For years, employers of all sizes have implemented arbitration programs as a means of resolving employment disputes. (In an article that appeared in the New York Law Journal on Jan. 12, 2017, we made practical suggestions for how to draft enforceable arbitration agreements that are likely to withstand court scrutiny. See A. Michael Weber, “Mandatory Arbitration Agreements: To Be or Not to Be,” 257 N.Y.L.J. 4 (Jan. 12, 2017).) During that same time period, the U.S. Supreme Court has repeatedly held that the Federal Arbitration Act mandates enforcement of Arbitration Agreements in all but the most unusual circumstances. See generally DIRECTV v. Imburgia, 136 S. Ct. 463 (2015); AT&T Mobility v. Concepcion, 563 U.S. 333 (2011); Circuit City Stores v. Adams, 532 U.S. 105 (2001); Gilmer v. Interstate Johnson v. Adams, 500 U.S. 20 (1991).

Now, as the U.S. Supreme Court again revisits issues related to employment arbitration agreements in a series of cases involving class and collective action waivers, we revisit the advantages and disadvantages of implementing a workplace arbitration program.

The State of the Law

As recently as December 2015, the U.S. Supreme Court reiterated the well-accepted principle that “federal policy favor[s] arbitration,” and arbitration agreements should be placed “on equal footing with all other contracts.” Imburgia, 136 S. Ct. at 468, 471 (internal citations and marks omitted). This principle is reflected in §2 of the Federal Arbitration Act, which provides, in mandatory terms, that arbitration agreements “shall be valid, irrevocable, and enforceable.” 9 U.S.C. §2.

On Oct. 2, 2017, the Supreme Court heard oral argument in three consolidated cases which address the issue of whether arbitration agreements containing a class and collective action waiver are enforceable under the Federal Arbitration Act, notwithstanding provisions of the National Labor Relations and the Norris LaGuardia Acts, which guarantee employees the “right” to engage in “concerted activities.” Epic Systems v. Lewis, Docket No. 16-285 (U.S. 2017); Ernst & Young v. Morris, Docket No. 16-300 (U.S. 300); NLRB v. Murphy Oil USA, Docket No. 16-307 (U.S. 207). It is widely expected that the court will reaffirm its commitment to the enforceability of arbitration agreements, and uphold the collective and class action waivers that many employers include in arbitration agreements.

Practical Advantages of Employment Arbitration

There are a number of important reasons why an employer might choose to implement an arbitration program in the workplace. In many single-plaintiff cases, arbitration is less costly than a jury trial. Costs associated with extended jury trials, including time spent preparing and participating in voir dire, drafting and responding to motions in limine, quarreling over proposed jury instructions, and creating jury-ready demonstrative exhibits, do not exist in arbitration. Further, unlike juries who may feel sympathetic to a plaintiff or antagonistic to large employer and award large sums including excessive punitive damages, arbitrators may be less inclined to allow personal biases or emotions to affect their award. Indeed, arbitration awards consistently are smaller than jury awards in similar state and federal court litigation. In the class and collective action context, assuming the Supreme Court rules as we expect them to rule, the savings could be far larger. A class and collective action wavier in an arbitration agreement eliminates the significant litigation and settlement costs associated with defending class actions, which allow a single employee to bring suit on behalf of many.