, 1996)]
[Extensions of Remarks]
[Pages E1486-E1487]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              MANDATORY ARBITRATION VIOLATES CIVIL RIGHTS

                                 ______
                                 

                        HON. PATRICIA SCHROEDER

                              of colorado

                    in the house of representatives

                         Friday, August 2, 1996

  Mrs. SCHROEDER. Mr. Speaker, many employers are forcing their 
employees to relinquish their civil rights by requiring them to sign 
contracts mandating arbitration under the employers' terms.
  This past week, the New York Times told about another victim of 
mandatory arbitration--a woman named Michele Peacock.
  As the July 28 article points out, Ms. Peacock's sexual harassment 
case against Great Western Mortgage Corporation was compelling, but she 
will probably never be able to take her case to court because her 
company required her to agree, as a condition of her employment, to 
mandatory arbitration under terms that were highly advantageous to her 
employer. I ask that this article be included in the Record.
  Members of this body have the opportunity to ensure that employees 
don't sign away their civil rights at the corporate door by 
cosponsoring a bill introduced by myself and Mr. Markey, the Civil 
Rights Procedures Protection Act, H.R. 3748.
  H.R. 3748 would prevent the involuntary application of arbitration to 
claims that arise from unlawful employment discrimination. It would 
amend seven federal statutes to make it clear that the powers and 
procedures provided under those laws are the exclusive ones that apply 
when a case arises.
  This bill would also invalidate existing agreements between employers 
and employees that require employment discrimination claims be 
submitted to mandatory, binding arbitration, while allowing employees 
who want to resolve their claim under arbitration to elect to do so 
voluntarily.
  I urge Members to support this bill.

                [From the New York Times, July 28, 1996]

                  Workers Who Sign Away a Day in Court

                           (By Roy Furchgott)

       When Michele Peacock left the Great Western Mortgage 
     Corporation in January 1996, she and her lawyers thought they 
     had an ironclad sexual harassment suit, one rife with 
     examples of on-the-job innuendo. At an Atlantic City 
     convention, she said, one executive tried to maneuver her 
     into bed as a chance ``to get to know you better.'' Ms. 
     Peacock sued. ``I wanted my trial by jury,'' she said. 
     ``There is no doubt in my mind that I would win. None.''
       But like an increasing number of American workers, she will 
     probably never have her day in court. When Ms. Peacock, 31, 
     joined Great Western she was required to sign a contract that 
     mandated that any dispute with the company would be settled 
     through binding arbitration. The human resources manual 
     contained the rules for arbitration: the company would pick 
     the arbitrator, whose fees would largely be paid by Great 
     Western; Ms. Peacock could not win punitive damages or 
     recover lawyers' fees; her lawyers could not question 
     opponents and she would get no documents before the hearing. 
     Ms. Peacock is now suing for the right to take her case to 
     court. Tim McGarry, a spokesman for Great Western, said the 
     company did not comment on pending litigation.
       Ms. Peacock is not alone. Employers increasingly use 
     employment contracts not only for traditional purposes--
     protecting trade secrets and limiting competition from former 
     employees--but to be able to dismiss employees without being 
     sued and to insulate themselves from discrimination suits. A 
     poll commissioned in 1995 by Robert Half International, a 
     headhunting firm, found that 30 percent of United States 
     companies with 20 or more employees planned to increase their 
     use of employment contracts, compared with 17 percent that 
     said they would decrease the use of the contracts.
       These contracts for lower-level workers are a far cry from 
     what ``employment contract'' often brings to mind when 
     applied to top executives--million-dollar bonuses and golden 
     parachute severance agreements. ``People are signing away 
     their right to take their claims to Federal court, and they 
     are signing away their right not to be discriminated 
     against,'' said Ellen J. Vargyas, a lawyer for the Equal 
     Employment Opportunity Commission.
       Employers counter that employees have abused rights granted 
     under a 1991 amendment to the Civil Rights Act of 1964. The 
     law, called Title VII, provides for jury trials and allows 
     punitive damages in discrimination cases. But dismissed 
     workers, employers say, often claim sex, age, race and 
     religious discrimination unfairly.
       ``An employee who loses a job just has to find one of those 
     cubbyholes to fit their claim in,'' said John Robinson, the 
     chairman of the American Bar Association's Employment and 
     Labor Relations Litigation Committee in Tampa, Fla. 
     ``Everyone is a protected something. Even a white male can 
     claim reverse discrimination.''
       Employers says that without mandating arbitration, 
     employees would choose jury trials, which are expensive for 
     both parties. ``Arbitration brings the recurring costs of 
     discovery and appeals under control,'' said Mr. McGarry of 
     Great Western. He also said arbitration ``levels the playing 
     field.''
       ``A company with vast resources can't wear down an opponent 
     with fewer resources,'' he said.
       Lawyers say courts have been blurring distinctions between 
     ``at will'' employees, who can be dismissed without being 
     told a reason, and ``just cause'' employees, who can be let 
     go only for poor work or misconduct. ``What's changed is 
     courts in several states find bland statements in handbooks, 
     comments on growing up together and making lots of money in 
     the future, two good reviews and a comment at the company 
     Christmas party'' and accept these as a contract, said 
     William F. Highberger, a lawyer at Gibson, Dunn & Crutcher, 
     which often represents employers.
       Such contracts were born in the securities industry, which 
     has long required all employees to sign an arbitration 
     agreement. This practice has withstood several attacks in 
     court, forcing employees into arbitration, where they 
     frequently fare less well than before a jury.
       Paul De Nisco of Staten Island is a former trader for 
     Merrill Lynch who signed a mandatory arbitration agreement in 
     1990. He wanted to sue his employer for age discrimination in 
     1991 when, at 48, despite years of good employee reviews, he 
     was dismissed during what Merrill Lynch said was a 
     reorganization of Mr. De Nisco's department. In 1995, Mr. De 
     Nisco went into arbitration with what he thought was a strong 
     piece of evidence: a page of notes written in 1992 by a 30-
     year-old manager.
       Nancy Smith of West Orange, N.J., one of Mr. De Nisco's 
     lawyers, said the page was notes taken from a conversation 
     the manager had with Mr. De Nisco's equally young boss. She 
     said the note showed that the manager had been directed to 
     hire someone ``our age--male'' for another department and 
     showed a predisposition of the company to hire young workers.
       Timothy Gilles, a spokesman for Merrill Lynch, said on 
     Thursday, ``These notes do not indicate any discriminatory 
     intent or conduct at Merrill Lynch, and the claimant did not 
     attempt to present any evidence to the contrary.''
       Arbitrators denied Mr. De Nisco's claim.
       ``I wrote a letter asking the arbitrators for their 
     rationale,'' Mr. De Nisco said. ``They

[[Page E1487]]

     said they don't have to tell me and they don't want to.'' No 
     appeal is allowed.
       Arbitration need not use previous cases in rendering a 
     decision, and they do not have to provide a written decision, 
     as judges do, or provide for appeals. Arbitrators must make 
     judgments under any rules laid down by the company, and that 
     has caused some arbitrators to turn down these assignments.
       ``I personally have a problem with it,'' said Arnold Zack, 
     an arbitrator and past president of the National Academy of 
     Arbitrators. Employers often stack the deck, he said, ``and 
     we are for fair play.'' The National Employment Lawyers 
     Association, made up of lawyers who represent employees, had 
     threatened to boycott arbitration companies that hear 
     mandatory arbitration disputes. The group has since worked 
     out guidelines with arbitrators that halt some practices, 
     like arbitrations in which employees cannot collect lawyers' 
     fees if they win, but may have to pay employers' legal fees 
     if they lose.
       Many judges seem to have no problem with arbitration. Not 
     only have they upheld arbitration decisions, but arbitration 
     keeps many disputes out of crowded courts. Some judges are 
     being enticed off the bench by the high pay of arbitration. 
     One employee lawyer, Cliff Palefsky, said arbitrators charged 
     up to $500 an hour and commonly earned $300,000 to $400,000 a 
     year.
       Not all courts uphold arbitration, though, and employee 
     lawyers continue to probe for a chink in the armor. One 
     successful challenge was mounted by Jane Letwin, a lawyer in 
     Fort Lauderdale, Fla., on behalf of her husband, Bob. 
     According to Mrs. Letwin, when his employer, the Bentley's 
     Luggage Corporation, demanded that all employees, even part-
     timers like Mr. Letwin, sign a contract agreeing to mandatory 
     arbitration, he balked.
       The Letwins said that when he refused to sign, Mr. Letwin 
     was dismissed after eight months at the company. But Mrs. 
     Letwin pressed her husband's claim with the National Labor 
     Relations Board, contending unfair labor practices because 
     the arbitration threat could be used to prevent labor from 
     organizing. Mr. Letwin was reinstated with full back pay. 
     Officials at Bentley's did not respond to requests for 
     comment.
       The trend in contracts has not escaped notice in 
     Washington. Senator Russell D. Feingold of Wisconsin and 
     Representatives Patricia Schroeder of Colorado and Edward J. 
     Markey of Massachusetts, all Democrats, have proposed bills 
     to protect employees. The Senate version says it would 
     ``prevent the involuntary application of arbitration to 
     claims that arise from unlawful employment discrimination.''
       For now, experts expect the mandatory-arbitration trend to 
     grow. And employees faced with the requirement on employment 
     contracts appear to have two choices: take it or leave it.

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