Anticipating litigation in the context of employment litigation is an inevitable cost of being in business. The cost of litigation for any case is ever rising. Thus, for employers, managing employment related claims through arbitration is an appealing method of reducing costs and managing the risks and liabilities associated with such cases. However, when arbitration agreements hold little enforcement, all appeal can be lost.
Employment related claims can include allegations of harassment, discrimination, wrongful discharge, unpaid wages, unpaid overtime and failure to provide break periods. Despite the existence of arbitration provisions in employment agreements, many plaintiffs, through their lawyers, will attack and often successfully invalidate those arbitration agreements.
Several recent cases have strengthened the employers hand in these disputes. Properly drafted employee waivers of the right to file a class action have also been upheld as binding in the United States Supreme Court. The Court recently overturned a line of cases from the California courts, which negated arbitration agreements on the basis of unconscionability, due to class action waivers allegedly violating public policy. In AT&T Mobility LLC v. Concepcion (2011), the Court held that under the Federal Arbitration Act (FAA) however, states are required to honor such agreements.
A similar result was recently reached in Nitro Lift v. Howard (2012), where the Oklahoma Supreme Court upheld a lower court denial of arbitration on the basis that the arbitration agreement held non-compete provisions. This Oklahoma Supreme Court ruling was overruled by the United States Supreme Court which rules that the state had the obligation under the FAA to arbitrate and the claims about the arbitration agreement should have been resolved by the arbitrator, not the courts.
In a recent Oregon case, (Hatkoff v. Portland Adventist Medical Center (2012)) an employee claim was dismissed for not having “complied with a mandatory arbitration procedure in the employee’s handbook.” The employee’s argument of unconsionability was dismissed being that the arbitration agreement did not hold any unreasonable time limits and did preserve most (but not all) of the employee’s rights.
While arbitration agreements are being upheld for frequently by many courts, it is crucial that such contracts are created and handled carefully. Including detail is important and even creating an arbitration agreement separate from the employment agreement can provide clarity that might be beneficial to employers if cause for arbitration ever arises. Highlighting important clauses in the agreement and clearly advising employees of their rights will further strengthen such contracts. Taking the time to carefully layout an employee arbitration agreement early on, can save employers both time and money in the future.