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By June 14, 2012No Comments

Arbitration is an increasingly popular and often cost-effective way to avoid protracted litigation in court, however whether they are equitabile is subject to great debate.  Arbitration provisions are increasingly being considered by employers for inclusion in employment contracts relative to disputes between employers and employees.  There is much controversy between worker’s advocates and management lawyers as to whether such provisions are fair and/or effective.

Arbitration clauses are often used by management to limit defense costs, avoid bad publicity attributable to litigation, circumvent unpredictable juries and skirt precedent setting court opinions.  Employee advocates, outside the realm of labor arbitration, are skeptical to say the least.  They feel that pre-employment Arbitration provisions are unfair and may be unconstitutional as they are negotiated between parties with an imbalance of bargaining power, they limit access to the courts and jury system and are often contracts of adhesion, signed during the rush of the hiring process.

Nonetheless, the Courts have, subject to certain restrictions outlined below, found Arbitration provisions to be mostly enforceable and as such employment agreements in Massachusetts routinely include arbitration clauses, requiring employees to arbitrate their employment-related claims.  Many employers feel that Arbitration affords a lower cost alternative that resolves disputes more efficiently and quickly.  Through Arbitration, the scope of a dispute may be narrowed, discovery can be limited, trial and hearing dates are firm and Arbitrators are usually more accessible than judges. 

Employees frequently fail to carefully review or consider pre-employment Arbitration provisions in the rush of landing a new job.  Even if employees resist Arbitration clauses – their ability to negotiate is compromised by a tough economy and few job alternatives.  Therefore, employees are routinely waiving their right to a jury trial and giving up their right to seek immediate relief in a court of law without fully appreciating the consequences.  Some of the other drawbacks to arbitration include the high price of arbitrators (payment is often required in a lump sum), the lack of objective Arbitrator quality control (Judicial nominations are screened) and the finality of an arbitrator’s decision (since an arbitrator’s decision is difficult to appeal).  It is because of these problems that legislation has been introduced in Massachusetts to outlaw and limit pre-employment Arbitration agreements which, it is argued, effectively closes access to the courts and jury system relative to employment disputes.

Currently, arbitration clauses are generally enforceable (depending upon the type of claim) if there is no foul play at their inception.  In order to invoke an arbitration provision in the event of an employment dispute, the employer must demonstrate that “a valid agreement to arbitrate exists, that they are entitled to invoke the arbitration clause, that the other party is bound by that clause, and that the claim asserted comes within the clause’s scope.”  Campbell v. Gen. Dynamics Gov’t Sys. Corp., 407 F.3d 546, 552 (1st Cir. 2005) quoting InterGen N.V. v. Grina, 344 F.3d 134, 142 (1st Cir. 2003). So long as the parties both signed the agreement, it was drafted in clear and unmistakable terms, and there is no evidence of coercion, deceit, bad faith or unclean hands courts have routinely enforced arbitration clauses.

It remains an open question, and up to our elected officials, whether Arbitration clauses will continue to remain an available option for employers in Massachusetts.  Bennett & Belfort will keep you updated on further developments in this rapidly evolving area of law.