Mediation and arbitration often provide a fair, consistent, faster, and more economical way to resolve employment-related disputes. In addition, the results of mediation and arbitration are confidential. Thus, these alternative dispute resolution mechanisms offer benefits to both parties: they minimize workplace disruption and litigation costs, while at the same time offering speedy results.
The U.S. Supreme Court recently issued a ruling protecting the rights of employers to require arbitration with their workers under Federal Arbitration Act guidelines, even if state laws try to limit those rights.377 The decision limits your employees' chances of challenging your employment agreements in court - but you may still lose the war if your arbitration clauses are ruled unenforceable for other reasons.
Where employees are not represented by a union and there is no collective bargaining agreement,378 an agreement to mediate and arbitrate is an important tool for an employer to consider in resolving employment-related claims. Mediation is voluntary and non-binding; it is a cooperative process designed to get the employee and employer to communicate with one another before a neutral party experienced in dispute resolution. Arbitration provides a binding resolution of employment disputes. Generally, courts have upheld arbitration clauses that provide an employee due process and the remedies and relief available under federal and state law or through administrative agencies.379
If arbitration is the preferred course, it is usually easiest to enter into an arbitration agreement at the beginning of an employment relationship. It should be made clear to the prospective employee that the arbitration agreement is a required aspect of employment.380 Arbitration agreements can also be effected during the employment relationship. This is usually accomplished by tying the agreement to the granting of special benefits , such as a promotion or a special pay raise.381 It is also helpful to make the promise to mediate and arbitrate a mutual one. A mutual promise to arbitrate is more likely to withstand "fairness" challenges to the validity of the arbitration agreement.
A few points to consider in designing an enforceable arbitration agreement are:
It should be noted that the Equal Employment Opportunity Commission ("EEOC") can seek all available remedies for job discrimination in court regardless of an employer-employee agreement to resolve disputes through binding arbitration.385
377 Preston v. Ferrer, 128 S. Ct. 978 (2008).
378 An arbitration provision in a collective bargaining agreement did not prevent an employee from commencing a statutory claim in court where the contract at issue containing the arbitration clause was agreed to by the union and not the individual. See Alexander v. Gardner-Denver, 415 U.S. 36 (1974). However, a clear and unambiguous waiver of statutory rights to sue under federal employment law in a collective bargaining agreement may be enforced. See Wright v. Universal Maritime Serv. Corp., 525 U.S. 70 (1998).
379 Absent fraud, impartiality of the arbitrator, or an award that violates public policy contained in a specific law, the arbitrator's decision is virtually unappealable. See Eastern Associated Coal Corp. v. United Mine Workers, 66 F. Supp. 2d 796 (S.D.W.V. 1998).
380 In Circuit City Stores Inc. v Adams, 532 U.S. 105 (2001), the U.S. Supreme Court held that the 1925 Federal Arbitration Act, 9 U.S.C. § 1 et seq., which requires enforcement of valid arbitration agreements, applies to an agreement entered into as a condition of employment.
381 In a recent decision, Campbell v. General Dynamics Government Systems Corp.,407 F.3d 546 (1st Cir. 2005), a federal court of appeals held that an e-mail sent to all employees did not result in a legally enforceable agreement to arbitrate employment-related disputes because the e-mail did not provide sufficient notice to employees that their continued employment with the company constituted a waiver of their right to pursue legal claims in a judicial forum Therefore, employers should be careful of how they communicate an arbitration policy to employees and ensure that it is done clearly in a form that will gain the attention of employees.
382 The Supreme Court has held, however, that an arbitration agreement was enforceable even though the agreement did not specify who would pay the administrative cost of the arbitration. See Randolph v. Green Tree Financial, 531 U.S. 79 (2000).
383 The AAA's rules can be found at http://www.adr.org. The CPR's rules can be found at http://www.cpradr.org.
384 See the above rules.
385 See EEOC v. Waffle House, Inc., 534 U.S. 279 (2002).