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Mandatory arbitration of employment disputes is becoming increasingly popular with employers of all sizes and across many industries. This IN FOCUS examines the trend, identifying the benefits and risks as well as some of the important considerations in implementing such a policy. While mandatory arbitration agreements have the potential to create tremendous cost savings for employers, they can be extraordinarily complicated to implement and should only be undertaken with the assistance and advice of counsel.

Q Why should an employer consider adopting a mandatory arbitration policy?
A Mandatory arbitration has long been the centerpiece of dispute resolution in unionized work places as a fast and relatively inexpensive way of resolving any disputes that may arise under the union’s collective bargaining agreement. Proponents of mandatory arbitration argue that those same benefits of speed and cost efficiency can be realized in non-unionized settings where the number of lawsuits against employers continues to grow at a remarkable rate. Avoiding jury trials is another strong motivation for employers that have adopted mandatory arbitration policies. In recent years, responding to the explosion of employment-related litigation, organizations like the American Arbitration Association even have created special rules and procedures designed specifically for dealing with employment-related disputes, as well as designating special panels of arbitrators to hear such disputes who ostensibly have experience in the field or who otherwise are supposedly knowledgeable about the laws governing the work place, in an effort to make arbitration more attractive to employers and employees alike.

Q Can mandatory arbitration be used to force employees to bring statutory claims, such as discrimination claims, before an arbitrator rather than to the courts?
A After several years of conflicting decisions, the current trend is that courts will respect and enforce private agreements to arbitrate statutory claims in non-unionized settings if the agreement is properly worded and was implemented in a way that satisfies the court that the employee knowingly and voluntarily waived his or her right to pursue the statutory claims in a court of law.

Q Can I implement a mandatory arbitration Policy by simply amending and reissuing my employee handbook to include it?
A This is probably not a good idea for at least a couple of reasons. For one thing, based on the Connecticut Supreme Court’s decision in Torosyan v. Boehringer Ingelheim Pharmaceuticals, Inc. (seeEmployment Advisory volume 1, number 2), Connecticut courts might conclude that, as to existing employees, there is inadequate consideration for the waiver of the right to go to court under the implementation scenario just described. More importantly, most employers take great pains to include disclaimer language in employee handbooks, noting that the statements and policies set forth in the handbook are not a contract of employment. Courts are not likely to permit an employer to enforce one provision of a handbook against the employee as a contractual obligation if the employer maintains that the employee does not have the same right. Because of the non-contractual nature of the handbook, it is generally better to deal with mandatory arbitration as a separate written agreement, ideally given to the employee at the time of hire, that is signed by both employer and employee, emphasizing that the agreement does not in any way alter the “at will” nature of the employment relationship.