There's been considerable controversy over exactly when arbitration agreements are enforceable. After all, if you require your employees to sign arbitration agreements, you're requiring them to sign away their right to jury trials. This is particularly controversial if the employment relationship ends in charges of sexual harassment or discrimination. A decade ago, when ex-employees were questioning the enforceability of arbitration agreements, courts ruled that the agreements could be assumed to cover discrimination and other "statutory claims" brought under state or federal law. More recently, courts in most jurisdictions have been enforcing arbitration agreements only if the agreements specifically state that they cover discrimination and other statutory claims. The apparent reason? Because Congress in Title VII granted employees the right to a jury trial, employees must knowingly and willingly sign away that right before the court will enforce arbitration.
Accordingly, if you're drawing up an arbitration clause for employees to sign, cover the following points to ensure that it will hold up if challenged:
The clause must be equally binding on both sides.
The employee must have read, understood and signed the agreement. It can't be hidden in fine print at the back of the employee handbook.
The clause has to provide a procedure for discovery. It's best to state that the arbitration process will follow the rules that have been agreed on by the American Arbitration Association or another major association where these issues have already been addressed.www.jamsadr.com: The JAMS Web site describes the company's dispute resolution services and allows users to start the dispute resolution process by submitting cases online.
www.adr.org: The Web site of the American Arbitration Association (AAA) includes state-by-state laws, arbitration procedures and biographies of AAA arbitrators.
There must be some kind of "consideration"-that is, the employee must have received something of value in exchange for signing the arbitration clause. Saying "Sign this or I'll fire you" isn't good enough. For current employees, you can offer bonuses or promotions in exchange for signing. For new hires, you can require their signatures as a condition of employment. If they don't like it, they don't have to take the job.
In some jurisdictions, the arbitrator must be able to assess the same level of damages as a regular judge-including punitive damages. Check with your attorney on this one. Have your lawyer look at the clause in any case, because some states have other distinctive rules.
To be effective, an arbitration clause should be part of a whole dispute resolution system. "An employer looking to go down this path is looking at conflict in the work environment as a matter to be addressed," Bridgesmith says. "A culture of conflict resolution in the workplace will be multifaceted, with arbitration being the most formal [method]." Your dispute resolution policy might start with a meeting with the supervisor in hopes of ironing out the problem informally. If needed, the dispute would go to mediation. Only if mediation fails would it go to arbitration.
Bridgesmith advises employers considering a dispute resolution policy to involve their employees in its final design. "Anything imposed from above tends to be resisted," he says. But if employees are involved in creating the policy, they'll probably agree that alternative dispute resolution can be better for everyone concerned.
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