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Employee arbitration agreements are back

October 12, 2018

By Michael Burns, courtesy SBAM Approved Partner ASE

With last Spring’s Supreme Court Epic Systems Corp. ruling that upheld class action waivers and arbitration as a legal dispute resolution process, employers are once again free to require employees to sign alternative dispute resolutions agreements. 
That said, these waiver agreements must meet legal specifications or else be rejected by a court as unfair.

Employers who choose to implement arbitration with employees should work with qualified legal counsel to draft a legal arbitration and class action waiver agreement.

An Economic Policy Institute survey found more than half of nonunion private sector employers have mandatory arbitration agreements in place. That translates to over 60 million employees covered by such agreements.

 Some common components of a fair arbitration agreement are:

  • Both parties have a say in choosing the arbitrator. Typical rules supporting arbitration agreements give both sides the right to reject at least one arbitrator when presented a list of qualified arbitrators.

  • The arbitrator should be required to make known information about his/her personal interests, so the parties can determine if he/she is biased one way or the other.

  • Though not all, most arbitration agreements have the employer pay for the arbitration. It is not recommended an employer impose an expensive arbitration process on the employee if costs will be shared.

  • Employees should be given the opportunity to have the arbitration agreement reviewed before signing, and the employee should be advised they have the right to have their own attorney look the agreement over.

  • The damage relief employees may get under the arbitration agreement should normally be what the employee would have received had they been able to litigate the claim in court.

What are the advantages of arbitration?
The big one is cost saving. Secondly, arbitration solves for the inconvenience and distraction of a court case. Further discovery in a legal action might reveal information about an organization that it would prefer not to be made public due to public relations concerns. Arbitration is generally faster than court proceedings, and the process is more predictable.

What are the negatives of using arbitration?
Employee relations may take a hit, particularly if the employer is initiating arbitration for the first time rather than having it in place to start with. There can be confusion over arbitration, less discovery (this is good from a cost savings perspective), and the decisions generally cannot be appealed.  

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