A mandatory arbitration clause in a Waffle House employment contract prevented a New Orleans employee from pursuing claims against her employer for discrimination and harassment, according to a recent Wall Street Journal article. The employee’s contract prevented her from filing claims in civil court, and, instead, required her to settle any employment-related claims through arbitration.
Many employees now find themselves in a similar situation, as employers increasingly adopt mandatory arbitration clauses. Since the early 2000s, the percentage of non-union private-sector employees with mandatory arbitration clauses has more than doubled compared to union employees with those same clauses. Because the payouts in arbitration are far less than EPLI claims filed in civil court, plaintiff attorneys are less willing to take on these cases.
Arbitration hearings model court trials in some ways, but arbitrators are not bound by the rules of civil procedure. Narrower limits on evidence than may be obtained during discovery are also often a limiting factor. Arbitration is generally confidential, and difficult to appeal.
It is unclear how many sexual harassment claims are arbitrated each year due to confidentiality. Evidence suggest that only a small number of employment practices claims are arbitrated, despite the fact that the Equal Employment Opportunity Commission receives about 7,000 sexual harassment complaints annually.
Implications for EPLI Panel Counsel Members
The avoidance of employment practices-related litigation through the use of mandatory arbitration clauses has pros and cons.
On the favorable side, the employment defense law firm that counsels clients to adopt mandatory arbitration clauses in employment agreements may be helping the employer to avoid litigated claims. This simple risk management strategy can keep legal expenses down by providing a confidential resolution for sensitive employment disputes.
While these claims may otherwise be subject to employment practices liability insurance—which more employers are purchasing—the ability to stay away from the courthouse allows the employer to remain focused on day-to-day business operations.
On the negative side, the avoidance of EPLI claims potentially stifles the flow of litigated claims to EPLI panel counsel members. An offsetting factor is the sheer number of employment-related claims overall.
Of course, the employment defense firm always needs to do what is best for the client.
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