Arbitration remains effective tool for dispute resolution

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In the last several years, the federal circuit courts have been split on whether employers could force employees to ar-bitrate their employment claims. Last year, the United States Supreme Court finally resolved the issue.|ret||ret||tab|

In a 5-4 decision, the Court ruled that employment agreements containing arbitration provisions are enforceable under federal law. |ret||ret||tab|

As a result, employers are looking to this form of alternative dispute resolution to resolve employment disputes in lieu of litigation.|ret||ret||tab|

The Supreme Court disagreed with the Ninth Circuit Court of Appeal's decision of the California case, Circuit City Stores v. Adams, which held the act did not apply to any employment claims.|ret||ret||tab|

The primary issue centered on the in-terpretation of the Federal Arbitration Act's exceptions which excludes from the act employment contracts of seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce.|ret||ret||tab|

The Supreme Court agreed with the employer's argument that the phrase "other class of workers" is defined by the terms seaman and railroads. Therefore, the majority of Justices concluded that this qualifying language excluded only employment contracts with railroad em-ployees and seamen from coverage under the act.|ret||ret||tab|

As a result of this decision, many private employers have implemented arbitration agreements with their employees. Many of these employers feel that arbitration offers them the opportunity to resolve employment disputes more quickly and less costly.|ret||ret||tab|

They also feel it would be better to have these matters addressed by one who has specific knowledge and experience on employment issues rather than allowing jurors to decide these cases. How-ever, other employers fear that arbitration will cause more employees to complain than would have otherwise.|ret||ret||tab|

Employers who are interested in this dispute mechanism should be very careful in drafting the documents. The Su-preme Court stressed that the arbitration agreement must provide a fair mechanism for the employee to address his or her employment claim. Therefore, em-ployers are trying to devise a mechanism which will withstand court scrutiny.|ret||ret||tab|

Employers must consider whether to require the employee to split the cost of the arbitration, whether discovery will be allowed in the process, where the arbitration will take place, and whether the arbitration will ultimately be controlled by some other entity such as the Amer-ican Arbitration Association. |ret||ret||tab|

Already we have seen some courts strike down arbitration agreements in which the employers attempted to limit the amount of damages an employee could recover through the arbitration process, for example. Similar issues will continue to be addressed by the courts to insure that a fair and impartial dispute resolution process is in place.|ret||ret||tab|

Interestingly, the Ninth Circuit recently invalidated Circuit City's employment agreement again, not on the original basis but by holding that it was too one-sided under California contract law. As a result, many legal issues surrounding the arbitration of employment claims re-main.|ret||ret||tab|

The Supreme Court resolved one of these legal issues in a separate decision issued on Jan. 15 of this year. The Court addressed the statutory rights of the Equal Employment Opportunity Com-mission acting on behalf of an employee subject to an arbitration agreement.|ret||ret||tab|

The Court held in EEOC v. Waffle House Inc. that the EEOC retains the right to independently adjudicate an employee's claims through litigation even though the employee has signed an agreement to arbitrate all of his or her statutory discrimination claims.|ret||ret||tab|

In effect, the Court's ruling does not restrict the EEOC's statutory rights to pursue damages on behalf of an employee notwithstanding a valid arbitration agreement between the employer and the employee. Hopefully, this will not be seen as a major setback to employers as the EEOC has historically litigated less than 5 percent of all claims filed.|ret||ret||tab|

On a positive note, employers may see the EEOC promulgate guidelines concerning the fairness of arbitration agreements to placate the EEOC and, hopefully, to prevent its intervention, as a result of this recent decision. |ret||ret||tab|

Although we have not heard the final word on this issue, private employers should still consider using an arbitration agreement to resolve employment disputes, as it is the most effective means available at this time. |ret||ret||tab|

(Bob Lawson Jr. practices labor and employment law representing management and is a partner with the law firm of Blackwell Sanders Peper Mar-tin LLP in Springfield.)[[In-content Ad]]