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Can you explain what “Circuit City” and “Waffle House” are? Most people would describe them as business establishments that one would find in or near a shopping mall. On the other hand, to the individual experienced in the laws of the workplace these are the shorthand names of two U.S. Supreme Court decisions handed down in 2001 and 2002. They both deal with certain aspects of mandatory arbitration agreements covering employment disputes. In the past several years there has been a growing interest in alternative dispute resolution procedures for employment law claims. Companies, in particular, have looked for ways to reduce their legal costs in defending against a variety of complaints brought by former employees or disgruntled workers. Employers also have been unhappy with the lengthy process of litigation, and the risks of runaway jury awards. One approach that they have been following with greater frequency to deal with these problems is the establishment of an arbitration procedure involving the company and employee that forces both parties to resolve their disputes through binding arbitration rather than in the courts. As you might expect, the imposition of such a mandatory agreement has caused some furor from plaintiffs’ attorneys, labor unions and other groups representing worker interests. The U.S. Supreme Court upheld in principle the use of mandatory arbitration of employment claims, but it was not a complete victory for management, since there are still many questions regarding the enforceability of these agreements. In Circuit City Stores v. Adamsthe Supreme Court held that an employer could file suit under federal law to compel arbitration of a terminated employee’s discrimination complaint. THE COURT WAFFLES Next, in EEOC v. Waffle House, Inc. the court said that private mandatory arbitration agreements could not preclude the EEOC from filing suit to seek its own enforcement action on behalf of an individual discriminatee. The decision in Waffle Housecould serve to set back or complicate the trend toward the use of these arbitration agreements. Employers have no guarantee of the benefit of their bargain since the EEOC might step in at any time. Also, plaintiffs’ attorneys can be expected to refer strong cases, which cannot be litigated privately because of an arbitration agreement, to the Commission. What are the remaining questions following Circuit Cityand Waffle House? Most importantly they focus on the enforceability of the arbitration agreement. The answer here turns on the requirements and procedures that it contains. Companies must be careful when drafting the document to ensure that it is not one-sided, that it does not contain unconscionable provisions and that a “mutual” agreement was validly reached between the employer and employee. Also, management cannot retain the unilateral right to modify the provisions of the contract. Before embarking on the path to mandatory arbitration of workplace disputes, an employer should carefully weigh the pros and cons of adopting such a procedure. Studies suggest that the chances of a successful defense in an employment case are similar in both the court and arbitration. However, large multi-million dollar awards are less likely to come from an arbitrator. With streamlined discovery procedures and expedited time limits an arbitration case could be resolved in a year or less. These proceedings are private, so any pleadings, evidentiary documents and testimony can remain confidential. At the same time, companies should consider the possibility that with informality and reduced costs employees may be encouraged to file more claims. Higher legal costs also will occur if businesses face continued initial challenges to the enforceability of such agreements. Furthermore, there is no guarantee of a favorable award, and some arbitrators are prone to compromise decisions. In addition, there is more limited discovery in arbitration, and this curtails the extent of preparation by each party prior to the hearing. Finally, there are generally more limited appeal rights from an arbitrator’s decision. The jury is still out on several aspects of mandatory workplace dispute arbitration. Although it is still a point of controversy among plaintiffs’ lawyers, the trend is definitely toward a greater role for ADR in the employment context. Peter A. Janus is the editor ofConnecticut Labor & Employment Law , published by theConnecticut Law Tribune , and he is a principal in the law firm of Siegel, O’Connor, Zangari, O’Donnell & Beck, www.soszlaw.com, in Hartford.

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