In a marked reversal from past pronouncements, the Securities Industry Association (SIA) now supports the NASD's proposed rule that would eradicate the requirement that employment discrimination cases be arbitrated.
In a Jan. 13 comment letter to the SEC, the SIA wrote that it supports the NASD's proposed rule to eliminate mandatory arbitration of claims under Title VII of the federal code. The SIA also advocates a one-year delay between the SEC's passage of the rule and implementation, according to the comment letter.
"SIA particularly supports the rule's recognition that its implementation represents a dramatic departure from the way firms and employees currently operate and that it will have an enormous impact on both firms and employees," wrote Stuart Kaswell, SIA general counsel.
The SIA supports the one-year delay to give firms time to create private agreements for dispute resolution--i.e., firms will still be able to keep employees in industry arbitration forums. In addition, the SIA wrote, firms would need time to notify more than 556,000 registered persons of the change and to prepare for the "increased administrative and workload burdens."
Last year, the SIA vehemently defended the arbitration process for all disputes--including discrimination claims. Last spring, the SIA wrote two letters to the NASDR in response to criticism of employment-related arbitration presented in a Feb. 3 letter from three members of Congress to SEC Chairman Arthur Levitt.
"In our view," wrote Kaswell, "the criticisms voiced in the Feb. 3 letter are based on misconceptions of how the arbitration process works. Arbitration is in fact the least expensive, most efficient and fairest means of resolving employment disputes." The SIA argued that arbitration panels, do, in fact, have expertise in employment law, and SROs do make an effort to recruit women and minority arbitrators.
Kaswell also wrote: "We strongly urge that the NASDR follow the recommendations of the Ruder Report, and that it not abandon a system that has served, and continues to serve, so many so well."
On Aug. 7 of last year, the NASD announced its proposed rule to eliminate mandatory arbitration of employment discrimination claims. But the NASD press release states: "The new NASD policy would permit employees to choose between entering into private arbitration agreements with their employers, or reserving the right to file a case in federal or state court for statutory discrimination claims."
On Sept. 7 of last year, the SIA submitted a friend-of-the-court brief supporting Merrill Lynch's attempt to keep a discrimination case in arbitration. The plaintiff, former Merrill rep Susan Rosenberg, was petitioning a Boston federal court to allow her case to proceed in court.
The SIA's brief attacked Rosenberg's legal arguments and supported mandatory arbitration. The trade group argued that NYSE arbitration is fair, and it conducted its own study of 25 NYSE discrimination cases from 1992 to 1997, finding that female claimants prevailed in 60% of those cases, and 79% of the panels included at least one female arbitrator. The SIA concluded that Rosenberg had not demonstrated "systemic arbitral bias."
Federal District Judge Nancy Gertner ruled Jan. 27 of this year that the case should be heard in court (see "Federal Judge Sends Merrill Discrimination Case to Court," OddLots, March '98 RR, Page 36). Gertner said the possible "structural bias" of NYSE arbitration was "deeply troubling."