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Are mandatory arbitration agreements legal?

by on
in Employment Law,Human Resources

Q. We require, as a condition of employment, that our employees agree to resolve all disputes by binding arbitration, rather than going to court. One of my friends said a lot of the government agencies don't like those kinds of arbitration policies and one agency even decided that they were illegal. I know lots of employers have binding arbitration, so I don't think that could be right, but thought I better check. —S.T.

 A. That's a big question that covers lots of ground. You are correct that many employers have such policies requiring binding arbitration. When drafted correctly, the courts have upheld their legality and required employees who filed a lawsuit to go to arbitration under the terms of the policy rather than continue in traditional litigation.

However, your friend is right that a number of agencies, including the U.S. Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB), have expressed concerns about such policies. A particular concern is whether employees reading the policies think they are prohibited from filing charges with the agencies and instead are required to go directly to arbitration. The law is clear that even if you have an arbitration agreement, you can't keep employees from filing charges with the appropriate agencies, such as the EEOC and the NLRB.

Your friend probably heard about a recent decision involving U-Haul in which the NLRB found that the company's arbitration policy didn't make it clear that an employee could still file charges with that agency. The board ruled that having an unclear policy was an unfair labor practice and ordered the employer to remove the agreement from all employee files. Even though that decision is being appealed, it's important that your arbitration policy makes clear that employees are always free to file charges with governmental agencies.  

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