Dr RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY

2019-20

Alternate Dispute Resolution

ARBITRATION OF EMPLOYMENT DISPUTE: Desirable yet not practical. Or

is it?

Submitted to:

Mr Prasenjit Kundu

Assistant Professor (Law)

RMLNLU

Submitted by:

Shashank Pandey

Enrolment ID-160101134

7th Semester
Acknowledgement

I express my deepest regard and gratitude to my teacher, Mr. Prasenjit Kundu . His
consistent supervision, constant inspiration and invaluable guidance have been of immense
help in understanding and carrying out this project report.
I would also like to thank my family and friends without whose support and encouragement,
this project would not have been a reality.
I take this opportunity to also thank the University and the Vice Chancellor for providing
extensive database resources in the Library and through Internet.

Name: Shashank Pandey

Semester- VI
Section- B
Contents
INTRODUCTION......................................................................................................................4
PART I: ARBITRATION UNDER 10A OF INDUSTRIAL DISPUTE ACT..........................5
Not qualified as an “industrial dispute”.................................................................................6
Every “Workman” is an employee but every employee is not a “workman”........................7
SUB-CLAUSE (III) AND (IV)..........................................................................................7
PART II: ARBITRABILITY OF EMPLOYMENT MATTERS...............................................9
Kingfisher Airlines and Rajesh Korat: Determining arbitrability on a slippery slope.........10
Presence of special tribunals: A conflicting standpoint.......................................................11
PART III: CLASS ARBITRATION V. INDIVIDUAL ARBITRATION..............................12
Class arbitration and class action waive: Epic system case.................................................13
Should it be applied in India? Maybe not!...........................................................................14
PART IV: CONCLUSION......................................................................................................15
 INTRODUCTION

In India the Arbitration & Conciliation Act 1996 does not specify which subject matters are
arbitrable and which are not. It is based on the UNCITRAL Model law 1 which also follows
the same principle. The Indian courts have occasionally decided the question of arbitrability
in different subject matters.2 The court has taken the resort of public policy to enlist certain
matters that cannot be arbitrable.3 However there is no exhaustive list and court have to
regularly deal with the question.

India envisions itself to become a hub of the International Commercial arbitration. 4 One of
the factors governing party’s choice to seek a place as a seat of arbitration is the degree is
interference by the national court or government of that jurisdiction in the adjudication
process.

Resolving employment disputes has traditionally been within the scope of industrial tribunal
and national courts of the state. The adjudication machinery provided under the Industrial
Dispute Act 1947 (hereinafter referred as IDA) also provides an option to go for voluntary
arbitration.5 The IDA expressly excludes application of Indian Arbitration Act on the
proceedings under it. Hence it is imperative for us to look into this voluntary adjudication
process provided in this principal legislation to understand the current arbitration procedure
for employment disputes (Part I). This highlights the limited scope of the arbitration process
in employment dispute. Secondly, after the award is granted, it should be enforced. The
arbitral award will be enforced if employment dispute are arbitrable. The note shall try to
highlight this aspect of arbitration of employment dispute by looking into the reasoning of the
court while deciding this question and parameters o determine the arbitrability question (Part
II). The Indian employment laws have envisioned the arbitral adjudication of employment
dispute only in the class form; however courts have not dealt with the question of class
arbitration and its legality in its isolation outside the scope of IDA. The recent usage of
mandatory arbitration employment contract involves a question of waiver of right to proceed
as class and hence class arbitration Employment disputes usually involve collective claims
where parties seek to arbitrate collectively. India has a social responsibility to protext the
1
United Nations Commission on International Trade Law [UNCITRAL], Model Law on International
Commercial Arbitration, 1985 U.N.G.A. Res 40/72 (Dec. 11, 1985), as amended by U.N.G.A. Res 61/33 (Dec.
18, 2006) UN Doc A/RES/61/33, art. 35 [hereinafter “UNCITRAL Model Law”];
2
See
3
Booz-Allen & Hamilton Inc v. SBI Home Finance Ltd. & Ors, (2011) 5 SCC 532
4
Somesh Dytta, How Realistic Is India’s Dream of Becoming a Global Arbitration Hub?, THEWIRE, (April 30,
2018), available at https://thewire.in/law/india-global-arbitration-hub-modi-government
5
Sec 10A of the IDA
Labour force hence while advocating for arbitration question of class arbitration and issues
associated to it need to be answered. Thus, whether class arbitration, as understood, should be
permissible or not? If yes then in what form? (Part III). Finally the note concludes trying to
balance the parties’ autonomy to opt for arbitration and fulfilling social responsibility by
protection of employees. The note seeks to achieve this by answering these vital questions.

PART I: ARBITRATION UNDER 10A OF INDUSTRIAL DISPUTE ACT

India lacks any labour code which deals with all aspects of labour or employment law. On the
contrary the labour/ employment matters are governed by set of different legislation in India.
Industrial Dispute Act 1947 (hereinafter referred as IDA) is a primary legislation to resolve
employment disputes between employer and workmen, employer and employer, and
workmen and workmen. Chapter III of IDA deals with reference of disputes to Boards,
Courts or Tribunals for adjudication. Section 10 deals with reference of industrial dispute6 by
appropriate government to the Tribunals established under the legislation. However for our
discussion we will be looking at the Section 10A of the IDA 7 which applies where the
employer and the workmen have agreed to refer the disputes to arbitration at any time before

6
Industrial dispute is defined under section 2(k) of IDA as “any dispute or difference between employers and
employers or between employers and workmen, or between workmen and workmen, which is connected with
the employment or non- employment or the terms of employment or with the conditions of labour, of any
person;”
7
Voluntary reference of disputes to arbitration.-
(1) Where any industrial dispute exists or is apprehended and the employer and the workmen agree to refer the
dispute to arbitration, they may, at any time before the dispute has been referred under section 10 to a Labour
Court or Tribunal or National Tribunal, by a written agreement, refer the dispute to arbitration and the reference
shall be to such person or persons (including the presiding officer of a Labour Court or Tribunal or National
Tribunal) as an arbitrator or arbitrators as may be specified in the arbitration agreement.
(1A) 4 Where an arbitration agreement provides for a reference of the dispute to an even number of arbitrators,
the agreement shall provide for the appointment of another person as umpire who shall enter upon the reference,
if the arbitrators are equally divided in their opinion, and the award of the umpire shall prevail and shall be
deemed to be the arbitration award for the purposes of this Act.]
(2) An arbitration agreement referred to in sub- section (1) shall be in such form and shall be signed by the
parties thereto in such manner as may be prescribed.
(3) A copy of the arbitration agreement shall be forwarded to the appropriate Government and the conciliation
officer and the appropriate Government shall, within 1 one month] from the date of the receipt of such copy,
publish the same in the Official Gazette.
(3A) 2 Where an industrial dispute has been referred to arbitration and the appropriate Government is satisfied
that the persons making the reference represent the majority of each party, the appropriate Government may,
within the time referred to in sub- section (3) issue a notification in such manner as may be prescribed; and
when any such notification is issued, the employers and workmen who are not parties to the arbitration
agreement but are concerned in the dispute, shall be given an opportunity of presenting their case before the
arbitrator or arbitrators.]
(4) The arbitrator or arbitrators shall investigate the dispute and submit to the appropriate Government the
arbitration award signed by the arbitrator or all the arbitrators, as the case may be.
(4A) Where an industrial dispute has been referred to arbitration and a notification has been issued under sub-
section (3A), the appropriate Government may, by order, prohibit the continuance of any strike or lock- out in
connection with such dispute which may be in existence on the date of the reference.]
(5) Nothing in the Arbitration Act, 1940 (10 of 1940 ), shall apply to arbitrations under this section.]
the dispute has been referred under section 10 of IDA. 8 The procedure to be followed in 10A
is only directory.9

Arbitration under section 10A is not what is understood under the Indian Arbitration law
rather arbitrator appointed under 10A has been termed as quasi-judicial body. 10 Thus there
has been a distinction carved out between 10A arbitration and private arbitration. For
example arbitrating under section 10A is subject to the same limitation as on Labour court or
tribunal or national tribunal and cannot travel beyond the terms of reference. Arbitral award
granted by the arbitrator has been brought under the definition of “award” under section 2(b)
leading to the application of application of s. 17, 17A, 18(2), 10(3), 21, 29, 30, 33c and 36A’.
A total failure to follow the procedure under section 10A93) and requirement of publication
of an award under section 17A would render the award invalid 11. Hence arbitral award is only
enforceable if it is published by the government in the official Gazette.

Arbitration under section 10A therefore has a limited application viz.a.viz employment
matters. However the two most prominent factors limiting its application are the scope of
‘industrial dispute” and “workman”.

Not qualified as an “industrial dispute”

Parties can refer the matter for voluntary arbitration only when the dispute is an industrial
dispute. The definition of industrial dispute is given under section 2(k0 of IDA. The dispute
must relate to the terms of employment or with the condition of labour and they must arise
inter alia between workmen and his employer, or workmen and workmen or employer and
employer.12 Cognisance cannot be taken by the arbitrator of the demands which don’t
constitute industrial dispute. The definition entails three part– factum of real dispute, parties
to the dispute and subject matter of the dispute. It is clear from the definition of the Industrial
depute that the Act envisages a collective dispute only as an industrial dispute.13

Section 2A inserted in 1965 makes a dispute of a workman as an industrial dispute if the

dispute relates to dismissal, discharge, reinstatement or termination of service of individual
workmen. Dispute raised by individual becomes “Industrial dispute” only when it is
8
Section 10 of IDA deals with the
9
OP MALHOTA, THE LAW OF INDUSTRIAL DISPUTES 5th edn , Vol 1, universal law publishing co pvt
ltd, 1998, pp816
10
See Rohtas industries ltd v staff union (1976) 3 SCR 12
11
Madras machines tools manufacturers v special deputy commissioner, (1979) II LLJ 331
12
Workmen of dimakuchi tea estate v management of dimakuchi tea estate AIR 1958 SC 353
13
Supra note at p
supported either by the union or in the absence of union by number of workmen.14 2A lays
down precondition of collective interest before qualifying Individual dispute as industrial
dispute15. The entire jurisprudence of IDA is in respect of collective disputes of workmen.
Industrial dispute of an individual unless covered under the section 2A cannot be raised under
this act.16

Every “Workman” is an employee but every employee is not a “workman”

The definition of “workman “is provided under section 2(s) of IDA. The specification of the
seven types of work in the definition of 2(s) obviously is intended to lay down that an
employee is to become a workman only if he is employed to do work of one of these types
while there may be employees who not doing any such work would be out of the scope of the
word “workman” without having resort to the exception. 17 Employees who don’t do any of
the seven works conferred will be out of the definition of workman. 18 The fact that these
classifications are provided in the section in spite of the 4 exceptions shows that not all
employees were meant to be a workman otherwise there would have been no requirement of
enumeration these 7 classifications..19 For instance the officer or member of the management
staff cannot answer this description of “workmen” either on employment or on re-
employment or on re-instatement and cannot therefore come within the expression “any
person” and no industrial dispute can be raised by them.20

SUB-CLAUSE (III) AND (IV)

Managerial or administrative services have not been defined in the Act therefore have to be
interpreted in the ordinary sense. Mere designation of an employee us not a conclusive proof
its status. It has to be determined by the industrial adjudication body by looking at the nature
of the duties assigned. For instance if a person is designated as supervisor, the employer has
to prove that his work and his duties were in nature of a supervisor 21. Being in a management

14
Workmen of dharamdal premchand (Sangadhi) v dharamdal premchand (Sangadhi) AIR 1966 Sc 182, Jadhav
JH v Porbes Golak td (2005) I LLJ 1089, Workmen of Indian Express Newspaper v Management of Indian
Express Newspaper
15
See Bombay Union of Journalism v The hundu, (1962) 3 SCR 893
16
Management of Hotel services v Governemtn of NCT (2007) I LLJ 950, para 14
17
May and Baker (India0 Ltd v at p 765
18
Burmah Shell Oil Storage & Distribution Co of India Ltd v Burmah Shell Management State Assn., (1971) 2
SCR 758
19
OP Malhotra, th Law of Industrial Disutes, Vol 1 6th Edn LexisNexis Buttersworth at p 731, priest is not a
workman as temple cannot be equated with an industry or commercial employer A Kesava Bhatt v Sree Ram
Ambalam Trust (1990) 1 LLj 192 (ker0
20
United Commercial bank ltd v sri kedar nath gupta (1957) I JJL 782 at p 788, para 26
21
Delta Jute & Industries Ltd. Staff Association and Ors. v. State of West Bengal and Ors [2015(145)FLR105]
position however does not mean that he should enjoy an absolute power in any respect 22.
Management position mainly includes powers and duties relating to hiring and firing, grant of
leave and taking policy decision viza.viz employees23.

A person doing work of a “supervisor’ nature has been entitled to the definition of
‘workman” by the amending Act of 1956 but this clause excludes such person who being
employed in supervisory capacity: (a) draw wages exceeding 6500 per month. 24 and (b)
exercises either by the nature of the duties attached to the office or by reason of the power
vested in him.

The question whether employee working in any particular capacity such as technical,
managerial or supervisory is a mixed question of law and fact which cannot be satisfactorily
decided on the basis of inconclusive evidence adduced for the limited purpose of deciding the
preliminary issue. It has to be decided after reading full evidence at the question would
require overall consideration of all the aspects of the matter,25

Voluntary arbitration has a limited scope and deals with unionised employment disputes. 26
The Act also interferes with the employer freedom to contract. 27 The 2nd national commission
on labour believed that there was a need to provide a minimum level of protection to
managerial and other individual employee against unfair dismissal or removal which should
be done through adjudication by a labour court or the labour relation commission or
arbitration.28

Vesting the discretionary power of referring industrial disputes for adjudication in the
government is vague and abstruse.29 t is even more arduous to find out its parallel (referring
of industrial disputes by the government for adjudication) in other countries which have well-
established systems of compulsory arbitration of industrial disputes.30
22
Standard Vacuum oil Co v Commissioner of labour (1959) 2 LLJ 771, 776 (Mad0
23
 Kanchan Modak, "Workman" Under Industrial Disputes Act, 1947, Mondaq, 4 October 2015, available at-
http://www.mondaq.com/india/x/434328/employee+rights+labour+relations/
Workman+Under+Industrial+Disputes+Act+1947
24
Vijay Kumar Majee v State of Rajasthan (1968) 2 LLJ 369, 401 (Raj)
25
Kesaram Industries & Colon Mills Ltd v third Industrail Tribunal 1987 Lab IC 769, 771 (Cal)(DB)
26
Although not all unionised employment disputes are covered as the employees not falling under the definition
of workman cannot opt for arbitration under 10A.
27
Vithalbhai B patel, Law on Industrial Disputes, Universal Buttersworth and Wadhwa (4 th Edn 2010) Vol 1 at p
28
Government of India (2002), Report of the Second National Commission on Labour, Conclusion and
Recommendations, Chapter 15, p 37, para 6.22
29
Santokh Ram ,Government's Discretion to Refer Industrial Disputes for Adjudication Indian Journal of
Industrial Relations, Vol. 15, No. 2 (Oct., 1979), pp. 307-322
30
For eg in Australia, the Commonwealth Arbitration Commission has been set up to settle industrial disputes
through conciliation and arbitration.
PART II: ARBITRABILITY OF EMPLOYMENT MATTERS

Arbitrabiliry refers to whether a given issue is subject to arbitration. 31 Article V(2) of the
New York Convention recognizes this exclusion. It provides that recognition and
enforcement of an arbitral award may also be refused if the competent authority in the
country where recognition and enforcement is sought finds that: (i) the subject matter of the
difference is not capable of settlement by arbitration under the law of that country; or (ii) the
recognition or enforcement of the award would be contrary to the public policy of that
country.

Under Arbitration & Conciliation Act, 1996 (A&C Act) based on the United Nations
Commission on International Trade Law Model Law, an arbitral award is not enforceable if it
is contrary to the public policy of India or deals with a subject matter that is not capable of
settlement by arbitration i.e. that is nonarbitrable. 32

In principle, an arbitral tribunal can adjudicate upon every dispute that can be adjudicated
upon by a court, except a few that are not considered to be ‘arbitrable’. 33 Public policy of a
jurisdiction reserves certain matters for the court alone. These include matters where the type
of remedy required is not one, which an arbitral tribunal is empowered to give.34

Arbitrability of employment matter is an essential question that needs to be answered. A

question of arbitrability is a question of public policy.35 Indian arbitration act doesn’t answer
the question of arbitrability following the footsteps of UNCITRAL law which itself doesn’t
address this question. The UNCITRAL model law has given discretion to countries to
determine their own set of rules to determine arbitratbility question. In India this question
was dealt by Bombay HC and MP HC.

Kingfisher Airlines and Rajesh Korat: Determining arbitrability on a slippery slope

31
Barbara Crutchfield George; Patricia Lynch; Mary Jane Dundas; Jane Elizabeth Hallas, Mandatory and
Voluntary Arbitration of Workplace Disputes: A Comparative Analysis of
U.S. & U.K. Systems, 2 J. Alt. Disp. Resol. 45 (2000).
32
art 48, A&C Act.
33
Journal of Intellectual Property Law & Practice, Volume 14, Issue 8, August 2019, Pages 632–
641, https://doi.org/10.1093/jiplp/jpz072
34
Francis Russell, Russell on Arbitration (22nd edn, 2002), 28, para 2.007.
35
Section 34 and 48 both render the award unenforceable if the subject matter of the arbitration is against public
policy. they are based on t
The question before the Bombay HC in the Kingfisher Airline 36 case was whether a industrial
dispute or a dispute relating to enforcement of right or obligation created under the IDA is
arbitrable i.e. capable of being adjudicated by a private forum of an arbitrator.

The court laid down that test to be applied for the dispute of the nature in the present
proceeding is not whether the action therein is in-rem or in-personam. The test would be
whether the adjudication of such dispute is reserved by the legislature exclusively for public
fora as a matter of public policy. (Para 13) looking into the broad scheme and object of IDA.
The court speaking in context of the Industrial Dispute said that industrial dispute is not seen
as a private dispute between the employer and employee but seen as affecting the industry as
a whole. The court is right and we have pointed out in the Part I that industrial dispute can
never be an “individual dispute”.37 The issue however was the arbitrability of employment
dispute as a whole and not in the context of IDA.

Delhi High Court in Union of India v Competition Commission of India 38 approached to

decide upon the question of maintainability of proceeding before the Competition
Commission where an arbitration agreement existed between the parties. The court held
proceeding before the arbitration commission as maintainable, since the scope and ad focus
of CCI investigation and consideration is very different from the scope of an inquiry before
an arbitral tribunal.

It is argued that establishment of special court/tribunal is seen as a public necessity hence

making the adjudication of such disputes by a private body is against this public concern. 39
Arbitration is a private affair an arbitral tribunal cannot be seen to oust the jurisdiction of a
special court..40 This is to not to suggest that creation of special tribunal with respect to
certain subject by itself precludes arbitration in that subject matter. The matter will be non
arbitrable only when the statue creates special rights and obligation and gives special powers
to the tribunal that are not enjoyed by the courts.41

Arbitrability relates to the issue in dispute and whether they are capable of settlement by
arbitration. When parties have chosen arbitration to resolve conflict then there is heavy

36
Kingfisher Airlines Limited v. Prithvi Malhotra Instructoe\r
37
See application of
38
Booz Allen, (2011) 5 SCC 532, ¶ 20 (India); National Seeds Corporation, (2012) 2 SCC 506, ¶ 66 (India).
39
id
40
S.B.P. & Co. v. Patel Engineering, (2005) 8 SCC 618, ¶¶ 24, 37 (India)
41
Supra 38
presumption in favour of arbigrability42 while drafting the UNICTRAL mode, law uts drafters
ignored the question of arbitrability however the issue has not given away. In its recent paper
“possible future works in the area of international Commercial arbitration” 43 it has referred to
the need to reach some worldwide consensus on the issue. There are three essential elements
in the article of New York Convention, firstly, there must be an agreement in writing,
Secondly, there must be a defined legal relationship and thirdly the subject matter of the
dispute must be capable of settlement by arbitration. We are only concerned with the last
requirement. There will be some forms of dispute which will be seen as falling within the
exclusive jurisdiction of the national court. The rationale for this is that certain matters are
considered to be so important to the operation of justice or running of business that they are
reserved exclusively to the control of courts.

Presence of special tribunals: A conflicting standpoint

The arbitration provided for under the ID Act is different from private arbitration, referenced
to under Section 8 of the Arbitration Act. Under the ID Act, even though arbitration exists as
a means, the same has been largely reserved by the legislature for the Authorities established
under the Act.44 Therefore, all disputes pertaining to matters under the ID Act are inarbitrable.
A stark contrast to the same can be seen in the Court’s observation in Vimal Kishor Shah &
Ors. v. Jayesh Dinesh Shah, where the court had to ascertain the arbitrability of trust
disputes.45 Unlike the case of labour disputes, here the Court saw the existence of the Indian
Trusts Act, 1882 as a bar on the parties’ ability to resort to arbitration, as the Act did not
provide for the same. Such incoherent reading of the arbitrability test propounded in the Booz
Allen case has left the commentators of arbitration in a state of confusion, where there is no
consensus on what the ‘true test’ of arbitrability is. The courts have been blindly, without
paying due consideration to the need for arbitration, deciding arbitrability based on the text of
the Act. In wishing to give the welfare legislation the broadest interpretation possible, the
courts have seemed to turn a blind eye to the practical benefits arbitration offers. Such an
approach creates a slippery slope and may result in the advent of a day when a majority of
subject matters are inarbitrable in India

42
Craig, Park, Paulson, International Chamber of Commercial Arbitration, (2000), 62. Also see Moses H Cane
Memorial Hospital v Mercury Construction Corp 460 US 1, 24, 103.5 Cr 927, 74 L Ed 2d 765 (1983)
43
A/CN 9/460 para 32-34
44
The Industrial Disputes Act, 1947, No. 14 of 1947, §10 (India).
45
Vimal Kishor, (2016) 8 SCC 788, ¶ 54 (India); Shradha Rakhecha, The Curious Case of Arbitration of Trust
Disputes, 2 (2) INDIAN J. ARB. L. 165, 172 (2014).
The very open textured nature of public policy has prompted fears about its unpredictable
scope. It is very unruly horse and when you get astride it you never know where it will carry
you. 46 There is a distinction between domestic public policy issue that arise during the course
of the arbitration and public policy issues which arise at the enforcement stage of an
international arbitration award.47

The application of the Act does not depend upon the dispute being a commercial dispute.
Reference to arbitration and conciliation depends upon the existence of an arbitration
agreement and not upon the question whether it is a civil dispute or commercial dispute48.

Concept of employment involves three ingredients (i) employer (ii) employee and (iii)
contract of employment.49 A term employment refers to a condition in which a man is kept
occupied in executing any work.

PART III: CLASS ARBITRATION V. INDIVIDUAL ARBITRATION

Class arbitration is not an alien concept in employment dispute adjudication process. As

pointed out in Part I parties can resort to voluntary arbitration only when collective interest is
involved. From our discussion in part I it appears that individual arbitration is what is
prohibited under the current employment adjudication procedure. The Indian courts, unlike
US where class action suits have long been a part of American jurisprudence 50, have not
formulated any jurisprudence when it comes to class arbitration. 51 SCOTUS (Supreme Court
of United States0 debated on individual arbitration and class arbitration or which among the
two is a fundamental attribute of Federal Arbitration Act (hereinafter referred as FAA). 52
Indian SC or HC have not yet gone into this aspect of Arbitration and Conciliation Act 1996.
The example of class arbitration in employment matter suggests that class action arbitration
has also been read as the waiver of right to class action under Labour legislation. 53 Employer
is in a more dominant position in private adjudication process hence abstaining employees to

46
Ricjardson v melllish (1824) 2 Bing 229, 252
47
Andrew Tweeddale, Keren tweedale, Arbitration of Commercial Disputes, Oxford University Press at p 114
Also See Westacre Investment Inc v Jugoimport SDPR Holding Co Ltd (2000) QR 288
48
H. Srinivas Pal v. H.V Pal 2010 (7) SCALE 171
49
Chinta raman Raov State of Madhya Pradesh (1958) 1 SCR 1340. Also see workmen of nilgiri coop Mkt
Society Ltd v State of Tamil Nadu, AIR 2014 SC 1639
50
Supreme Tribe of Ben-Hur v. Cauble, 255 U. S. 356, 363 (1921)
51
Elements of US scale class acton has been imported i arbitration context, SL Strong, Class, Mass and
Collective arbitration in national and international law, OxfordUniversity Press, Edition ed..: New York, 2013 at
p 6opqwefgh
52
See Breyer’s dissenting opinion in AT&T v Concepcion where he argues that majority seems to have
characterised individual arbitration as a fundamental attribute of Federal Arbitration Act (FAA).
53
See DR Norton, American Express and Epic sysytem
resort to class action waiver appears to be against the rule of law. This part will deal with the
issue of antithetical reading of class arbitration and class action waiver. The US case of Epic
System delved into this question in detail.

Class arbitration and class action waive: Epic system case

SCOTUS’s decision in Epic System Corp v. Lewis is an authority on class action arbitration
and deserves a discussion for our purpose. The court in the decision upheld the class action
waiver inviting criticism for its anti employee stands. The question to be determined in the
case was whether employee and employer can be allowed to agree that dispute between them
will be decided on one-on-one basis? Or their agreement to enter into individual arbitration
agreement will be against the statutory protection provided under welfare employment
legislation?

US’s labour welfare legislation National Labour Regulation Act (hereinafter referred as
NLRA) focuses on protecting unionization and collective bargaining in the workplace not on
guaranteeing class or collective action procedures in disputes before judges or arbitrators. 54
The question before the court then was whether NLRA renders class arbitration as illegal? It
was argued on behalf of the employees that Federation Arbitration Act (FAA) saving clause
creates an exception for cases like theirs i.e. class action waiver. SCOTUS relied on the
saving clause of FAA which allows courts to refuse to enforce arbitration agreement “upon
such grounds as exist at law or in equity for the revocation of any contract.” The court
however rejected this claim placing its reliance the word “any” where the saving clause
establishes an equal treatment rule for arbitration contracts. 55 The court held that clause
permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses,
such as fraud, duress, or unconscionability.......’ and clause offers no refuge for defences that
apply only to arbitration.56

In DR Horton the court said the NLRB said that NLRA nullifies FAA. 57NLRA also doesn’t
seems to be providing any right to class action arbitration as it was enacted way before the
concept was even developed.58

54
See Section 7 of NLRA
55
Kindred Nursing Centers L. P. v. Clark,,
56
Concepcion, 563 U. S., at 339
57
D. R. Horton, Inc., 357 N. L. R. B. 2277.
58
Epic system
The court delved into the object of FAA and the relevant provisions advocating for party’s
autonomy placing too much reliance on parties contract to resolve any dispute under the
arbitration Act and the “Arbitration Act seems to protect pretty absolutely”59

Class arbitration is a matter of consent: An arbitrator may employ class procedures only if the
parties have authorized them.60 The consent cannot be inferred by the court. it must be
explicitly given by the parties.61 This restriction is put given the cumbersome nature of class
actions, those benefits are absent in class arbitrations. Therefore, courts cannot infer consent
to class arbitration.62

The court In Epic system was dealing with the question whether employee and employer can
agree The concern of dissenting judges in Epic System appears to have been rightly placed. 63
US Supreme Court in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. 64
has said that a party
may not be compelled … to submit to class arbitration unless there is a contractual basis for
concluding that the party agreed to do so. Silence regarding class arbitration generally
indicates a prohibition against class arbitration.65 Requiring a class mechanism is an actual
impediment to arbitration and violates the FAA66.

Should it be applied in India? Maybe not!

The legislative history of the FAA makes it clear that the its drafters intended FAA to govern
voluntary arbitration agreements among merchants of equal bargaining power and to exclude
all workplace disputes.67 Indian labour and Arbitration legislation present a more complicated
situation than dealt by the epic system. So whether class arbitration may only arise in
countries that allow large scale litigation in their national court or with respect to same
subject matter allowed in class or collective litigation. Gary Born 68 answerers this dilemma in
59
Epic system at 6
60
Stolt-Nielsen S.A. v. Animal Feeds Int'l Corp., 559 U.S. 662, 684 (2010)
61
Lamps Plus Inc. v. Varela
62
Supreme Court Dims The Light On Class Arbitration, Fisher Philips,
63
J GINSBURG, “The inevitable result of today’s decision will be the underenforcement of federal and state
statutes designed toadvance the well-being of vulnerable workers.”
64
559 U.S. 662, 684 (2010).
65
Quilloin v. Tenet Health Sys. Phila., Inc., 673 F. 3d 221, 232 (3d Cir. 2012). Also see Reed Elsevier, Inc. ex
rel. LexisNexis Div. v. Crockett, 734 F. 3d 594, 599 (6th Cir. 2013); Reed v. Fla. Metro. Univ., Inc., 681 F. 3d
630, 643-44 (5th Cir. 2012) 5
66
D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 360 (5th Cir. 2013).
67
A Bill Relating To Sales And Contracts To Sell In Interstate And Foreign Commerce; And A Bill To Make
Valid And Enforceable Written Provisions Or Agreements For Arbitration Of Disputes Arising Out Of
Contracts, Maritime Transactions, Or Commerce Among The States Or Territories Or With Foreign Nations,
Hearing on S. 4213 and S. 4214 before S. Comm. on the Judiciary, 67th Cong. 10 (1923) (statement of William
H. H. Piatt, Chairperson, Am. Bar Ass'n Comm. on Commerce, Trade, and Commercial Law);
68
Gary. B Born, INTERATIONAL COMMERCIAL ARBITRATION, 1232
the following words “[t]he fact that class actions are not recognized or available in many
national litigation systems should not preclude the use of class action arbitrations. Just as
the unavailability of documents only, fast-track, or similar dispute resolution mechanisms in
litigation does not invalidate arbitration agreements requiring such procedures). There may
be requirements regarding procedural regularity and an opportunity to be heard, imposed by
national law, but these would involve the implementation of the class action arbitration, not
its basic enforceability.”

PART IV: CONCLUSION

Condition of employment requiring employees to waive their rights to vindicate their

statutory workplace protection in court contributes forced arbitration. Forced arbitration is
one sided and not consensual due to inherent inequality in the employer-employee
relationship. Lack of consent therefore does not result in Agreement. 69 Employers are
increasingly entering the arbitration clause in the employment agreement to resolve
employment disputes.70 The U.S. General Accounting Office reported that by 1995, ten
percent of all employers with 100 or more employees used binding.71

Labour arbitration is premised on an equal bargaining relationship between a union and an

employer.72 My non unionised arbitration provisions are forced arbitration provision
unilaterally imposed by employers on employees as a condition of employment and is not
bargained for between employer and employee. There is a need to be mindful of the clear
distinctions between arbitration of labour disputes under a collective bargaining agreement
and mandatory arbitration of individual statutory claims outside of the context of collective
bargaining.73

In the 17th session of the Indian Labour conference it was agreed that question of making the
provision of Indian Arbitration Act applicable to the arbitration proceeding under the
Industrial Dispute Act should be examined afresh by the central government 74. It was also

69
Carmen Comsti, A Metamorphosis: How Forced Arbitration Arrived in the Workplace, 35 Berkeley J. Emp.
& Lab. L. 5 (2014).
70
Anshul Prakash & Parag Bhide, Whether employment disputes can be settled through arbitration?,
BWPeople.in, 6th June 2018, accessed https://www.khaitanco.com/PublicationsDocs/BWpeople-
KCOCoverage6June18ANP.pdf
71
See Lisa B. Bingham,An Update on Employment Arbitrationand the Courts, 2:2 PERSPECTIOVNE SW
ORK 19 (1998).
72
Carmen Comsti, A Metamorphosis: How Forced Arbitration Arrived in the Workplace, 35 Berkeley J. Emp.
& Lab. L. 5 (2014).
73
Cole v. Burns International Security Services, 105 F.3d 1467 (D.C. Cir. 1997).
74
C.S.K. Singh, Indian Labour Conference 26 (Manak Publications, 1998)
agreed at the 17th conference that as far as possible disputes should be resolved through
bipartite mechanism. Where this was not possible tripartite mechanism could be adopted but
only in the form of arbitration. It is aid that adjudication is a form of arnitration and if the
adjudication process can be simplified then arbitration can be substituted.75

75
R.K.A. Subrahmanya, LABOUR ADJUDICATION IN INDIA : LEGISLATION AND TRENDS,