The term “arbitration” is often (and more clearly) referred to as “rent-a-judge.” It is a process by which a private party resolves a dispute between two or more parties. It differs from mediation in that a mediator cannot impose a resolution on the parties (he can only seek their consensus), while an arbitrator is empowered to impose a resolution on one or both parties.
Employment arbitration typically refers to arbitration of a dispute between an employee and an employer. Such arbitration is typically agreed to by both parties before a dispute arises (in an employment contract, for example). An arbitration clause in an employment agreement, or a stand-alone arbitration agreement, typically prevents either party from bringing the dispute to court or appealing the initial arbitration decision.
“Adhesion” Employment Arbitration Agreements
Employers typically like arbitration for reasons that are obvious when you think about it. Even a small company with only 100 employees faces 100 possible lawsuits from its employees. Courtroom litigation costs a lot more than arbitration does, and just a few lawsuits could bankrupt a company from legal fees even if it won every lawsuit.
An adhesion employment arbitration agreement is an arbitration agreement that a prospective employee must sign in order to be hired, or that a current employee must sign in order to keep his job. California courts sometimes strike down adhesion arbitration agreements on the reasoning that the employee had no real choice but to sign it.
The following should be included in any employment arbitration agreement in order to minimize the chances that your arbitration agreement will be struck down by a court:
The employer, not the employee, should bear the cost of arbitration.
Claims for workers' compensation benefits, unemployment insurance benefits, and the collection of allegedly due and unpaid wages should be excluded from the scope of arbitration.
Both parties (not only the employee) should be barred from submitting a dispute to a court for resolution.
A mechanism should be provided for the appointment of a truly neutral arbitrator.
Reasonable access to documents and witnesses should be guaranteed for both parties.
The arbitrator should be required to issue a written decision that includes essential findings and conclusions.
The arbitrator should be allowed to award just as much in damages as a court could award, including punitive damages.
Martinez v. Scott Specialty Gases Provides Employers with Leverage
The 2000 California case, Martinez v. Scott, allows courts to dismiss all employment claims by an employee who files a lawsuit in defiance of a valid arbitration agreement that prohibits such lawsuits. The reasoning is that, since the employee waived his only valid means of resolving his dispute (arbitration) by filing a lawsuit, there remains no valid forum with the jurisdiction to hear his complaints.
At CKB Vienna, we understand the difference between the business solution to a dispute and a “lawyer’s solution” that looks good on paper but fails to take into account business realities. Telephone us at 909-980-1040 or contact us online to schedule a consultation. Our office is located in Rancho Cucamonga and we serve clients from Alta Loma, Etiwanda, and elsewhere in town.