When Jones went to work for KBR in Texas, and later for its subsidiary, Overseas Administrative Services, she signed contracts containing mandatory binding arbitration clauses, which required her to give up her right to sue the companies and any right to a jury trial. Instead, the contracts forced Jones to press her case through private arbitration, which she did in 2006. In that forum, the company that allegedly wronged her pays the arbitrator who is hearing the case. For that she can thank Dick Cheney.
At the time of the alleged attack on Jones, KBR was a subsidiary of Halliburton, the behemoth military-contracting and oil-technology firm. (KBR was sold off earlier this year.) So Jones is covered by the Halliburton dispute-resolution program, which was implemented when Cheney was Halliburton's CEO. The system bears the markings of Cheney's obsession with secrecy and executive power. On his watch, Halliburton, in late 1997, made it more difficult for its employees to sue the company for discrimination, sexual harassment, and other workplace-related issues.
One day, Halliburton sent all its employees a brochure explaining that the company was implementing a new dispute resolution system. The company sold the new program as an employee perk that would create an "open door" policy for bringing grievances to management and as a forum for resolving disputes without expensive and lengthy litigation. In practice, it meant that anyone who had a legitimate civil-rights or personal-injury claim signed away his or her constitutional right to a jury trial. Anyone who showed up for work after getting the brochure was considered to have agreed to give up his or her rights, regardless of whether the employees had actually read it. In 2001, the conservative and pro-business Texas Supreme Court overturned two lower courts to declare that this move was legal.
Dallas lawyer John Wall has something of a franchise suing Halliburton on behalf of employees in civil-rights and other workplace cases. He says there hasn't been a year since 1986 that he hasn't had at least one case against Halliburton. He's represented dozens of the company's employees and won numerous settlements and jury trials in civil lawsuits against the company. The reason, he says, is that Halliburton targets "the old, the injured, and the ill" when it makes layoff decisions, and it has a history of firing people for making workers compensation claims. Under the arbitration process, he says, Halliburton has fared much better, winning many more cases. When it loses, he says, the company pays significantly lower damages, which he says rarely exceed $50,000.
The dispute-resolution program had been in place at one Halliburton subsidiary for a few years before Cheney arrived. But Wall contends that Halliburton adopted it for the rest of the company to head off lawsuits that would invariably have resulted from Cheney's ill-fated decision to merge Halliburton with Dresser Industries, a troubled company that had once employed both George H.W. Bush and his father, Prescott Bush. Indeed, court documents show that Halliburton sent out its arbitration brochure just months before the merger. Afterward, Halliburton closed several Dresser plants in Texas, firing 10,000 people.
Federal law requires companies to give 60 days notice before closing a manufacturing plant. Failing to follow the law can leave a company liable for back pay and benefits to laid-off employees. Rather than announce the plant closings, Wall says, Halliburton moved the Dresser employees from the targeted plants onto the Halliburton payroll, even though in many cases there were no jobs for them. Then, once they were on Halliburton's books and bound by the binding arbitration clause, they were let go.
Among those laid off in 1999 was a longtime Halliburton employee named Lonnie Pennington. Pennington had sued Halliburton once before, back in the 1980s, for retaliating against him for filing a workers compensation claim concerning a back injury. That case resulted in a jury verdict of almost $200,000 in 1989. Halliburton continued to fight the verdict for another three years, and refused to reinstate Pennington until1992.
When he was fired again in 1999, Pennington made a formal complaint to the Texas Commission on Human Rights, alleging that the layoff was not only a form of retaliation for his complaints about discrimination on the job but also violated the Americans With Disabilities Act and the 1967 federal law barring age discrimination in the workplace. As part of its investigation, the commission sent repeated requests to Halliburton for the layoff documentation, but the company refused to respond. Finally, the commission sent a letter to Cheney's office with a gentle reminder that the law required Halliburton to respond. Wall says that Cheney reportedly called the commission and basically told them to fuck off.
So the commission contacted the sheriff and had him serve Cheney with a subpoena for the documents. Rather than turn over the documents, however, Halliburton shredded them. (Wall eventually deposed the woman who did the shredding,.) In a traditional civil lawsuit, judges have wide latitude to impose sanctions against a defendant for destroying evidence. They can tell a jury to assume that the information was extremely damaging to the defense. They can impose fines. They can find for the plaintiff and toss out the rest of the case to punish the other side, regardless of how strong the case was.
But when Pennington later went before the Halliburton arbitrator, the arbitrator dismissed his case, saying he had failed to produce sufficient evidence to support his claims, which, of course, was difficult to do after Halliburton had shredded part of his personnel file. The arbitrator made no mention of the evidence destruction. Wall protested the evidence destruction to the Texas Attorney General, Republican John Cornyn, who is now a U.S. senator, but Wall says Cornyn's office never investigated and no one was ever held accountable for it.
By May of this year, when her lawyer sued in federal court to try to get her case before a jury, Jaime Leigh Jones had been in arbitration with KBR for 15 months. L. Todd Kelly, her lawyer, recently called arbitration a "star chamber," and argued that it was a way of keeping her case out of the public eye. In court, both Halliburton and KBR have responded to the suit by arguing that Jones knew what she was doing when she signed her employment contract and that she should have to abide by the arbitration agreement. In response to the media flurry triggered by Jones' public allegations, KBR and Halliburton have also claimed that private arbitration is not secretive. Halliburton's history suggests otherwise.
In 2002, the Securities and Exchange Commission launched a probe into accounting irregularities at Halliburton that came in the aftermath of its merger with Dresser Industries. The merger had resulted in a huge drop in Halliburtons stock value due to enormous unsettled asbestos liabilities that Cheney had failed to disclose to shareholders when he won their approval for the merger. As the inquiry heated up, reporters started looking at Cheney's tenure as CEO. One of them called Wall, who told the journalist about the shredding incident. A few days later, Wall received a "cease and desist" order from the arbitrator who had handled the Pennington case, telling him that he could not disclose anything about the document shredding.
It was a sign that secrecy is one of the reasons that Halliburton prefers arbitration. If its employees could sue the company in a regular court, reporters would have access to all the complaints and most of the documents in the cases. They could locate the plaintiffs and interview them. In effect, there would be some sunshine on Halliburton and KBR's corporate behavior. Instead, complaints made through private arbitration are virtually impossible to find and examine in any systematic way.
This week, I asked the American Arbitration Association (AAA), which handles many of Halliburton's arbitrations, if I could review all the complaints filed against the company by its employees in arbitration over the past three years—complaints that would be public if they had been filed in a courthouse. I received the following response:
"The AAA adheres to strict Standards of Ethics and Business Conduct, guided by our core values of Integrity, Conflict Management, and Service. As part of these ethical standards, we avoid any conflicts of interest that may jeopardize our impartiality.
The AAA's rules protect the confidentiality of the arbitration process by restricting the disclosure of information related to cases filed with the AAA by AAA employees and arbitrators."
When I protested, noting that simply releasing the complaints would not affect anyone's impartiality, an AAA spokesperson sent me to Richard Naimark, a senior vice president at the company. He explained that while arbitrations aren't necessarily confidential—though many are—they are technically owned by the two parties, who can release the information if they want to, but AAA cannot. Naimark insisted that employees like the confidential nature of arbitration. "Americans value their privacy," he said.
Rather than privacy, employment lawyers routinely say that most employees they represent crave a jury trial. Texas lawyer Barbara Gardner challenged the way Halliburton forced arbitration on its employees, but, after losing the case in 2001 before the Texas Supreme Court, she has taken a dim view of mandatory arbitration in employment contracts. "Employees don't fare very well in arbitration," she says "It's not a level playing field. It's all set up to make sure the employer wins." Her firm will no longer handle employment cases forced into private arbitration because they are considered so hopeless.
While it's impossible to get all the complaints filed by Halliburton's employees, it is, thanks to a California state law requiring arbitration companies to disclose some bare-bones data, possible to examine Halliburton's track record in those cases. Employment lawyer Cathy Ventrell-Monsees testified before Congress in October that AAA data show that between January 2003 and March 31, 2007, of the 39 Halliburton cases that went all the way to a decision, Halliburton won 32, a win rate of 82 percent. Plaintiffs in employment litigation face a high bar in court trials as well, but even so, that figure is very high. Employers win about 64 percent of all employment cases at trial in federal court and about half in state court, according to data from the Justice Department's Bureau of Justice Statistics (BJS).
The AAA data is a bit inscrutable, but a quick review of its most recent public report suggests, too, that the employee winners in Halliburton arbitrations arent winning much money. Out of 119 cases disposed of between April 2003 and March 2007, I could only find three in which the arbitrator actually awarded any money. The largest was for $82,000, and the smallest was a little over $7,000.
In state courts, according to the BJS, 43 percent of the awards in employment- discrimination trials were more than $250,000, and 16 percent were above a million dollars. The median award in state court for a discrimination case was $218,000 in 2001, the most recent year for which data is available. It's not too hard to see why Halliburton and KBR want to keep Jaime Leigh Jones in arbitration. If the allegations she has made are true, and her lawyers can prove it, her case could be worth many millions of dollars in a jury trial. It could also be both expensive and embarrassing, two things that Cheney clearly wanted to avoid a decade ago when he stacked the deck against his company's employees.