AAA’s Employment Rules: A Primer
In the world of workplace conflict resolution, the American Arbitration Association (AAA) stands as a prominent figure with its own set of rules known as the AAA Employment Rules. These guidelines are designed to facilitate fair and efficient proceedings for all parties involved. Understanding these rules is crucial for both employers and employees navigating conflicts related to employment contracts and workplace agreements, especially in cases where arbitration proves to be the preferable method of resolution.
The AAA Employment Rules are like a playbook for navigating the complex arena of employment disputes. They provide a comprehensive framework for arbitration, including instructions for what information both parties are required to disclose, such as documents supporting their claims, available witnesses, contract terms, and the names of individuals with knowledge pertinent to the situation. Most importantly, they help demystify the arbitration process for employees who may not have prior experience with it.
These rules are vital for several reasons; first, they establish a level playing field, ensuring that neither party is taken by surprise during proceedings . Second, by knowing what to expect, both employers and employees can adequately prepare and present their cases. Finally, they provide a measure of comfort for employees who may not be well-versed in the law or the complexities of legal terms.
While some of these rules are largely procedural, they address important issues that are not always explicitly covered in the written agreements between employers and employees. For instance, they discuss the use of private discovery, a significant concern in workplace disputes. They also explain how the AAA selects the arbitrators who will determine the outcome of a case, the complexity of these selection procedures, and the role of the AAA in resolving challenges against proposed arbitrators.
Additionally, the AAA Employment Rules contain a section on Jurisdiction and Arbitrability. This is a key component because it outlines the when the DC courts will intervene in the arbitration process. This section of the rules is similar to the rules published by the other major institutions, with only a few variations. In some cases, the rules are identical to AAA rules that govern other types of disputes.
Core Elements of the AAA Employment Rules
AAA employment rules encompass a range of fundamental components designed to streamline the dispute resolution process and ensure fair employment practices. At the very core of these rules are provisions related to dispute resolution procedure, including relevant timeframes, guidelines for petitioning and serving notice, methods for appointing and disqualifying arbitrators, and stipulations regarding the conduct and location of the hearing. Labor agreements represent a second key component of AAA employment rules. Unlike standard contracts, which are designed to bind parties without outside intervention, labor agreements from the AAA exist to not only outline binding stipulations but to also address issues such as past grievance handling. These express language provisions set the stage for how subsequent labor-related grievances will be handled. A third area of AAA employment rules covers regulations related to arbitration and the use of arbitrators in the workplace. These stipulations define the relationship between the AAA and both the employer and union, and set forth procedures for the creation of a list of arbitrators that, when submitted to the employee, can then work on behalf of both the union and employer to select the most qualified third-party judge(s) to resolve future disputes.
Employers’ Ability to Challenge the Application of AAA Rules in Dispute Resolution
The American Arbitration Association/International Centre for Dispute Resolution (AAA/ICDR) has specific rules and processes to handle employment disputes, including arbitration. These rules require the use of either neutral arbitrators or mediators to resolve workplace disputes. In order for an employment dispute to be handled by the AAA, one or both of the parties in the dispute must be subject to the AAA’s Employment Arbitration Rules (EAR). Employment arbitration is defined by the Employment Disputes between Employers and Employees as: [T]he submission, by or on behalf of a party or parties, of an employment dispute to binding arbitration prior to the commencement of a legal proceeding. It does not include the submission of disputes to a mediator or conciliator in the course of a mediation or conciliation process. However, the expedited mediation or conciliation of a dispute that is later submitted to the Employment Arbitration Rules shall be considered part of the proceedings in connection with which the arbitration took place. Disputes that can be made subject to EAR include, but are not limited to: employment agreements; arbitration agreements; employee handbooks; and Human Resources manuals. In the event of a dispute under EAR, the rules provide for the appointment of an arbitrator, and not a mediator, to resolve the dispute. The parties can agree to the appointment of an arbitrator, or the AAA will identify a neutral arbitrator if the parties cannot subsequently agree. The AAA will then send each party a list of arbitrators. Each party on the list will be mutually acceptable, but the parties can reject up to three of the seven neutral arbitrators on the list. If a party rejects three arbitrators on the list, a new list is sent to each party. The parties continue to reject up to three in this manner until one neutral arbitrator is selected for appointment to hear the matter. A similar arbitration process is used where the AAA appoints three arbitrators to hear the dispute. In the event of requiring three arbitrators, the parties will follow the same process as above, except neutral arbitrators are first identified per specialty. The parties can also waive the appointment of an arbitrator and use a mediator to resolve the dispute. However, a waiver to use of an arbitrator under EAR may not have any effect if there is an agreement between the parties to arbitrate the dispute before the AAA. The rules also provide for a mutually agreed upon arbitrator to serve as a mediator. This is useful when the parties have a mediator appointed but need an expert arbitrator to hear the case about the application of the law. This rule also applies to judges who serve as arbitrators and want to mediate a case. The neutral who serves in both capacities is called a "med-arb." The med-arb process has been used in many contract and construction dispute matters. The arbitrator serves as the sole decision maker for the dispute appointed under EAR, or at least recognized by the AAA, unless a court overrules the determination. The determinations made by the arbitrator can be challenged in state or federal court. The AAA does not hear appeals of awards. An award can be set aside by a court only if it is found to be: (1) procured by corruption, fraud or undue means; (2) evidencing an evident partiality or bias; (3) that the arbitrator was guilty of misconduct in [failing] to . . . afford a fair hearing; or (4) that the arbitrator exceeded his or her powers, [or] so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted [could] not be made. The rules provide the parties with a level playing field during arbitration between an employer and employee regarding the qualifications of the mediator and the arbitrator. It also gives an advantage to the employee with regard to the extent of the jurisdiction conferred upon the AAA by the employer.
Impact of the AAA Rules on Employee Rights
The application of the AAA Employment Rules safeguards all of the employees’ rights during the administrative phase and arbitration phase of proceedings. Everyone’s basic expectations about rights in the workplace are protected and can be addressed in arbitrations under the AAA rules. The rights protected by these rules are the right to wages, the right to working conditions, and the right to be free from discrimination.
The right to wages is protected in two ways. First, the employee is assured a decision and award within a reasonable timeframe. Rule 39 states, "The arbitrator shall make a good faith endeavor to render the award promptly within thirty days after closure of the hearing, or if oral hearings have been waived, within thirty days after receiving the final statements and proofs." The second method for protecting employees’ right to wages is by ensuring that the award is enforceable post-hearing. Rule 39(a) just states that an arbitrator will make a good faith effort in rendering a prompt award of the hearing, "but the arbitrator shall not be required to render an award solely because the award has been unreasonably delayed." But Rule 39(b) addresses the specific issue of the impact of a default on the award and states "The arbitrator shall be empowered to make an interim financial award to protect the rights of the parties. Rules 38 and 41 provide additional assurances to an employee in this regard. Rule 38 states that "The arbitrator shall have the authority to issue any interim awards or injunctions, or to provide for equitable or other appropriate relief, at any time prior to the issuance of a final award." And Rule 41 provides the hope of recovery of attorney’s fees and costs. Rule 41(a) states, "Unless otherwise provided in the agreement the costs of arbitration shall be borne equally by the parties. The arbitrator may direct that all or part of the costs of arbitration, attorneys’ fees, and/ or witness fees be paid either by one or both of the parties." Therefore, the money at issue is protected during the entire process of arbitration.
The next protected right is the right to working conditions. If the arbitrator determines that what was initially requested in the demand for arbitration may be insufficient to remedy the harm to the employee, Rule 23(c) ensures that the arbitrator can address these additional issues. Rule 23(c) states, "The arbitrator shall be empowered upon request from either party, prior to the hearing, to rule upon the relevance and materiality of any evidence that one party seeks to introduce. The arbitrator also shall have the authority to rule, either before or after such hearing, on applications for provisional remedies." If a merger with a potential environment impact is being proposed, and the employee fears that a merger could negatively impact wages or reduce hours, the arbitrator will "have the authority to rule, either before or after such hearing, on applications for provisional remedies."
If it is determined that an employee was discriminated against based on race, color, religion, creed, sex, national origin, age, marital status, sexual orientation, gender identity, disability, genetic information, ancestry, veteran status, or any other basis prohibited by applicable law, Rule 1(a) provides that arbitration of those employment actions. The rule states, "Any controversy arising out of or related to this contract, or any breach thereof or otherwise, shall be settled by arbitration in accordance with these rules." In addition to the level of protection that Rule 1(a) provides, the AAA also has special provisions for discrimination and harassment cases. The rules specifically provide that, the number of arbitrators appointed shall be three unless the parties agree otherwise, (see Rule R19) and the arbitration shall be free of or subject to less stringent formalities (see Rule R32). Meanwhile, none of this would be provided to an employee initiating litigation.
Advantages of the Implementation and Adoption of AAA Rules For Employers
Employers across all industries benefit from the incorporation of AAA rules into workplace practices. When (employer and employee) workplace relationships do sour (and they sometimes will), the standard AAA rules provide a no-fault, least-cost mechanism to resolve workplace differences. This reduces the costs, risks and uncertainties of workplace litigation.
Employers can also benefit from improved worker morale. Disputes and disagreements over workplace changes that impact the workforce – and even some employer policy decisions – can now be resolved through mediation and then arbitration under AAA rules .
Workplace relationship management and organizational goals are often compatible, and even aligned. Companies that are nimble and can adapt to the changing needs of clients and consumers will thrive in today’s marketplace. Higher worker morale diminishes turnover and improves productivity. Conflicts that remain within an organization impact morale and productivity. There are cost efficiencies in addressing conflicts internally and in improving worker morale. Companies that invest in resolution of workplace disputes by utilizing established AAA rules can reduce internal workplace conflict, improve morale and enhance productivity.
Recent Developments and Amendments to the AAA Employment Rules
In addition to the 2018 and 2020 amendments, the AAA also announced a number of proposed rule changes that were open for comment until early January 2021. Adopting an "If it isn’t broke, don’t fix it" approach, the AAA rejected, for now, proposals to change the threshold number of claimants that can trigger the application of representative procedures from 50% of claimants to either 80% or 100% and to add interim relief procedures. It did, however, implement two changes that are noteworthy. First, the AAA amended Rule 9 to clarify the standards that govern its admissibility rulings in AAA employment arbitrations (and in consumer arbitrations to the extent they are administered under AAA employment arbitration rules). The amended rule provides that the arbitrator will determine the admissibility of evidence under the federal rules of evidence (by analogy, not as the strict rules of evidence themselves) and not excluding evidence based solely on the fact that it is hearsay. Second, the AAA has adopted the public commenting process for the code of ethics for arbitrators, which is ISO compliant.
In addition, two notable cases interpreting the 2018 amendments demonstrate how outcomes may be affected by the revised rules. In one case, the California Court of Appeal overturned an order compelling arbitration of a former employee’s claims because the arbitrator failed to apply the California standard for unconscionability, rather than the federal standard that had been argued by the employer. In doing so, the appellate court summarized the AAA’s revised Rules 14(a) and (b) on challenges to the entire arbitration agreement, which require arbitrators to consider the unconscionability of the arbitration agreement before proceeding with arbitration of claims. In another recent California case, a putative class of restaurant workers defeated arbitration and "Gateline" waiver language in their arbitration agreement with the AAA by arguing that the arbitration agreement was unconscionable. In this case, the court reviewed the AAA’s J-8 Form and permitted the plaintiff-appellants to pursue discovery on how the policy decisions underlying the forms impact the substantive and procedural rights of the parties who sign the form agreements. The Court found that it was not bound by any arbitration decision that utilized the J-8 Form.
Overall, the most significant development over the past year and a half is the challenging environment for class or collection arbitrations that plaintiffs face as a result of the AAA’s policy change. Case outcomes do suggest, however, that courts may be receptive to arguments that the AAA’s J-8 Form and the previous Rule 14 provisions were defective or inadequate to ensure that the process complies with the requirements of the express language of the FAA and the seemingly broad application of both the Rule 8 (on waiver) and Rule 14 (on overall agreement) challenges to the parties’ right to arbitrate.
Conclusion and Compliance Tips
The final step in understanding AAA employment rules is exploring how to best comply with them, in practice. Fortunately, our experience representing both employees and employer offers some practical guidance that can help. First, it is important to realize that several AAA employment rules require diligence and promptness in complying. Many rules, particularly in the preliminary and interim as well as the hearings timeframe, control the entire process. This is where compliance can be very tricky. Thus, compliance would generally indicate responding or acting immediately. But compliance also indicates that such responses or actions be made properly.
In other words, not only must you do something when you should, you must do it correctly. The "immediate" requirement only holds if the action taken is the proper action that was required. For both employees and employers, reliance on legal counsel can help. First, ideally, employees will seek out the advice of counsel before the process begins, so that they may have the representation they need in the event of any disputes or issues. While AAA rules do set timeframes for certain activities, such as responding or demanding certain documents, those response times should be no surprise if the employee has consulted counsel . And for the employer, having counsel familiar with these process could be a real time-saver when the process begins.
Not only does compliance require acting immediately, it requires information gathering. Many, if not most, disputes arise from a failure to properly gather all necessary information and documentation at the outset. This is yet another reason why having counsel advise not only before the process begins but also during the interim process and hearing preparation can help both parties know exactly what information and documents are needed. Having to rush to gather information last-minute is never ideal. Additionally, failure to gather all necessary information can lead to claims of impropriety or unprofessionalism by one party or the another. This can also lead to third-party action when courts are called on to intervene, as the appeals from AAA Awards often involve claims that the neutral arbitrator was either partial or just incompetent. Failure to gather key information can lead to improper awards and grounds for appeal.
In sum, while managing expectations is also critical, compliance with AAA employment rules only requires diligence, prompt action, and being prepared with the necessary information.