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DOL Administrative Review Board Member Calls for ARB to Determine Whether Mandatory Arbitration Agreements Apply to Whistleblower Cases

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In a recent case before the Department of Labor’s Administrative Review Board, which is the appellate body within the DOL that issues final agency decisions, Judge Luis Corchado, in his concurrence, called for the ARB to decide whether whistleblower laws enforced by the DOL, such as AIR 21 (protecting airline employees) or Sarbanes-Oxley (protecting those who disclose securities violations), can be subjected to mandatory arbitration. A holding that definitively determined that all whistleblower anti-retaliation claims could be subjected to mandatory arbitration would likely have detrimental effects in furthering the purposes of those laws.

Under mandatory arbitration provisions, typically seen in employment agreements or settlement agreements after litigation, parties agree that legal claims that could be pursued in court or administrative bodies must instead be submitted to a private arbitrator. The outcomes of such cases are almost always confidential. Further, in most arbitration, the arbitrator’s decision is final and is immune from appeal to a court absent a showing of extraordinary circumstances. Arbitration often serves to promote judicial economy by reducing litigation costs and lessening judges’ caseloads.  But because of its inherently private nature, arbitration can also conceal wrongdoing from public knowledge.

In Mawhinney v. American Airlines, Robert Mawhinney filed an AIR 21 complaint alleging that American Airlines unlawfully retaliated against him by terminating his employment after he complained about safety violations. Mawhinney had actually been fired by American Airlines about ten years before and had filed an AIR 21 complaint after the first termination. In the settlement agreement Mawhinney signed with American to settle the first complaint, in which American re-employed him, Mawhinney agreed to mandatory arbitration of any future claims arising from his employment which did not fall under his collective bargaining agreement. After filing his second complaint, American filed a Motion to Compel Arbitration, which the DOL’s Administrative Law Judge granted.

On appeal, the ARB noted that the ALJ did not have jurisdiction to compel arbitration. The ALJ lacked this authority, according to the ARB, because AIR 21 authorizes federal district courts to enforce orders under AIR 21. The ARB reversed the ALJ on these grounds. The ARB also noted that Mawhinney’s settlement agreement did not bar a whistleblower complaint against American by Mawhinney “without clearer indication from the Secretary that this preclusion was intended.”

Judge Corchado, in his concurrence, called on the ARB to determine whether the Federal Arbitration Act serves to bar an employee from bringing a whistleblower retaliation claim when that employee has signed an arbitration agreement. Judge Corchado noted that a balance must be reached between protecting whistleblowers and protecting arbitration agreements from judicial review under the Federal Arbitration Act. The concurrence also noted that the whistleblower protection laws exist to help ensure that the public learns of potential safety issues or fraud within financial institutions. Judge Corchado expressed concern that the private nature of arbitration would serve to defeat the policy behind whistleblower laws.

The Administrative Review Board should be reluctant to hold that arbitration agreements can bar employees from pursuing whistleblower complaints in courts or administrative proceedings. Indeed, as Judge Corchado noted, any ruling from the ARB which definitively permitted mandatory arbitration for all whistleblower complaints would hide the details of such complaints and their determinations from the public.  Such a system, under which the employer would likely choose the arbitrator, could erode the protections that empower whistleblowers to come forward. More importantly, mandatory arbitration of whistleblower claims could weaken the deterrent effect on employers that public litigation of such claims provides.

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