Court Affirms Arbitration Panel’s Order to Reinstate In-House Attorney in Employment Discrimination Case

This week, a Court of Appeals for the State of Wisconsin decided Sands v. Menard, Inc., No. 2008AP1703, 2009 WI App 70. Sands is a former general counsel for Menard, Inc. Her employment was terminated following a dispute over compensation. Pursuant to a mandatory arbitration agreement, Sands submitted her claims to an arbitration panel.

The panel found that Menard violated the Equal Pay Act by paying Sands less than a male employee and also found that Menard retaliated against her for complaining of discrimination. According to Sands’ attorney, the panel awarded Sands with attorney fees and $1.6 million, which included $900,000 in punitive damages. In addition, the panel ordered Menard to reinstate Sands to her position with a salary of $175,000 per year plus a bonus (she previously earned $70,000 per year).

Menard refused to reinstate Sands and filed a motion to vacate the award’s reinstatement order on the basis that the arbitrators manifestly disregarded the law allowing clients to choose their attorneys. The circuit court refused to vacate the award and the appellate court affirmed.

This opinion is noteworthy for several reasons:

• The doctrine of “manifest disregard” of the law (discussed here) remains a basis for vacating arbitration awards in Wisconsin.
• The court concluded that employment discrimination law (reinstatement) trumps the Rules of Professional Conduct (conflicts of interest).
• The large amount of money awarded by the arbitrators, coupled with the judicial enforcement of the panel’s decision, overshadows the latest criticisms to mandatory arbitration in employment and consumer contracts. Namely, that binding arbitration is unfair to individuals.
• The court, granting the arbitration panel’s decision great deference, is in accord with the strong federal policy favoring arbitration. See latest Supreme Court case here.
• As suggested by Martha Neil here, this decision could persuade other courts to follow this court’s holding.

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