Arbitration May Help Fired Worker and Company, Too

William B. Gould III was an electrical engineer who had trouble getting--and could not keep--a job in his profession until he was 38.

William B. Gould IV, a 48-year-old Stanford Law School professor, recalls that, in his family, “there was great feeling that my father had been treated unfairly.”

Today, if the senior Gould got fired, he, like vastly increasing numbers of non-union employees, might follow the growing trend of going to court to seek damages or reinstatement in his job.

But Stanford’s Gould, and others on both sides of labor management relations, increasingly are advocating arbitration as a better problem-solving method than litigation in situations where non-union employees feel that they have been unfairly dismissed.

Promotes Workers’ Cause

Partly as a result of his late father’s treatment, Gould spends much of his life as a law professor promoting the workers’ cause and seeking ways to implement fair, effective and acceptable relationships among non-union employees and their bosses. The lawyer has become a nationally respected authority on those relationships.

Charles G. Bakaly Jr. is a man who commands similar respect among those who deal with non-union labor problems. Figuratively speaking, Bakaly sits on the opposite side of the table from the Stanford professor. He is a partner in the law firm of O’Melveny & Myers, head of his firm’s labor and employment law department and an attorney who spends much of his time representing employers in court and in arbitration proceedings.

Despite their considerable differences, Bakaly and Gould agree that going to court is not the best route to take when non-union workers and their bosses find themselves at loggerheads over employee-management disagreements, such as contested firings.

They prefer arbitration to litigation.

In arbitration, employers and employees hire mutually acceptable arbitrators from a pool of men and women who make their livings at such work.

Gould says there was one basic reason for his father’s inability to keep an engineering job: He could be fired without due cause. The only electrical engineering job he got before age 38 he lost when his employers discovered that he was black. “My father was a light-skinned black man,” Gould said, “and some people didn’t recognize him as a black man.”

When his father finally got and kept a job in his profession, it was with the Army Signal Corps, Gould said, adding that “World War II was about to start, and they needed electrical engineers.”

Gould and Bakaly see many areas in labor-management relationships where they feel non-union workers and employers both get shortchanged.

Lack of Organization

High on Gould’s list of problem areas is lack of organization. Non-union workers are unorganized and therefore at the mercy of their employers, who can fire them or shift them from job to job and place to place more or less at will, the law school professor said.

Gould grants that the door swings both ways, observing that employers as well as employees have legitimate problems. The professor feels that employers, when sued by employees, are often treated unfairly by juries and judges who see companies as impersonal entities oppressing “the little man”; it’s a kind of man-against-machine concept, with management cast in the role of machine, Gould said.

For management, “the most troublesome institution is the juries,” Gould added. “They are volatile and unpredictable in their damage judgments.”

Bakaly agrees that juries tend to be biased against large corporations. “I would say a jury would be likely to favor the employee,” the attorney said.

Gould also takes a pro-management stance when it comes to supporting no-strike clauses in labor-management contracts (such clauses forbid strikes for the duration of contracts), and he advocates prohibitions against unions using economic pressure during the term of a contract. He also opposes the right to strike when it involves certain workers, such as police.

Trade Union Growth

“On the other hand,” Gould said, “I think that public policy ought to be on the side of trade union growth and collective bargaining. Otherwise, the worker is at the mercy of what could be whim and arbitrary judgment on the part of the employer.”

As might be expected, Bakaly--who represents management--takes issue with Gould’s contention that public policy should favor trade union growth. “I do not agree,” Bakaly said. “I think that most employers today are treating their employees fairly and have procedures that guarantee that employees will be treated fairly.”

Regardless of how fairly workers may be treated by many companies these days, lawsuits filed by non-union employees who get fired have become increasingly common.

“I would estimate between 5,000 and 10,000 cases a year are being filed right now. It’s an astronomical figure. However, all but a small fraction are settled out of court or dismissed,” said Richard Moon, a Portland, Me., lawyer and management chairman of the American Bar Assn.’s Labor Law Section Committee on the Development of Individual Rights and Responsibilities in the Workplace. Moon emphasized that his estimates were approximate and that there are no official statistics on court cases brought by non-union workers who get fired.

No Statistics

“There just aren’t any statistics on this,” agreed Theodore J. St. Antoine, Degan professor of law at the University of Michigan Law School and a council member of the American Bar Assn.’s Section of Labor and Employment Law. “But, until the late ‘50s or early ‘60s, there weren’t any cases. It really began to burgeon in the ‘70s. There is no doubt that this has become just a massive movement.”

A member of the Court Statistics and Information Management Project of the National Center for State Courts in Williamsburg, Va., supported the lawyers’ statements on lack of statistics: “State court statistics on the number of non-union workers who sue over being fired simply don’t exist,” said Victor E. Flango, senior staff associate with at the center.

While Bakaly favors the process of arbitration to handle the skyrocketing number of non-union firing cases, he harbors one strong reservation when it comes to the rights of employees to contest their dismissal: “I think arbitration is a better, more equitable method for the employer and the employee,” he said. “But I would say that highly paid management personnel--those who make about $75,000 a year or more--should be able to be terminated for any reason whatsoever without arbitration or court action. I think it is essential for the well-being of corporations that the corporations should be able to change their top management.”

Bakaly sees another weak spot in current arbitration proceedings. It is wrong, he argues, that when employees lose in arbitration, they can go to court. “Arbitration should be binding,” the lawyer said.

Managerial Types Do Best

Gould believes that “most of the beneficiaries of wrongful discharge litigation have been professional, managerial types. They have had the wherewithal to institute legal action and in some instances obtain recoveries. But the average employee is literally screened out of this litigation system for a number of reasons.”

Among those reasons, Gould said, is that it can cost $7,000 or $8,000 to bring suit, even if the plaintiff’s lawyer will take a case on a contingency basis, in which the attorney’s pay consists of a percentage of the award.

Also, lawyers working on a contingency basis “tend to screen out the average worker because, if the lawyers are going to get a share of the recovery, they will do much better representing the well-paid managers” who lose more income by getting fired and therefore tend to get bigger settlements.

Bakaly agrees that most lawyers would rather represent the higher-paid employees. “But,” he noted, “if they have a good case, lawyers will take on a lower-paid employee’s case because what the lawyers are looking for is punitive damages, and if a low-paid individual has a case that looks as if it has punitive damages to it, the outcome can be extremely lucrative.”

Gould said that another problem faced by non-union employees is that the courts “appear to require a considerable amount of longevity with a company to be possessed by the employee in order to file a meritorious claim.”

Workers Want Jobs Back

And, Gould added, further problems can develop in court because, although many white-collar workers who fight non-union firings don’t want their jobs back, a majority of blue-collar workers who get fired do want reinstatement. Under California law, the courts cannot reinstate workers who have been fired. Arbitrators can and do require employers to rehire workers they’ve dismissed.

Another of management’s problems is the vagueness of the courts, Gould said, noting that “while the concept of just cause is one that is necessarily vague because it must be applied in such a variety of situations, it has been shaped with much more precision by the arbitrators in the unionized sector than by the courts in the non-union sector.”

Bakaly agrees that juries do indeed have a vague sense of what “just cause” means. Sometimes, Bakaly said, juries faced with defining “just cause” will rule against management accused of firing a non-union worker because juries tend not to consider “a little dishonesty” on a worker’s part to be just cause for firing. So, instead of “just cause,” Bakaly often asks juries to consider whether an employer showed “good faith” in firing a worker. The change in terminology gives him a higher ratio of success in court, Bakaly said.

Gould cited another important problem faced by employers: “I think management is now confronted with a very large number of frivolous complaints. Frequently this litigation is really used to extract what we might call ‘dislocation’ or ‘severence’ pay so that increasingly employees--higher echelon employees--are utilizing (the courts) for this purpose.” What this means, Gould said, is that employees who get fired, even for good reason, will sue their former employers because those employers often will settle out of court to avoid the nuisance and expense of a suit, even if the suit is frivolous.

Although Gould strongly favors arbitration over litigation to solve the problems of non-union workers and their employers, he does not see arbitration as a panacea.

“I think the solution ought to be arbitration rather than litigation,” he said. But, he continued, arbitration carries with it at least one major potential headache: the possible lack of impartiality among arbitrators.

Bias Possible

Although they are selected and paid mutually by the employees and employers, arbitrators are likely to see the same employers repeatedly, but the same employees only once, Gould said. So there can be a tendency among some of arbitrators to favor the employers, he added, noting that “this could lead to the antithesis of impartiality.”

On the other hand, Gould noted, Canada has used arbitration to resolve non-union firings for about seven years, “and there have not been complaints about impartiality.” He also suggests that the integrity of the process could be enhanced if a state panel or an organization such as the American Arbitration Assn. kept a roster of arbitrators “in whom they have special confidence for this function.”

Gould and Bakaly cite numerous advantages of arbitration over litigation, not the least of which is that arbitration is cheaper and faster. Also high on the list is the fact that job reinstatement for the employee who wants it is available through arbitration but not litigation.

For a number of reasons, Gould feels “the little guy,” who he said is so often effectively screened out of litigation, would be more likely to enter into arbitration.

The Longevity Factor

In the first place, the law professor noted, arbitrators would place less emphasis than judges and juries on employees’ longevity with a company as a criterion for the worker having established unwritten contractual obligations. Also, an arbitration setting is less intimidating than a court room, so employees would find it easier to represent themselves in arbitration, Gould said. Such self-representation would sidestep the problems presented by attorneys’ preference for representing higher-income employees. Of course, if an employee in an arbitration proceeding wants to be represented, either by a lawyer or a non-lawyer, that is perfectly permissible, Gould explained.

Bakaly pointed out that arbitration has been used by some major firms for decades. Northrop Corp. and Garrett Corp. have had in-house arbitration proceedings for a quarter of a century, the lawyer said.

“If a corporation has arbitration in house like that, the company tends to be fairer to employees. Supervisors know where they stand,” Bakaly said. Put another way, supervisors know that if an employee feels he or she has been treated unfairly, an attractive mechanism exists for the worker to act swiftly, easily, inexpensively and with a means likely to result in a fair decision.

It comes as no surprise to find Gould responding to Bakaly by stating that “the number of corporations that have established impartial arbitration procedures is extremely small. They really constitute an aberration: a far departure from the ordinary. It goes against the grain of usual practice.”

Idea Ahead of Its Time

Neither Gould nor Bakaly expects an overnight transformation in which arbitration will replace litigation to deal with non-union worker-management differences.

“What I’m propounding is an idea whose time has not yet come,” Gould said. “Too many organized groups are against it. Lawyers are against it because they would no longer be so necessary to the procedure, and because arbitrators tend to offer smaller awards than juries, so, where lawyers were involved, their shares would be smaller too.

“Business is against arbitration because most businesses have not yet been sued and really do not believe that they will be sued, or sued successfully. A lot of corporations are counterattacking by getting applicants to sign forms to the effect that they can be dismissed without just cause.”

Although many smaller businesses may shy away from arbitration, a lot of large corporations favor it, Bakaly said. “Many small employers haven’t been met with the large court cases yet, and they are very wary of an ‘easy quick way’ to settle their problems,” the lawyer explained.

The road to acceptance of arbitration for non-union labor-management conflicts may be long, but Bakaly and Gould both favor traveling that road and share optimism about its destination.

“I think that I, representing employers, would prefer arbitrators because they are not as biased against large corporations as juries are,” Bakaly said.

Gould said he sees “movement toward arbitration, but it’s a long-range project.”

“Things will have to get much worse before they get better. There will have to be a lot more cases filed in court, and million-dollar judgments imposed before the public decides there is a lot better way of handling these cases.

Popular acceptance of arbitration “is a long way off, but it will come,” Gould predicted, to which Bakaly responded: “I agree.”