The U.S. Supreme Court recently ruled in Circuit City Inc. v. Adams, 2001 WL 273205 (U.S.) that a claim of employment discrimination had to be arbitrated according to the parties' agreement. The Wall Street Journal, New York Times and other news publications heralded this decision as a proclamation that employers can routinely force workers to arbitrate employment disputes rather than litigate them. While encouraging to employers, the holding is not that profound. Rather, it provides employers in the Federal Ninth Circuit, e.g., Alaska, Arizona, California, Iowa, Montana, Nevada, Oregon, Washington, Guam and Hawaii, with the ability to require employees to arbitrate employment disputes in much the same manner as employers elsewhere.
Arbitration may not be appropriate for all employers or in all circumstances. Generally, arbitration is less expensive but there is frequently a tendency for arbitrators to "split the baby." Also, in cases where the employer is likely to obtain summary judgment, e.g., cases where the employee cannot produce sufficient evidence to support his/her claim, arbitration may not be the best alternative as judges are more likely to grant summary judgment than arbitrators. Moreover, certain employment agreements, specifically those of seamen, railroad workers and transportation workers who actually move goods in foreign or interstate commerce, are excluded from arbitration by the Federal Arbitration Act as these workers generally are covered by collective bargaining agreements having arbitration clauses that are enforceable under federal labor laws.
Despite the Supreme Court's favorable decision, arbitration agreements remain subject to certain challenges, namely, that Congress intended to preclude arbitration, that the arbitration agreement is defective under state contract principles, or that the arbitration proceedings do not meet minimum fairness standards. Whether these challenges will be successful frequently depends on the court in which the enforcement proceeding is brought. Most courts agree that Congress did not intend to preclude arbitration of statutory employment claims, but, courts are all over the board on contract formation and due process issues. These issues frequently turn on whether the employee was offered something in addition to employment or his/her regular compensation, who pays the fees, where the arbitration proceeding takes place, and what remedies are provided.
Many factors must be considered in establishing an enforceable predispute arbitration program. Therefore, we encourage employers who have or are considering establishing a predispute arbitration program to consult with counsel to assure that their programs have the best possible opportunity to withstand legal challenge.
For more information or assistance, please contact one of the following partners in our Labor and Employment Group:
These materials should not be considered as, or as a substitute for, legal advice and they are not intended to nor do they create an attorney-client relationship. Because the materials included here are general, they may not apply to your individual legal or factual circumstances. You should not take (or refrain from taking) any action based on the information you obtain from these materials without first obtaining professional counsel and you should not send us confidential information without first speaking to one of our attorneys and receiving explicit authorization to do so. |
