Arbitration Programs

Have an arbitration program at your workplace?

In Davis v. O’Melveny and Meyers, 9th Cir., No. 04-56039 (05.14.07), the 9th Circuit Court of Appeals ruled a law firm’s mandatory dispute resolution program for issues relating to employment with the organization. While the program included options for mediation and mandatory final and binding arbitration on claims against the firm, it exempted workers’ compensation and unemployment benefits as well as confidentiality issues. Dispute disclosure to third parties were written into the program as prohibited.

An employee for the law firm filed a lawsuit detailing the firm’s failure to pay her for overtime and work performed during meal and breaks periods. Because of the binding arbitration agreement signed by the employee, the courts ordered the matter to arbitration. On appeal, it was determined the mandatory dispute resolution program was “procedurally and substantively unconscionable” and therefore unenforceable.

The 9th Circuit determined the dispute resolution program was implemented on a “take it or leave it” foundation and left employees with either the choice to accept the terms and conditions of the program or seek employment with a different employer. The court also ruled the law firm imposed a substantially short statute of limitations, minimized an employee’s various employment claims under continuing violation doctrine, and the confidentiality provision stifled the ability to investigate claims – to the employer’s advantage.

What this means to you, as an employer, is be careful what provisions you include in any mandatory or alternative dispute resolution programs enforced in your workplace. One of the main reasons why employers implement such programs is to reduce the costs of employment-based lawsuits, but language limiting employee rights and increasing the employer advantage will most likely diminish cost savings.