Enforcement of Arbitration Clauses: Supreme Court Rules Them Valid in Union Contracts - Free Enterprise
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Enforcement of Arbitration Clauses: Supreme Court Rules Them Valid in Union Contracts

Today a divided Supreme Court issued an opinion that workers covered by collective bargaining agreements which contain an arbitration clause must submit claims of age discrimination to arbitration rather than sue in federal court. Overturning the court below, today's decision further illustrates the strength of arbitration clauses in a growing variety of employment disputes.

The 14 Penn Plaza LLC v. Pyett opinion released today (discussed in detail on FindLaw's Law & Daily Life) held that a union can collectively agree to arbitrate claims of age discrimination and thereby waive individual workers' rights to bring claims under federal law. It also serves as a general reminder of the power of arbitration clauses in employment contracts.

Here are a few tips about making an employment arbitration clause enforceable.

1. Put the arbitration clause in an employment agreement; don't simply put it in the employee handbook. Courts in some states have refused to enforce arbitration clauses where the employee did not explicitly agree to arbitration.

2. Make sure the employee has an opportunity to negotiate regarding the arbitration clause. Some courts have refused to enforce arbitration clauses offered take-it-or-leave-it on the theory that vastly uneven bargaining power should not force an employee into waiving their right to sue in court.

3. Make sure that the arbitration clause clearly states that the employee is waiving their right to a jury trial. If a court finds that the employee did not know they waived the right to sue, it may refuse to enforce the arbitration clause.

4. Make sure the arbitration arrangement provides for all of the types of relief that would otherwise be available in court.

5. Make sure the arbitration clause does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum. Employees may be required to pay the arbitration filing fee or an administrative fee (just as they would have to do if suing in court), but costs beyond that should be paid by the employer.