USING MANDATORY ARBITRATION TO RESOLVE WORKPLACE DISPUTES

By: Jacqueline I. Silvey, Esq.
May, 2014

The ability to require compulsory arbitration in the employment setting is supported by the Federal Arbitration Act (FAA), which formalized the general principle that arbitration is a matter of contract. However, for decades, a debate raged as to whether employment contracts were excluded. Subsequent U.S. and federal court cases have addressed the applicability of the FAA to a myriad of employment contracts. The general consensus is that the FAA confers contractual status to arbitration clauses and, as a result, these agreements will be scrutinized pursuant to traditional contract principles and should be enforced according to their terms. Statutory discrimination claims can be subject to arbitration and an employer can compel arbitration while excluding the employee's ability to participate in class and/or collective actions. See Gilmer v. Interstate/Johnson Lane (500 U.S. 20, 1991); Corp. Rent-A-Center West Inc. v. Jackson (561 U. S. ____, 2010); American Express Co. v. Italian Colors Restaurant 570 U. S. ____, 2013).

“We are finding that more employers are implementing mandatory arbitration programs given the U. S. Supreme Court' s decision in American Express Co. v. Italian Colors Restaurant and recent Second Circuit decisions holding that the right to proceed collectively under the FLSA can be waived in an arbitration agreement. Provided the agreements are well drafted and in accordance with the nuances of state law, they can be useful to minimize the tremendous costs associated with collective action litigation,” said Diane Windholz, Esq., shareholder in the New York, New York office of Jackson Lewis P.C. Since joining the firm in 1988, Ms. Windholz has been engaged exclusively in employment litigation.

A significant benefit to an employee, in the situation of a well-drafted and pervasively fair agreement, is that the employee will see an expeditious resolution of their dispute, whether the relief sought is monetary or not. The employee should have all available remedies in law and equity in addition to the ability to secure meaningful discovery. The process ensures the employee's privacy, which can be of particular emotional benefit when sensitive issues are involved, like sexual harassment or hostile work environment.

Finally, arbitration meets the needs of all involved in securing a speedy, cost-effective resolution. Nothing is more disruptive than disputes in the workplace and everyone benefits when these types of issues are resolved sooner rather than later, especially if the employee is staying with the company. In many instances, workplace discord demands a swift solution outside the traditional purview of court authorized remedies, and the resolution of these issues by the arbitration process can provide that relief.

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Jacqueline I. Silvey, Esq. is General Counsel at NAM (National Arbitration and Mediation). She is involved in various operations of the company, including oversight and implementation of commercial and employment dispute resolution initiatives. Ms. Silvey is former in-house counsel to one of the largest property and casualty insurers in the United States.

For any questions or comments, please contact Ms. Silvey via email at jsilvey@namadr.com or direct dial telephone at 516-941-3228.