Issue: More employers require employees to solve employment disputes through arbitration, not in court.
Risk: Courts are quick to invalidate mandatory arbitration agreements that don't meet the letter of the law.
Action: Don't back off mandatory arbitration because of legal uncertainties; just make sure to follow these seven rules.
For financial, publicity and productivity reasons, employers want to stay away from employment lawsuits at all costs. That's why an increasing number of organizations require employees to sign mandatory arbitration agreements, which bind employees to resolve disputes through arbitration, not in court.
But many courts continue to show an aversion to such agreements, tossing them out for various technicalities and legal breaches.
To overcome this, arbitration agreements must be written precisely. Here are seven tips to drafting an agreement that will pass muster in court:
1. Make sure employees read, understand and sign the pact. Don't rush them or hide it in the fine print of your employee handbook. In fact, the pact should be separate from your handbook.
2. Provide a procedure for discovery, so employees can access company information needed to present their side adequately, such as personnel files or time sheets.
3. Ensure that the arbitrator is neutral. One way is to follow established arbitration rules, such as those of the American Arbitration Association. Check out its guide to resolving employment disputes at www.adr.org.
4. Limit the employees' costs. Courts won't look kindly on pacts that cause workers to pay more to arbitrate than go to court.
5. Render the agreement equally binding on both sides. You can't require staff to arbitrate while you retain the right to sue.
6. Give workers something of value in exchange for signing away their right to a jury trial. For new hires, the pact can be a condition of employment.
7. Furnish a written decision. Require the arbitrator to outline the findings and conclusion.