Rethinking Mandatory Arbitration of Employment Disputes

In 1991, Congress amended Title VII of the Civil Right Act of 1964 to permit employees to demand jury trials for alleged violations of the statute. Before the 1991 act, Title VII plaintiffs were not entitled to a trial by jury and were limited to remedial damages, e.g., back pay, reinstatement, front pay, and injunctive relief. The 1991 act amended Title VII to create the right to a jury trial and to allow employees to recover compensatory and punitive damages. Employers reacted swiftly to these changes in the law by requiring their employees to enter into mandatory arbitration agreements in which the employees waived their right to pursue in a court of law any claims arising out of their employment and instead submit such claims to final and binding arbitration. The general sentiment among employers at the time was that they would be much better off having employment claims decided by neutral arbitrators instead of juries. Arbitrators were less likely than juries to be swayed by emotions or anti-corporate sentiments and more likely to base their decisions on the facts before them. Employers also believed that, even if an arbitrator were to find in favor of the employee, the damages awarded against the employer would be lower and more realistic than those awarded by juries and that arbitrators (unlike juries) generally would be hesitant to award punitive damages. In essence, employers were relying on arbitration to eliminate the “lottery ticket” mentality among employees who were considering pursuing employment claims.