Protect: Employment Arbitration Agreements
Employment-related disputes can be draining, expensive, and time-consuming. Even more so when the claims are meritless. This blog post will identify employment-related claims and how to protect against them by using arbitration agreements.
Common Employment Claims
Claims against employers can arise from 1) breaches of contract (oral or written); 2) tort law (wrongful acts); or 3) statutory violations of state or federal law. Some of the more common claims are for wrongful termination, discrimination, harassment, wage and hour violations, workplace injuries, final paycheck violations, and paid sick leave.
Protecting Against Employment Claims
While the best protection against employment claims is to employ best practices and abide by the law, sometimes this is insufficient to ward off meritless claims by disgruntled employees or to prevent claims from arising while you are away from the office. Two additional layers of protection should be considered: arbitration agreements and employment practices liability insurance. This blog post will discuss arbitration agreements, their advantages, disadvantages, and additional considerations.
Arbitration provides a contractual alternative to the court system for dispute resolution. Both parties typically agree, by contract, to resolve all disputes arising from or related to an agreement through a private arbitration forum that provides significant flexibility and efficiency in resolving disputes. For example, the parties may decide what matters are subject to arbitration, whether to limit or expand the scope of discovery, and how much power to give to the arbitrator. Upon the conclusion of the arbitration, the outcome, or award, will be binding on the parties – with limited grounds for challenging the award in court.
Arbitration agreements are commonly enforced in the employment dispute context and can provide several advantages to private practice healthcare professionals. Arbitration can: 1) eliminate or reduce the risk of private employment class actions, 2) increase cost-effectiveness, 3) be faster and achieve finality sooner than litigation; 4) reduce the risk of high damages awards, 5) increase the likelihood of settlement, 6) provide more privacy than a public proceeding, 7) allows the parties to select a specialized arbitrator to control the dispute, 8) allows for procedural flexibility, 9) is convenient for scheduling, evidentiary and witness issues, and 10) provides for easier access to the arbitrator.
Conversely, arbitration presents disadvantages as well: 1) costs can be substantial (many arbitral organizations require that the employer bear the costs of arbitration); 2) discovery costs may be higher than litigation if the arbitrator is permissive about discovery motions; 3) the parties may have difficulty agreeing on an arbitrator; 4) popular arbitrators may be unavailable; 5) permissive arbitrators may be less inclined to grant dispositive motions; 6) arbitrators may afford a party more leeway to present irrelevant evidence and claims or be more lenient for technical defenses; 7) arbitrators may be incentivized (consciously or subconsciously) to prolong a matter because they are paid by the hour; and 8) not all claims may be subject to arbitration (some states have prohibited the mandatory arbitration of sexual harassment and related claims).
Private practice healthcare employers will also need to weigh other considerations in determining whether arbitration is an appropriate means of resolving disputes. Among those considerations, the following should be considered: practice size, location, workforce composition, employer/manager risk profiles and claim histories, and workplace culture and values.
The law governing employment arbitration agreements is fluid. It is constantly changing and varies from state to state. As a result, it is imperative that employers review their arbitration agreements, policies and programs, and evaluate whether agreements to arbitrate are appropriate for their workforce.
Feel free to contact Justin Morgan or your current attorney at Wood and Delgado to discuss whether employee arbitration agreements are appropriate for your practice.