Will Your Arbitration Policy Keep You Out of Court?
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An increasing number of employers have policies that employer-employee disputes be resolved in arbitration as opposed to in court. Unfortunately, an increasing number of courts have refused to enforce arbitration agreements relating to employee claims. This is so even in light of the Supreme Courts' recent decision in Circuit City Stores, Inc. v. Adams, 121 S. Ct. 1302 (2001), upholding arbitration clauses in employment relationships. A standard arbitration policy in an employee manual or employment contract will provide for the arbitration of all disputes arising out of the employment relationship. The details of implementing this policy are critically important to ensuring enforceability of the agreement to arbitrate. First, if the employer does not intend the policy manual to be a contract, the employer must ensure that the arbitration agreement not make it one. This can be accomplished by having the employee sign an Acknowledgement and Arbitration Agreement separate from the policy manual. Please contact me if you would like further information as to agreements to arbitrate. Even after the Supreme Court's decision in Circuit City Stores, courts have found ways to avoid sending employee claims to arbitration. For example, in Ball v. SFX Broadcasting, Inc., a federal court in New York refused to enforce an arbitration clause because the court deemed it unfair to require the employee to pay arbitration costs greatly in excess of court filing fees. Generally, American Arbitration Association costs are much higher than court filing fees, and h AAA makes the litigants pay the arbitrators' fees, whereas taxpayers pay judicial salaries. The Ball case is interesting: Facts Plaintiffs Karen Ball and Tracy Christopher filed a title VII gender and pregnancy discrimination class action against SFX Broadcasting, which purchased the radio station at which they worked. After SFX purchased the station, it required employees to sign an employment agreement, which contained an arbitration clause, as a condition of continued employment. Ball became pregnant, took leave, and was terminated upon her return on the grounds she was no longer needed. Ball claimed that stated the reason was pre-textual, as her job duties were assigned to a non-pregnant female who lacked Ball's credentials. After the parties unsuccessfully attempted to negotiate a resolution of the dispute, SFX filed a demand for arbitration with the American Arbitration Association. Ball filed an action in New York State Court, seeking to stay the arbitration. The State Court found the agreement to arbitrate valid and enforceable. The parties proceeded to arbitration. In a questionable strategic decision, Ball and her attorney refused to participate in the arbitration, fearing a waiver of their argument that the arbitration clause was unenforceable. Not surprisingly, SFX prevailed in the one-sided arbitration Plaintiff Christopher, on the other hand, participated and lost in the arbitration of her claim. SFX filed an action in Federal Court to confirm the arbitration awards. Both Ball and Christopher claimed the arbitration clause was unenforceable. The Federal Court found that Ball had already litigated that issue in her State Court action and lost, precluding her from relitigating the issue. The arbitration award against her was affirmed. (Legal malpractice claim as to refusing to participate in the arbitration to follow?) Christopher, on the other hand had not previously litigated the issue and argued that even in light of Circuit City Stores v. Adams, an employee cannot be required by an arbitration clause to forfeit and "substantive rights" as a condition of employment. Decision The Court, quoting a pre-Circuit City Federal Circuit Court of Appeals decision, stated: The Court noted that Christopher had submitted an affidavit indicating her inability to pay the $1,000 per day arbitrator's fee, a $500 counterclaim fee, and fees of $150 per day for hearing day or postponement fees. The Court held that in light of those fees, arbitration was not "a reasonable substitute for a judicial forum" and the arbitration clause was unenforceable. Suggestions:
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