Predispute Arbitration Clauses Restricted
Employer mandated pre-dispute arbitration clauses must be fairly drawn, or will be rendered void said the California Supreme Court in Armendariz v. Foundational Health Psychcare Services, Inc. In that case, a mandatory predispute arbitration clause limited the employee's available remedies for an employment discrimination claim under California's Fair Employment and Housing Act. The employee's remedies were limited to a Asum equal to the wages and the employee would have earned from the date of termination to the date of the arbitration award. Declaring the restriction as void, the Court established guidelines for employers who require predispute arbitration provisions as a condition of their employment. The guidelines, however, do not apply to post-dispute arbitration agreements.
The arbitration clause must:
- provide for neutral arbitrators;
- provide for more than minimal discovery;
- require a written arbitration award that will reveal the essential findings and conclusions on which the award is based;
- provide for all types of relief that would otherwise be available in court; and not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum.
Discovery
An arbitration clause may restrict but may not prohibit discovery. Employees should be permitted to conduct discovery sufficient to adequately arbitrate their statutory claim. This can include access to essential documents and witnesses. However, the scope of discovery can be determined by the arbitrator and subject to limited judicial review.
Costs of Arbitration
When an employer imposes mandatory arbitration as a condition of employment, the employee cannot be obligated to pay the expense of arbitration. The ruling places the costs of arbitration on the party that imposes it, i.e., the employer. The absence of specific provisions covering arbitration costs, however, are not grounds for denying enforcement of an arbitration agreement. Any arbitration agreement should state that the employer will pay the costs of arbitration.
No one-sided arbitration agreements
Absent reasonable justification by the employer, the court declared that a predispute arbitration agreement must impose the same limitations on the employer which the employer sought to be imposed on the employee. An arbitration clause cannot require the employee to arbitrate all claims arising out of the employment relationship without imposing identical requirements on the employer.
In March 2001, the United States Supreme Court ruled that the language of the 1925 Federal Arbitration Act requires all workers, except Aseamen, railroad employees and transportation workers, and to submit their employment discrimination claims to arbitration if their employers request it.
Clearly, the law of employment-related arbitration clauses continues to evolve. In order for any arbitration agreement to stand up to judicial scrutiny, the clause should:
- Designate a neutral arbitrator
- Require a written decision
- Make the agreement mutual
- Not limit an employee's remedies
- Allow for limited discovery; and
- Specify that the employer will pay the costs of arbitration
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