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IBM continues corporate trend of using arbitration to avoid responsibility for violating employees’ rights

IBM recently discontinued its longstanding practice of including in its severance packages a disclosure of the ages and job titles of the other employees it had decided to lay off.  IBM made these disclosures in order to comply with the Older Workers Benefit Protection Act (OWBPA).  29 U.S.C. sec. 626(f).  It has now decided to comply with the OWBPA in a different way: requiring laid off workers who accept severance packages to pursue age discrimination claims in arbitration, instead of court.

IBM has been no stranger to age discrimination lawsuits. Several years ago, it faced a class action age discrimination lawsuit which alleged that it discriminated against older workers when it instituted layoffs.  More recently, a single plaintiff prevailed in an age discrimination lawsuit against IBM and received a verdict of about $2.5 million.

Arbitration is an “alternative dispute resolution” process where a privately hired arbitrator, usually a lawyer, presides over the trial and decides which party should win.  Instead of a jury, the arbitrator decides both whether the defendant broke the law and how much money to award to a successful plaintiff.  Many corporations have chosen to compel their employees to agree to arbitration because the corporations enjoy built-in advantages in arbitration that they do not enjoy in court.  Because of these built-in advantages, many of these corporations require all employees to agree, as a condition of their employment, to pursue any claims against the corporation through arbitration.

Large corporations that require their employees to pursue their claims through arbitration appear before arbitrators repeatedly—and arbitrators know this.  This dynamic creates an incentive for arbitrators to side with the corporations so that the corporations will continue to select them, and pay them, to arbitrate their cases.  This dynamic has been called the “repeat player” or “repeat employer” advantage.  This advantage, of course, is not present in arbitrations where the corporation faces a union in arbitration because the arbitrators know that the union is also a repeat player.  However, most employees are not in unions and, thus, unlike unions, they do not repeatedly provide arbitrators with business.

In 2011, Cornell University’s School of Industrial Labor Relations (Cornell ILR School) released a study on arbitration which provided empirical evidence of this repeat player advantage.  The researchers from the Cornell ILR School studied data from 3,945 arbitration cases handled by arbitrators associated with the American Arbitration Association (AAA), the largest arbitration service provider in the employment law field.  The AAA handled these cases between January 1, 2003 and December 31, 2007.  Among other things, the researchers found “a significant repeat employer arbitrator pairing effect in which employees on average have lower win rates and receive smaller damage awards where the same arbitrator is involved in more than one case with the same employer, a finding supporting some of the fairness criticisms directed at mandatory employment arbitration.”

There is a bill in Congress, the Arbitration Fairness Act, which would correct some of the unfairness created by the repeat player advantage. The version of this bill in the Senate is not sponsored by either Senator Collins or Senator King. The version of this bill in the House is sponsored by Representatives Michaud and Pingree.