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Can Employment Arbitration Agreements Protect Your Company from Employee Lawsuits?
By Amy R. Guerin on February 11, 2016
Can Employment Arbitration Agreements Protect Your Company from Employee Lawsuits?

It’s no secret that employment litigation is one of the fastest growing areas of litigation – and expense – for employers. From June 2014 through June 2015, there were 12,258 lawsuits filed in United States District Courts across the county alleging violations of civil rights in employment. During that same period, also in United State District Courts, there were another 19,047 lawsuits initiated alleging violations of various U.S. labor labors, such as the federal wage and hour statute and the family leave act. And these numbers do not include lawsuits filed in state courts. How is a private business supposed to plan for the costs of the inevitable disgruntled employee who wants to sue you?  One way to manage costs is by using employment arbitration agreements.

Arbitration agreements are becoming increasingly common.  In general, they work by the employer and employee agreeing in writing (usually at the beginning of the employment relationship, but not always) that any disputes arising from the employment relationship will be addressed through binding arbitration.  The agreement itself spells out how the arbitrator is selected and what rules will be followed.  The agreement also makes it clear that the employee is foregoing the right to bring a lawsuit against the employer for various kinds of claims, such as discrimination claims, Family Medical Leave Act (FMLA) claims, whistleblower claims, and/or all types of other labor and employment claims.  Arbitration is significantly less costly and offers much faster resolution of disputes than going to court, and employers are better able to control expenses.  The U.S. Supreme Court opened up the door to the enforceability of such  arbitration agreements in the Gilmore v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), and the New Jersey Supreme Court has readily followed suit.  See e.g. Garfinkel v. Morristown Obstetrics & Gynecology Assoc., P.A., 168 N.J. 124 (2000).

However, it is important to consult with your labor and employment counsel.  The key to any court actually enforcing an employment arbitration agreement is showing that it is clearly written, identifies the types of claims that must be arbitrated, and demonstrates that the employee fully understood that he/she was giving up a right to go to court.  Also important is being able to show that the employee freely entered into the agreement.  Moreover, the Equal Employment Opportunity Commission has been actively involving itself in determining whether arbitration agreements are enforceable.  Specifically, an arbitration agreement cannot preclude an employee from filing a claim and/or participating in an Equal Employment Opportunity Commission (EEOC) action; it can only limit the employee from filing his/her own lawsuit in court.  Experienced counsel should be guiding you through the drafting of any arbitration agreement that an employer wishes to use.

If you would like to explore using arbitration agreements for your business, contact Parker McCay P.A. today to consult with one of our experienced labor and employment attorneys.

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