Should Mandatory Arbitration of Employment Agreements by Enforced Where the Parties Are Required to Split Fees?

By Siler, Brent | The University of Memphis Law Review, Fall 2002 | Go to article overview

Should Mandatory Arbitration of Employment Agreements by Enforced Where the Parties Are Required to Split Fees?


Siler, Brent, The University of Memphis Law Review


I. INTRODUCTION

Today, a claim in the court system can take years, or even decades, to resolve. Such a prolonged time frame can increase litigation costs and jade the parties' view of the justice system. Our government has sought to reduce the time and expense involved with legal proceedings through a process known as alternative dispute resolution (ADR). ADR is simply any method of resolving a dispute other than trial.1 ADR can take the form of mediation, conciliation, arbitration, grievance procedures, or judicially sponsored settlement conferences.2 Congress has approved of ADR by allowing or requiring it under a variety of federal laws. For instance, the Civil Rights Act of 1991 provides that "[ADR] is 'encouraged' when dealing with claims under Title VII, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and 42 U.S.C. sec 1981, all of which are codified by the Civil Rights Act of 1991."

Nowhere has ADR been more controversial or widespread than in the employment context. Today, employers often provide for mandatory arbitration of any dispute involving a contract, tort, or statutory right arising out of employment contracts. In theory, resolving disputes between employers and their employees by ADR is better for both parties for several reasons. First, having an ADR process helps employers avoid liability. For example, ADR processes often allow an employer to correct a potential problem before a claim arises.5 Also, employees can rely on an ADR procedure because it establishes that the employer had knowledge of the problem situation and failed to correct it.6 Second, both employer and employee may not want the publicity of a trial, and ADR awards may be kept confidential. Third, ADR procedures are often informal and less adversarial than a court proceeding! This becomes especially important if the employee is reinstated and the employee-employer relationship must be maintained. Finally, ADR may reduce the amount of money and time spent on

resolving the dispute.9 According to some estimates, a typical employment dispute may take over two years to litigate and cost over $50,000.10

More and more employers are attempting to use the advantages of ADR by including mandatory arbitration or mediation clauses in their employment contracts. One of the most common methods of ADR is arbitration. Arbitration is a process in which a neutral third party holds a hearing, listens to both parties, and renders a decision resolving the dispute.11 Arbitration in the employment context is often modeled after procedures used in collective bargaining agreements between unions and employers.12 Typically, an employer will have a clause in the employment contract or the employee handbook that requires arbitration of grievances, instead of allowing the employee to seek judicial remedies.13 Arbitration agreements often require companies to implement an internal procedure to handle employee complaints. If the employer and employee are unable to resolve the conflict internally, they then use final and binding arbitration.14

This note will examine whether employers' use of feesplitting provisions in mandatory arbitration agreements that govern federal statutory claims is consistent with Congress's intent and the federal courts' interpretation of the issue.15 This note will also discuss relevant Supreme Court decisions involving arbitration and the differing views that the federal circuits have taken on the issue while focusing on the federal policies involved in the arbitration of statutory claims.16 Finally, this note will review the costs of arbitration and the reasons behind the courts' differing views on fee splitting. …

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