Can I insist that new hires sign mandatory arbitration agreements?

Yes, but there's a caveat: Although recent decisions from federal (including the U.S. Supreme Court) and state courts haven courage employment arbitration agreements, the issue of whether such agreements are enforceable has not been fully and finally settled in all jurisdictions. For example, at least one federal Court of Appeals has ruled that employers may not force employees to arbitrate discrimination claims under federal law (e.g., claims for unlawful race, sex, disability, or age discrimination).

In contrast, many state courts, including the California Supreme Court, have ruled that agreements to arbitrate employment claims, including discrimination claims under state law, are enforceable provided they guarantee certain fairness and due process standards. To be fair and to meet due process guidelines, arbitration agreements must not be ''unconscionable'' or be otherwise procedurally biased against the employee in the eyes of the court.

What are the advantages to a company of compelling arbitration rather than allowing for a trial court to hear a case? Saved time and money—lots of it. It's generally true that arbitration is advanta-geoustoemployersbecauseitoftenreducesthecostsoflitigation, imposes some reasonable limitations on discovery, and grants plaintiffs smaller awards than a court or jury verdict. In addition, arbitration generally reaches resolution much faster than traditional litigation.

There are also advantages for employees: Generally speaking, arbitration is inexpensive, efficient, and allows workers to be ''heard'' on a timelier basis, that is, closer to the triggering event. This sometimes increases the chances of a successful resolution because the employee doesn't stew over the problem for months or years before getting to trial.

On the other hand, certain companies feel less inclined from a moral standpoint to mandate that employees give up their access to the court system. Other employers feel that all the ''at will'' and ''mandatory arbitration'' paperwork in the new hire process alienates new hires from day one. As a result, determining whether mandatory pre-employment arbitration clauses belong in your employment practices and policies is a matter of opinion, corporate culture, geography, and the laws of your jurisdiction. After all, certain states are simply more employer friendly than others.

Tell Me More

Confer with outside counsel regarding both the decision to use arbitration agreements and for the drafting of those agreements. If your company chooses to implement a practice of mandating arbitration of workplace disputes, follow these guidelines:

1. Choose the American Arbitration Association (AAA) or some other respected arbitration firm as your arbitrator.

2. Do not restrict the damages the arbitrator can award. Remedies available in arbitration should be identical to those allowed at law.

3. Your company should pay all arbitration fees. However, you may create a policy that requires employees to pay reasonable filing fees and other administrative costs. As a side note, if you decide to adopt an arbitration policy for your current employees (as opposed to your newly hired ones), remember that you will need to give them some new consideration in exchange for their signature. Cash consideration is the norm; the appropriate amount should be discussed with qualified counsel before implementation.

Finally, mandatory arbitration language is normally found in offer letters, employment applications, and employee handbooks. In order to increase the enforceability of the agreement, it should also be presented as a freestanding written agreement between the company and the employee. See Appendix B for examples of mandatory arbitration language. The samples are intended as blueprints only and just represent an effort to save you time. Please ensure that qualified counsel customizes such language to your company's particular needs.

< Prev   CONTENTS   Next >