Barber, Banaszynski & Hiatt, PSC

THE RISE OF ARBITRATION CLUASES IN EMPLOYMENT CONTRACTS
posted by David A. Ehsan
Tags: In the news 

Arbitration clauses in employment agreements are now becoming the norm in the United States. Arbitration is an alternate dispute forum to the court system, where the parties present their dispute to an arbitrator and his decision is often binding. Employers have included arbitration clauses in employment agreements for many reasons. The first is that it prevents an employee from filing a lawsuit in the court system. As a result, it prevents the employee from having their case heard by a jury. The employer often designates who they want to arbitrate any potential disputes between the employee and themselves, which gives the employer an inherent advantage in the arbitration process. Anthony Kline, a California appeals court judge, said in an interview with the New York Times. “This is a business and arbitrators have an economic reason to decide in favor of the repeat players.” The “repeat players” in this instance would be the companies that consistently have disputes that go to arbitration.

The second reason is that arbitration serves as an effective deterrent against the employee filing a dispute, because arbitration is costly. Unlike in the courts, the arbitrator is paid by the hour and those costs have to be paid by the parties.

Another reason employers like arbitration is that an arbitrator’s rulings are binding and usually not appealable. In the courts, a person has many avenues of appealing a ruling. For arbitration, a ruling can be reviewed by the courts only under very limited circumstances, such as serious misconduct by the arbitrator. The benefits to an employer of arbitration are self evident. By limiting the avenues for an appeal by the employee, an employer saves the high costs of litigation. The courts have consistently enforced arbitration clauses in employment agreements. Courts feel their dockets are overburdened with cases and are more than happy to send those cases somewhere else.

What can you do if your employer includes an arbitration clause in your employment agreement? Employers will usually tell employees if they want the job, agreeing to binding arbitration in their employment contract is “take it or leave it.” If you find that you have some bargaining power with your would be employer, ask them to remove the arbitration clause from your contract.  For more information please contact David Ehson at (502) 254-2110.

1. Silver-Greenburg, Jessica, and Michael Corkery. "In Arbitration, a ‘Privatization of the Justice System’." Beware the Fine Print | Part II . New York Times , 1 Nov. 2015. Web. Jan. & Feb. 2017.

2. Id.