The Arcane World of Arbitration

To sue or not to sue?

A mechanic working for a corporate aviation activity called me recently and asked about arbitration agreements. He said he was required to sign an arbitration agreement, as part of a dispute resolution program adopted by his employer. Pilots were also required to sign the agreement. This prompted an inquiry from the mechanic. Should he sign it? Is it enforceable? Will they fire me if I don’t sign it? These questions prompted a look at the requirements and necessity of an arbitration agreement with his employer. The key issues are whether he should sign it and whether it is enforceable.
Arbitration agreements are very popular today. You find them everywhere from the doctor, dentist, or hospital you visit to consumer goods purchases.

Employers use them in company dispute resolution programs. Employers want to avoid lawsuits by employees. Lawsuits consume too much time and money and therefore are to be avoided, if possible, by the use of mandatory arbitration agreements. These agreements usually provide your exclusive remedy to address employment grievances. Most employers require you to sign the agreement as part of the employment process. However, many employers who never had an arbitration process are now requiring employees to sign such agreements.

Arbitration is simply a matter of submitting a dispute to an agreed upon person (the arbitrator) for a decision on the dispute. Arbitration is a nonjudicial dispute resolution process.

An arbitration agreement is nothing more or less than a contract between you and your employer to settle all of your employment grievances by arbitration. The arbitration process generally provides for a prompt resolution of any employment problems and saves money that would be spent in a formal legal proceeding.

A typical portion of the agreement would be as follows:

“Except as otherwise provided in the Dispute Resolution Program, neither you nor the company will initiate or pursue any lawsuit or administrative action in any way related to or arising from any claim covered by this program.”

“An employee must give written notice of any claim to the company along with a demand for mediation (or arbitration) within one year from when the basis of the claim is known or should have been known … Failure to give timely notice of a claim, along with a demand for mediation will waive the claim and it will be lost forever.”

Of course, not every employee gets involved with arbitration agreements. Where you are a member of a union or other collective bargaining unit, your union provides a process to handle complaints. Other federal laws like the Railway Labor Act and the National Labor Relations Board overlap employment agreements and provide broad remedies and procedures to govern labor relations in the air carrier field and other transportation areas.

In addition, employment arbitration agreements must exclude federal administrative complaints of discrimination. You must file these complaints with the Equal Employment Opportunity Commission (EEOC). State complaints filed with agencies, such as the California Department of Fair Employment and Housing and the New York Human Rights Commission and similar state agencies, are also excluded.

Complaints about workers’ compensation benefits and claims for unemployment compensation benefits, routinely filed with state agencies, are also excluded and filed with the appropriate state agencies.

The process
The way an arbitration agreement is looked at for legality and enforceability is when an employee files a lawsuit in a federal or state court alleging some sort of employment complaint. (The substance and merit of the complaint is not discussed here.) After a complaint is filed the employer responds, usually asking the court to dismiss the case and compel arbitration. The court may then dismiss the case and order arbitration in accordance with the agreement or allow it to continue in the formal legal process. The employee can appeal an order compelling arbitration, stating that the arbitration agreement is unenforceable because is it unconscionable, among other things, (word of art … means unreasonable, excessive, and unfair and therefore should be set aside because it violates basic contract law).

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