You May Not Have Considered
employer clients to have employees
sign mandatory arbitration agreements,
particularly with regard to discrimination
and wrongful discharge claims. While
this generally is considered sound
advice as it avoids bad publicity, time-
consuming and expensive litigation and
runaway jury verdicts, did you know
the following? Your client might have
to pay the full cost of the arbitration
if the former employee refuses to pay
his share due under the arbitration
agreement, or your client might find
itself in court on the claims it intended
to arbitrate? The arbitrator may lack the
authority to issue pre-hearing subpoenas
to non-parties to enable you to obtain
discovery? Your client might be stuck
simultaneously having to arbitrate with
signatories to the agreement and litigate
very similar or even identical claims
against related non-signatories to the
arbitration agreement? Your client
may face unfair labor practice charges
under the National Labor Relations Act
("NLRA" or the "Act"), if the arbitration
a collective or class action in arbitration?
Finally, did you know an arbitrator
lacks the authority to enforce an order
issued during the arbitration and even
the ultimate award? As a result, when
a former employee still has company
records or property, the employer
will have to bring an action in court
to compel their return. As discussed
below, be careful what you wish for and
choose the language you use carefully
when drafting an arbitration clause in an
employment agreement.
To Arbitration When They
Didn't Sign An Arbitration
Agreement?
discuss the law with regard to whether
an arbitrator or the court decides
the question of what issues and what
persons (other than direct signatories)
are bound by an arbitration agreement.
However, keep in mind that in certain
jurisdictions, incorporating the rules of
("AAA"), JAMS or a similar body by
reference in an arbitration agreement
may empower the arbitrator to make
this determination. This not only
includes any objections with respect
to the existence, scope or validity
of an arbitration agreement, but
also the arbitrability of any claim or
counterclaim. This may result in an
arbitrator deciding that officers or
directors of your corporate client are
proper parties to the arbitration on an
unrelated third-party claim filed by
a former employee, even though the
officers or directors were not parties to
the contract containing the arbitration
provision. Moreover, if the officers or
directors challenge that determination in
court, various reported cases, including
one from the United States Supreme
Court, have held that courts under
those circumstances must defer to an
arbitrator's arbitrability decision. That
is, courts "must" give considerable
leeway to arbitrators and should set
Department at Mandelbaum, Salsburg, Lazris & Discenza. He writes
extensively on labor and employment issues and has represented
management on all types of employment related claims over his
past 30 years of practice.
155 Prospect Avenue
West Orange, New Jersey 07052
973.325.7467 Fax
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