Last week, the Supreme Court… (yawn)…No, really, you should read this!
Seriously, the Supreme Court issued a major win for employers last week, but before we get to the really exciting part, let’s break it down.
What’s an employment arbitration agreement anyway?
Great question. It is a contract that requires employees to arbitrate, rather than litigate, any employment claims. Arbitration is an alternative to litigation, which can be costly and is public information (at least anything filed with a court). There is no jury; just an arbitrator (or panel of arbitrators, depending on what your agreement indicates) that makes the determination. Oftentimes the arbitration is binding, which means an employer doesn’t have costly, drawn-out appeals (though conversely it means the employer is stuck with decisions it doesn’t like as well).
So what does the Supreme Court have to say about this?
The Court decided that employment arbitration agreements can specifically require workers to arbitrate their claims alone – not as a class. The plaintiff in the case was arguing that the National Labor Relations Act, which allows individuals to come together to complain about terms and conditions of employment, allowed class action lawsuits – even where an individual signed an arbitration agreement. The Court determined if the contract says all claims go to arbitration – that’s what it means. No separate class action lawsuits.
What’s class action? Why should I care?
Class action = big $$$. In more words, class actions are more expensive. It’s when a class of similar individuals come together to sue the employer. Instead of itty bitty damages for each individual, the collective case is worth more (and much more attractive to an attorney).
So should I have an employment arbitration agreement with a class action waiver?
In typical lawyer fashion - it depends.
Arbitration is less public (not open records like anything filed in court).
If you had a large class action, you’d be more likely to try to settle it quickly because of the sheer volume and cost (so the arbitration agreement/class action waiver would allow you more time to actually go through discovery and decide the value of the case).
Arbitration means no jury (i.e. 12 people who really don’t have any legal education and may vote with their heart more than the facts).
You may be forced to arbitrate lots of little claims (which can be costly too in attorney fees) that may be more efficiently dealt with in a class action.
Arbitration is usually binding, meaning you cannot appeal the decision.
Likely to be seen as less employee-friendly company (or for the real cynics – that you are intending on doing something bad and are using this to hide behind significant damages).
Your choice. But now you know. And if you’re looking for a sample arbitration agreement, head over to SHRM’s website. Or talk to your attorney.