Overview: An arbitration program is only as strong as the arbitration agreement from which it derives. In other words, if the arbitration agreement which spawns an arbitration program is considered unenforceable, the arbitration program is typically a waste of effort. Both the Federal Arbitration Act (FAA) and state law include provisions pertaining to the enforceability of arbitration programs. Thus, HR professionals who have a hand in creating arbitration agreements or otherwise advising in-house or external counsel regarding arbitration agreements, must be keenly aware of limitations on the enforceability of arbitration agreements deriving from both state and federal law.
Specifically, arbitration agreements may be declared unenforceable if they impose unreasonable procedural or substantive rules on employees, if they remove rights from employees while conferring an unfair advantage to employers, if they violate state or federal public policy considerations, or if employees are deprived of equal bargaining power. Essentially, the parties must be presented with a "meaningful choice" as to whether to participate in arbitration programs and if so, the parties must not be defrauded or otherwise deprived of their fair chance to prevail.
Trends: The popularity of arbitration programs is growing among employers with both unionized and non-unionized employees, particularly following the Supreme Court's 2011 decision, AT&T Mobility v. Concepcion. In wake of that decision, employers can also craft arbitration agreements that do not allow employees to bind together as a class to prosecute their claims. This, of course, confers a considerable advantage to employers in terms of resources to defend claims.
On the other hand, there has been a push to enact legislation called the Arbitration Fairness Act, which would render all pre-dispute arbitration agreements pertaining to employment claims invalid. Given the makeup of Congress, that legislation is not likely to be enacted, but employers should nevertheless be aware of the push and pull, so to speak, between employers and attorneys representing employees as it pertains to the prevalence of arbitration programs and the enforceability of arbitration agreements.
Author: Michael Jacobson, JD, Legal Editor
On this podcast, longtime Proskauer employment attorney Anthony Oncidi and XpertHR Legal Editor David Weisenfeld discuss key developments from the Supreme Court's term, including its latest arbitration rulings.
The Supreme Court has ruled 5-4 that employees may not compel their employer to face classwide arbitration when an agreement is ambiguous as to whether the parties agreed to submit to class arbitration.
A broad New Jersey law now prohibits mandatory arbitration of all employment discrimination, harassment and retaliation claims, and also significantly restricts employers from using nondisclosure agreements as part of a settlement.
Google has announced it will soon end its practice of requiring employees to resolve employment disputes through arbitration as a condition of employment.
The Supreme Court has handed a rare victory to workers in a case involving a mandatory arbitration provision, ruling unanimously that a court's authority to compel arbitration under the Federal Arbitration Act does not extend to all private employment contracts.
The Supreme Court has ruled unanimously that when a contract delegates an arbitrability question to an arbitrator, a court may not override the contract even if the court thinks the arbitrability claim is groundless.
Google recently announced significant changes to its sexual harassment policies in response to a one-day walkout by employees around the world protesting the company made payments at termination to employees accused of sexual harasserment.
A new Supreme Court case asks whether workers may bring employment claims in a class arbitration if an arbitration agreement does not explicitly bar class actions. In prior cases, the justices have generally interpreted the Federal Arbitration Act in favor of employers.
A new Kentucky Supreme Court ruling bans employers from requiring job applicants or employees to sign a mandatory arbitration agreement as a condition of their employment.
Updated to reflect information on a Supreme Court ruling concerning collective action waivers in arbitration agreements.
HR guidance on the importance of crafting arbitration agreements designed to be enforceable, and guidelines for building arbitration programs from fair and balanced arbitration agreements.