by Jackson Lewis

The U. S. Supreme Court has made it easier for employers to resolve workplace disputes through the use of arbitration procedures rather than the courts. In ruling on March 21st that employment agreements containing arbitration provisions are enforceable under federal law, the Supreme Court settled conflicting opinions among the lower courts as to whether employers could require employees to submit disputes to arbitration rather than file lawsuits. Employers now have a reliable alternative to courtroom litigation as a means to redress employee complaints. Circuit City Stores, Inc. v. Adams, 532 U.S. ____(2001).

Jackson Lewis drafted a "friend of the court" brief on behalf of the Society for Human Resource Management which helped convince the 5-4 majority to rule in favor of arbitration. While highly unusual, the Court specifically referred to these briefs in its decision. "Employers now should be evaluating the pros and cons of arbitration to decide whether it is right for their workplace," says David Block, the Jackson Lewis partner who drafted the SHRM amicus brief.

Points favoring arbitration over courtroom litigation:

• disputes may be resolved more quickly and efficiently
• proceeding through arbitration is generally less costly
• arbitrators are believed to be "expert" decision-makers bringing specific knowledge and experience to the table, as opposed to lay jurors
• arbitration may provide a "user friendly" vehicle for both employee and employer
• arbitration may provide a system that insures fairness and due process

Possible Employer Concerns

• a fear of proliferation of employee disputes
• the difficulty of overturning an arbitrator's unfavorable decision
• a tendency among arbitrators to "split the baby" to resolve the dispute
• inclusion of evidence that normally would be excluded from a court proceeding

Although the Supreme Court now has said arbitration agreements are enforceable, it did not address the practical issues regarding implementation. Mr. Block cautions that employers must make certain their arbitration provisions are carefully drafted.

"That's going to be the next issue," Mr. Block told the New York Times in a March 22 article on the case. "Employers wishing to construct these agreements must be very careful in how they draft them, because the lower courts have been deeply troubled by arbitration processes that are one-sided. The Supreme Court didn't address the details."

Note to California employers
The California Supreme Court last year approved mandatory arbitration agreements in employment so long as "certain minimum requirements" have been met. Armendariz v. Foundation Health Psychcare Svcs., Inc. (2000) 24 Cal.4th 83, 90-91. Those minimum requirements include (1) neutrality of the arbitrator, (2) provision for adequate discovery, (3) a written decision that will permit limited judicial review, and (4) limitations on the costs (the employee may be required to pay no more for the arbitration than he or she would have to pay for court proceedings, effectively requiring the employer to bear the cost of the arbitration proceeding). The U.S. Supreme Court's decision in Circuit City Stores, Inc. v. Adams fills in certain gaps for California employers, giving them the ability to seek enforcement of arbitration agreements under federal as well as State law.

Jackson Lewis was among the first law firms to advise clients on arbitration and other alternative dispute resolution mechanisms as a means of resolving workplace disputes. If you would like more information on the Supreme Court's decision or if you have questions about implementing arbitration or other forms of alternative dispute resolution in your workplace, please contact the attorney with whom you regularly work, or David Block, at 305-577-7600 or [email protected].