ENFORCIBILITY OF ARBITRATION AGREEMENTS

Employers interested in implementing arbitration programs should be wary of drafting their own arbitration agreements. The law provides very specific requirements in order for arbitration agreements to be enforceable in the employment context.

An arbitration agreement must include a provision providing how the arbitrator will be selected. Employees should also be permitted to participate in the process of selecting the arbitrator. The arbitrator should be neutral and render a written decision reviewing his/her essential findings and conclusions. The arbitration process must allow for adequate discovery and employees need to be provided access to essential documents, witnesses, and other discovery in order to properly arbitrate their claim. An arbitration agreement cannot limit an employee's damages that are otherwise available in employment litigation. Thus, a provision limiting punitive damages at $5,000 is unenforceable and could jeopardize enforceability of the entire agreement. An arbitration agreement cannot shorten the applicable statute of limitations. The employees are not responsible for any type of expense they would not be required to bear if they were to bring the action in court. This means that the employer must bear the cost of the arbitration and fees. The arbitration procedures must be fair and reasonable. This means that the obligations and limitations imposed by the agreement are applied equally to the employer and employee. This means, an employer cannot reserve the right to modify the agreement.

The arbitration agreement must specifically describe the types of disputes that are covered and that might arise from the employment relationship, however, the agreement should not try to include disputes that are not the proper subject of an arbitration agreement such as violations under the National Labor Relations Act or disputes within the preview of a collective bargaining agreement.

There should also be a provision providing for an expressed waiver to the right to jury trial. An employer can implement its arbitration agreement by including a provision in its employee handbook or creating a "stand alone" agreement, or including a provision in an existing employment contract. An arbitration provision can also be included in a new benefit package or part of a severance agreement. Of course, employers should not draft arbitration agreements, but should consult with counsel in order to insure implementation of an enforceable arbitration agreement.