A Modest Suggestion re Associate Layoffs

Three guesses what these numbers represent:

*not verified

**assumes "?" = 0

Yes, obviously, the number of associate layoffs admitted to by the various firms (hat tip to Above the Law).   Obviously, I have not been able to include firms that have implemented stealth layoffs or, inhumanely, dismissed associates for "performance" reasons when that was actually not the case.  ("Inhumane" because of the enormous blot it leaves on the target's resume: Far better to call a spade a business downturn and leave the hapless associate to the mercies of the market—but at least an accurately informed market.) 

Of perhaps even greater materiality—but equivalent or greater uncertainty—is the number of associates yet to be, uh, excused.  As reported in The Lawyer, "another recruitment consultant, Larry Mulman of Major Lindsey & Africa, puts it [this way]: "To an extent, the downturn in structured finance has provided an excuse for firms to look at other practice areas and to cut dead wood. Within the boundaries of good taste, firms are going to try to get as lean as they can. We're going to see more.""

But this is not a column about layoffs.

It's about requiring arbitration of associate employment disputes.

Assuming arguendo mandatory arbitration clauses are enforceable (I'm not an employment lawyer and never will be), the benefits to the firm and for that matter to the associate seem compelling:

• Confidentiality.  Arbitration proceedings can be conducted essentially under seal, and all the inevitable and predictable nastiness kept off the record, clearly for the benefit of both the firm's and the associate's reputation.
• Finality.  Arbitration proceedings, absent drastic irregularities such as perjury or fraud, are all but impossible to appeal or overturn.
• Speed.  Although arbitration is getting more, not less, complex in terms of discovery and briefing, it remains quicker and more economical than full-dress court proceedings.
• No punitive damages.  Although arbitrators theoretically can award punitive damages (and agreements to waive them in advance may be deemed contrary to public policy), they hardly ever do.  And the professionals who typically make up the composition of arbitration panels are far less likely to have their passions inflamed than your average jury.

Is arbitration a panacea? Obviously not.  But the current environment has to start one thinking about minimizing repercussions to firms as we proceed through and eventually out of this weird and bitter economic stew composed of equal parts liquidity freeze, housing market slide, financial sector contraction, consumer confidence plunge, systemic over-leverage, commodity inflation worries, historically high oil prices,... (Do you want me to go on?  I thought not.)

That said, I'm not aware of any AmLaw firm that requires arbitration in associate employment agreements.  If I'm wrong, please let me know!

This brings us to the crux of the problem:  No one wants to be first.  Understandable, but not insoluble.

Firms have managed to reach magical and mysterious agreement parity on any number of other characteristics of associate employment, without running afoul of 15 USC §§ 1—27, and I'm about to suggest they could conceivably do the same with mandatory arbitration.

All you have to do is read this very column on "Adam Smith, Esq."  There:  How hard was that?

Far be it from me to tell you what to do on this score.  But we already have 174 reasons, and counting, to think about this.

Update 26 June, 8:00 pm:

Helpful readers have pointed me to this story about Kirkland & Ellis' mandatory arbitration policy (apparently effective this past February), which also lends support to the notion that mandatory arbitration is enforceable ("continued employment in most states is adequate compensation [sic: consideration?] for an arbitration procedure")—unless you're in California. 

There, the Ninth Circuit struck down O'Melveny's arbitration agreement with its own employees, finding it "procedurally unconscionable" because presented on a take-it-or-leave-it basis.  Well, at least it wasn't substantively unconscionable.  (The O'Melveny case may be an outlier, as its stricken clause was evidently asymmetrical, allowing the firm to sue employees but not vice versa, as well as forbidding employees from filing discrimination or administrative claims with labor regulators.) 

I've also heard that Wilson Sonsini began signing new associates to mandatory arbitration after the dot-com meltdown, but I have no independent verification of that, and, given the O'Melveny decision, it may be moot whether they do or don't.