Opinions vary, but most employment lawyers believe that they are not worth the effort and expense outside of special industries and unique circumstances. Many issues arise when employers seek to bind their employees to arbitration agreements. The U.S. Supreme Court has ruled that employee arbitration agreements must provide at least the same level of protections that employees would have under federal law. This means that they must be able to recover the same remedies (including damages and recovery of attorneys’ fees for many claims) through roughly the same processes, although the procedures in arbitration can be streamlined to a degree.
Arbitration agreements can effectively remove the impact of jury verdicts from employment disputes. Additionally, in 2011, the U.S. Supreme Court appeared to loosen these requirements when it comes to class action waivers in arbitration agreements outside of the employment context. (See AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011)). Shortly thereafter, however, the National Labor Relations Board ruled that this exception does not apply to class action waivers in employee arbitration agreements, which the Board held would violate the National Labor Relations Act. Despite this Board ruling, earlier this week the Fourth Circuit Court of Appeals ruled that a class action waiver in an employee arbitration agreement was valid and enforceable. (See Muriithi v. Shuttle Express, No. 11-1445 (4th Cir. Apr. 1, 2013)). Nevertheless, employers can still expect challenges if they create employee arbitration agreements for purposes of reducing employees’ ability to bring their claims to the same degree allowed under federal law.
Certain industries with large labor forces and common types of disputes can benefit from quick and impartial determinations through arbitration, sometimes with a reduction in legal costs. For example, most unionized workforces include grievance arbitration provisions in their collective bargaining agreements for this reason.
Nevertheless, even where arbitration can, as a general matter, reduce legal costs, individual cases may sometimes last longer and cost more than a full jury trial in federal court. Additionally, the rules of arbitration can sometimes allow questionable evidence to be submitted and relied upon, and arbitrators typically do not have the same level of experience and breadth of legal knowledge as judges. Thus, employers should consider carefully and should seek the advice and assistance of qualified legal counsel before deciding to implement employee arbitration agreements.