Arbitration is becoming more prevalent as an alternative resolution
dispute method in today’s employment environment. Business owners
look at it as a cost-effective, simple and
less combative way of resolving disputes
with employees. A growing number are
including arbitration clauses in their
employment contracts and even making
them a condition of employment for at-will employees.
It’s helpful for business owners to
work with attorneys to craft arbitration
agreements that courts will approve and
that will help alleviate some misconceptions of the way the judicial system
resolves disputes. Enforceable agreements must include some of the “savers”
that make an agreement enforceable and
exclude the “killers” that have the opposite effect.
Smart Business spoke with Amy Dunn
Taylor, a partner at Godwin Pappas
Langley Ronquillo LLP, about recent
developments in the use of arbitration
agreements within the employment law
context and to gain more insights into
arbitration “savers” and “killers.”
How are arbitration savers and killers
In general terms, killers may mean that
the client’s arbitration agreement is not
enforceable. Savers give clients the best
chance of making advantageous, yet
enforceable, arbitration agreements. For
the most part, the killers are the corollaries to the savers. As long as clients
include the savers, they can avoid the
pitfalls that might render an agreement
What are the perceived advantages of arbitration, and are they a reality?
Arbitration is perceived to be cheaper,
quicker, simpler and less combative.
None of these ideas is necessarily true.
Realistically, arbitration can be just as
expensive, or more expensive, than traditional litigation. It can take as long or
longer, and it may not be simpler or less combative, because it involves human
dynamics and interactions. Since it is a
dispute, people can be less than cordial,
particularly in cases where employees
feel that the process puts them on
unequal footing with their employers.
There is also the danger of runaway
arbitration awards, just as there is with
some jury verdicts. These factors are not
always present, but ‘bulletproof’ arbitration plans can help allay the fears of parties to employee disputes and facilitate
their equitable resolutions.
How does a client enhance enforceability?
The client has to communicate
unequivocally, clearly and formally with
employees about the terms of the agreement and should consider an outward
act by the employees that signifies their
acceptance of it. For example, employees can sign a written document signifying their agreement to arbitrate any dispute or use voting buttons, which are a
common feature used in many e-mail
Another way to assure even ground
and fairness is to split the cost of arbitration in a fair manner. For instance, the client can limit the employee’s financial
liability to paying only the cost of filing a
traditional case in court.
Next, check the policy for all elements
of enforceable agreement, such as the
Federal Arbitration Act and applicable
state contracts and arbitration laws.
Consider including a de novo review
provision in the policy. Some courts
allow parties to agree that a trial court
could review an arbitrator’s award on a
de novo basis, which means that trial
courts have the power to review and set
aside part or all of the arbitrator’s decision.
De novo provisions add a safety net to
the arbitration process and help alleviate fears about out-of-control arbitrators. Arbitration agreements can also
help control costs by limiting the
amount of discovery that will be
allowed. This is beneficial for both sides.
It helps them realize the benefits of limitations on discovery if a cheap, quick
and unbiased decision is handed down
from an arbitrator with sufficient knowledge of the underlying facts.
What can an attorney do to implement an
arbitration policy that a client cannot?
An attorney may offer objectivity,
counseling and advice that a client might
not readily have available. The extent of
the attorney’s involvement sometimes
depends on the nature of the dispute.
For example, if the dispute is about the
payment of overtime wages or a holiday
employment policy, the client may be
able to handle the arbitration with little
or no help from an attorney.
But if it is about something more complex, such as ERISA benefits, a client
might have a difficult time handling it
alone. It is always advisable to have
attorneys involved in the drafting stage
of any written agreement. This will help
clients avoid the pitfalls that can be arbitration killers.
AMY DUNN TAYLOR is a partner with Godwin Pappas Langley
Ronquillo LLP in the Houston office. Reach her at (713) 425-7404 or [email protected].