April 2001

On March 21, 2001, the United States Supreme Court approved the use of arbitration procedures, rather than the court system, for employers and employees to resolve disputes that arise in the workplace. Specifically, the Supreme Court held that employment agreements with arbitration provisions are enforceable under federal law. In doing so, the Court resolved a split among lower courts as to whether an employer could lawfully force employees to submit their disputes to arbitration instead of court litigation. In its 5-4 decision in Circuit City Stores, Inc. v. Adams, the Supreme Court approved the use of mandatory arbitration agreements under the Federal Arbitration Act.

Given the approval of mandatory arbitration agreements, employers can now benefit from a dispute resolution system which is quick, efficient, and usually less costly than court litigation. However, private arbitration agreements are not a panacea, as they may actually encourage employees to file disputes through arbitration that otherwise would not have been raised. In addition, it is not uncommon in arbitration forums to have the arbitrator split the difference in resolving a dispute. Further, due to the relaxed atmosphere of arbitrations, strict rules of evidence tend not apply.

If an employer wishes to use mandatory arbitration provisions to govern workplace disputes, counsel should be consulted to ensure that the arbitration clause is drafted broadly enough to cover the range of possible disputes and that the provisions and procedures are fair to both sides.

Thus, in certain circumstances, the use of mandatory arbitration agreements gives employers a mechanism for providing due process and fairness to all employees, while also providing a prompt, efficient and cost effective manner of resolving employment disputes.