Arbitration Agreements

cxc

If your company requires employees to arbitrate their employment discrimination claims, what has been your experience with that process? I've heard that some employers have decided against using arbitration, finding that it is not the panacea it was expected to be. I would be interested in your thoughts and experiences. Thanks.

WOCO Frank

It has taken me 18 months, but I've finally convinced my current employer to develop a mandatory arbitration process. The company I had formerly worked for had great success with it, although we had limited its use to non-union employees.

We found that our process:

Helped create a feeling that HR was an advocate for the employee;
Enabled us to find out about problems in their earlier stages;
Provided us a "pre-emptive strike" against EEOC filings; and
Boosted our fight against unwarranted unemployment claims.

I was a major opponent of its use when we first rolled it out. By my nature, I don't like "mandatory" anything, and I tend to shy away from anything that curtails anyone's legal rights. It only took a few months for me to see that by-and-large, legitimate claims were being addressed by the new system, and in a more effective manner.

I am anxious to see the same results with my present employer as we move forward with this.

P.S. - We had not one case where the EEOC or any other regulatory/enforcement agency ruled an arbitration agreement void.

System

There's an article on this subject, "Considering a mandatory arbitration program for your employees?" on our National News page:
[url]http://www.hrhero.com/national/nationalnews.shtml[/url]

James Sokolowski
Senior Editor
M. Lee Smith Publishers

Gillian

I feel the opposite of WOCO Frank. I think that arbitration agreements detract from the ability of the employer to have a positive relationship with its employees. I think that an employee who is asked to sign one at the new hire orientation thinks the same thing that the rest of us think when we go to the hospital and sign an arbitration agreement that states that if the doctor or the hospital messes up that we agree to arbitration. My feeling would be "well, they are taking care of themselves, who will take care of me?"

I don't think that arbitration short-circuits EEOC claims. That certainly isn't the position of that agency.

Theresa Gegen TX

My experience with arbitration programs has been that there a great ones and bad ones.

You can't just slap together a one page arbitration agreement, force all the employees to sign it, then expect them to be happy about and expect to get good results from it. These types of forced arbitration policies go over like lead balloons. And they can result in big arbitration awards for employees.

If a company wants mandatory arbitration, it needs to be the final step in a problem solving process. This gives the employee a full opportunity to be heard by the company before arbitration, and gives the company a chance to reconsider the decision before arbitration.

Also rolling out the program is critical. It needs to be sold to employees as a benefit (which a good program is). It needs to be explained to employees in language they understand and it must be fair. One company I know of actually hired a marketing firm to help it develop materials for its roll out of its dispute resolution procedure.

Courts have been very active lately in defining issues like who must pay the costs and when an arbitration program is unenforceable. In fact, the US Supreme Court just heard oral argument in a case involving whether the EEOC could sue on an employee's behalf if the employee signed an arbitration agreement.

One big downside of arbitration for the employer is that it is almost impossible to set aside the arbitration award. Arbitrators are people too, and sometimes go crazy (most arbitrations I have seen have had fair results, but I have seen a few where the arbitrater, in my humble opinion, disregarded the law and facts, and ruled in favor of the employee because the arbitrator felt sorry for him or her). Arbitrators don't necessarily need to be attorneys, so they may not be as versed in the law as the company would like.

Therefore, before you roll out such a program, you really need to get legal advice from your employment attorneys.

Good Luck!

WOCO Frank

I'm just speaking from the experience of using one for 6 years. The EEOC and many courts have deferred to arbitration rulings repeatedly over the last several years, and in recent months there has been one appeals court affirmation after another. The article James cites is a pretty good synopsis of where arbitration agreements stand today.

When we rolled out our process, we emphasized the potential benefit to the employee - don't sell that short. Through arbitration, the employee has the opportunity to have their case heard without having to go to court, and many will see that as a plus.

Theresa Gegen TX

Also, arbitration is a lot quicker. Most lawsuits (at least in my area) take over a year before they go to trial. Then there can be a lengthy appeals process that goes on for well over a year. I still have cases that are on appeal that were filed 3 years ago or more.

If an employer decides to roll out an arbitration policy, it needs to market the policy to the employees, just like it was marketing a product to customers. Sell the benefits of arbitration. One large company I know actually hired a marketing firm to help them develop the arbitration roll out, and put together a short film for employees to watch that explained the process and the benefits. The film included testimonals from people who had used arbitration and thought it was a fair process (even one employee who lost at arbitration but said that he thought the process was fair).

Good Luck!

Theresa Gegen
Andrews & Kurth, LLP
Dallas, Texas