Originally from Journal of American Arbitration (JAA)

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I. INTRODUCTION 

II. THE UNITED STATES SUPREME COURT RULES THAT ARBITRATORS ARE NOT COMPETENT TO DECIDE STATUTORY CLAIMS, BUT THEN CHANGES ITS MIND 

A. The Federal Arbitration Act 

B. In Three Consecutive Employment Decisions, the United States Supreme Court Determined that Arbitrators Are Not Equipped to Resolve Statutory Employment Disputes 

1. Alexander v. Gardner-Denver Co. 

2. Barrentine v. Arkansas-Best Freight System, Inc.

3. McDonald v. City of West Branch, Michigan 

C. After Initially Rejecting the Arbitration of Statutory Claims in Commercial Disputes, the United States Supreme Court Reverses Itself 

1. Wilko v. Swan 

2. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. 

3. Shearson/American Express, Inc. v. McMahon 

4. Rodriguez de Quijas v. Shearson/American Express, Inc. 

D. The United States Supreme Court Finally Embraces the Arbitrability of Statutory Claims in an Employment Setting:  Gilmer v. Interstate/Johnson Lane Corp. 

III. CIRCUIT CITY STORES, INC. V. ADAMS ENDS THE ARBITRATION DEBATE 

A. Factual and Procedural Background 

B. The Legal Issue 

C. The Decision 

IV. LEGAL ISSUES REMAINING AFTER CIRCUIT CITY 

A. Are Arbitration Agreements Enforceable Where Employees Demonstrate that They Cannot Afford the Costs of Arbitration? 

B. Must an Arbitration Agreement Be Signed by the Employees to be Binding?

C. Can an Employee Who Refuses to Sign an Arbitration Agreement Be Lawfully Discharged? 

D. What Happens When an Arbitration Agreement Restricts a Prevailing Employee’s Statutory Rights to Damages, Attorneys’ Fees, and Costs?

E. Can an Employer Reserve the Right to Seek Judicial Remedies Against an Employee? 

F. Can an Arbitration Agreement Limit an Employee’s Right to Discovery? 

G. Can an Arbitration Agreement Shorten the Applicable Statutes of Limitation? 

H. What Other One-Sided Provisions in an Arbitration Agreement Will Result in Its Unenforceability? 

I. Can an Arbitration Agreement Preclude Class Actions? 

J. What Is the Definition of “Transportation Workers”? 

K. What Is the Law in the Ninth Circuit? 

L. Does Gardner-Denver Maintain Its Validity?

M. What Are the Prospects of New Legislation Overruling Circuit City?

V. THE UNITED STATES SUPREME COURT CARVES OUT A NARROW EEOC EXCEPTION CONCERNING ARBITRATION OF STATUTORY DISCRIMINATION CLAIMS 

A. Factual and Procedural Background 

B. The United States Supreme Court’s Decision 

C. Waffle House’s Impact Is Limited 

VI. THE ADVANTAGES AND DISADVANTAGES OF ARBITRATION 

A. Aspects of Arbitration Favorable to Both Employers and Employees 

1. Faster and Less Expensive 

2. Less Formal

3. Less Hostile 

4. Confidentiality 

5. Experienced and Knowledgeable Arbitrators

B. Limited Appeals Rights Are Both Beneficial and Detrimental to Employers and Employees

C. Aspects of Arbitration Favoring Employees 

1. Arbitrators May Be Reluctant to Dismiss Frivolous Cases Summarily 

2. Admission of Hearsay and Other Questionable Evidence 

3. Arbitrators May “Split the Baby”

4. Arbitration Makes It Easier for Employees to Seek Relief Against Employers

D. Aspects of Arbitration Favoring Employers 

1. Employers Can Avoid the Possibility of a “Runaway Jury” 

2. Employers Can Likely Avoid Class Actions 

3. Limited Discovery Is Sometimes Advantageous to Employers 

E. The Public’s Interest 

1. Arbitration Is Less Costly 

2. Arbitration Takes Employment Discrimination Out of Public Glare

3. Arbitration Stifles the Development of the Law

VII. SOME BASIC DOS AND DON’TS IN ESTABLISHING A PRACTICAL AND LEGALLY-BINDING ARBITRATION PROGRAM 

A. Use Comprehensive Language Setting Forth the Issues Covered by the Agreement

B. Include an Arbitration Provision in the Employment Application 

C. Include an Arbitration Selection in the Employee Handbook 

D. Provide for Arbitration in a Separate Stand-Alone Agreement, Distribute the Agreement to Employees, and Have Them Sign Arbitration Acknowledgments 

E. Dealing with Employees Who Refuse to Sign the Arbitration Acknowledgment

F. Include a Provision Stating that the Employee’s Arbitration Costs Will Be No More than the Equivalent of the Federal District Court Filing Fee

G. Be Careful When Including a Provision Concerning Claims that Are Not Arbitrable 

H. Include a Provision Concerning Motions to Dismiss and Summary Judgment Motions 

I. Include a Provision Reasonably Limiting Discovery 

J. Include a Fair Remedies Section 

K. Include Other Provisions to Ensure Fairness and Finality

L. Include a Savings Clause in the Arbitration Program 

M. Miscellaneous

N. Consult with Knowledgeable Counsel Concerning an Arbitration Program

VIII. A SUGGESTED ARBITRATION PROGRAM:  EMPLOYEE PROBLEM RESOLUTION AND ARBITRATION PROCEDURE 

A. Introduction 

B. Who the Employee Problem Resolution Procedure Covers

C. What the Employee Problem Resolution Procedure Covers 

D. Claims Not Covered by the Procedure 

E. How the Employee Problem Resolution Procedure Works

F. Preclusive Effect to Bar to Other Proceedings 

G. Waiver of Jury Trials 

H. Miscellaneous Provisions 

1. Sole and Entire Statement of Policy 

2. Requirements for Modification or Revocation 

3. Construction/Savings Clause 

4. Consideration

5. Not an Employment Contract for Any Specific Duration 

6. Binding Nature of Arbitration Policy 

IX. CONCLUSION