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To keep arbitration clause legal, ensure workers’ cost is reasonable

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in Compensation and Benefits,HR Management,Human Resources,Maternity Leave Laws

When SFX bought a New York radio station, it required all workers to sign a binding arbitration clause. Station employee Tracy Christopher later accused the company of gender and pregnancy discrimination and took her case to court. A federal district court refused to compel arbitration, saying SFX made the cost of arbitration too high.

Last year's Supreme Court decision in Circuit City Stores Inc. v. Adams (No. 99-1379) gave employers new power to send employment disputes to arbitration. But lower courts have been throwing out arbitration rulings if the arbitration fees the employee pays aren't "reasonable."

In this case, Christopher was the sole financial support for herself and four children, and she recently started a commission-based job. Therefore, this court said the required arbitrator's fee of $1,000 per day, plus a $500 counterclaim fee, $150 per day hearing fee and $150 per day postponement fee were unreasonable. (Ball v. SFX Broadcasting Inc., No. 00-CV-1090, N.D.N.Y., 2001)

Advice: In crafting an arbitration plan, don't just think about how much you can save. Consider how much the employee would have to pay. There are no bright lines on when an arbitration fee is considered reasonable. One measuring stick: The court won't look kindly on workers paying more to arbitrate than they'd pay to take the case to court.

In an earlier case, the D.C. Circuit said the employer should pay any added expense for its choice of arbitration. The 10th Circuit ruled in 1999 that the average arbitration would cost an employee between $1,875 and $5,000, an amount it deemed prohibitive for many.

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