In the last week, there have been two Supreme Court opinions regarding the juncture between arbitration and employment. Last year, the Supreme Court of the United States also issued an opinion on the same topic. So what is arbitration and why are the courts talking about it so much lately?
Arbitration is a form of alternative dispute resolution, where the parties, typically by agreement, consent to having a private neutral adjudicator resolve the dispute between the parties. The private neutral adjudicator, or arbitrator, then issues an arbitration award, which is typically binding on both sides and enforceable in the courts.
Arbitration is thought to be simpler, more informal, and quicker than litigation, while allowing both parties to present their case and obtain an award. Whether arbitration is less costly than litigation depends on a variety of factors, including but not limited to the complexity of the dispute and the choice of arbitrator or arbitrators, especially for employers.
What we have learned from the recent opinions is that agreements to arbitrate, as issues related to the freedom to contract, are generally enforced and respected by the courts. This includes when the agreement between the parties states that even the question of whether something should be arbitrated or not is for the arbitrator.
There are some exceptions. For example, as Section 1 of the Federal Arbitration Act states, it does not apply to “contracts of employment of . . . workers engaged in foreign or interstate commerce.” So, if like in New Prime Inc. v. Oliveira (2019), a transportation company asks the courts to compel arbitration related to a contract with those doing work for them, the courts cannot compel arbitration.
There are several factors, and alternatives, to consider before adding arbitration to your employment agreements. If you would like to discuss whether arbitration is right for your business, do not hesitate to reach out to one of our attorneys. We will be more than happy to help you determine if arbitration is right for you.