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TO: The Vice President FROM: Danielle Balson DATE: 24 Oct 2017 SUBJECT: Arbitration

General procedures or rules governing a typical arbitration proceeding

A contract encompassing an agreement for arbitration of disputes usually outlines some of the fundamental aspects relating to any possible future arbitration. The procedures and rules that would be utilized in a given arbitration are usually part of the agreement (Smit & Thacher, 2013). In case an outside or third party service would be utilized for handling an arbitration, the contract may provide specifications of whether the service’s already-established procedures and rules would be utilized (Smit & Thacher, 2013). As a result of the different kinds of arbitration services, and the flexibility that is usually provided to participants to draw up their preferred rules, there is no single set of procedures and rules applicable to all arbitrations (Smit & Thacher, 2013). Nevertheless, regardless of the rules or procedures used, below are some of the fundamental issues or general procedures and rules governing a typical arbitration proceeding:

Number of arbitrators. The parties involved in an arbitration proceeding usually outline in the contract whether one, a panel comprised of three, or more arbitrators would rule or make decisions on their dispute (Smit & Thacher, 2013). As a general procedure or rule, the more significant and complicated an issue is, the higher the number of arbitrators would be involved.

The number of arbitrators to be selected. Parties can make the decision to appoint arbitrators in various ways, including through the process of elimination, selection from a list of different arbitrators or through an agreement (Smit & Thacher, 2013).

Timeliness for arbitration. Rules and procedures can establish timelines for making resolutions in a dispute, including when notices are issued, and how long the arbitration hearings last (Smit & Thacher, 2013).

Evidence. Rules and procedures of evidence can be complicated in ordinary litigation processes. They are usually more relaxed in arbitration proceedings thus allowing more evidence to be put into consideration, even though there can be inadequate time for presenting and discovering the evidence (Smit & Thacher, 2013).

Awards. Rules and procedures often dictate the form that can be presumed by an award, as well as any possible deadlines for decision-making (Smit & Thacher, 2013).

Records and confidentiality. Rules and procedures may allow parties to receive and keep records of the arbitration proceedings and to ensure such records are kept confidential.

Use of arbitration as opposed to a lawsuit in settling employment-related dispute

An employer may for an employee to use arbitration as opposed to a lawsuit in settling employment-related dispute (Mathis, Jackson, Valentine, & Meglich, 2016). Many employers usually ask their workers to sign arbitration agreements, which ensures the employees give up their legal right to sue the employer in court over employment-related issues such as discrimination, breach of contract, and wrongful termination (Mathis, Jackson, Valentine, & Meglich, 2016). An employee who agrees and signs an arbitration agreement thus offer a promise to pursue any legal claims against his/her employer through an arbitration, as opposed to a lawsuit and the employer has the right of enforcing this by requiring the employer to only use arbitration as a way of resolving any employment-related dispute (Mathis, Jackson, Valentine, & Meglich, 2016).

Times when an arbitration clause might be invalid or unenforceable against an employee

There are two key circumstances under which an arbitration clause might be unenforceable or invalid against an employee, and they include, whether the said arbitration clause is applicable to the involved dispute, and whether the arbitration clause is unenforceable or void because it is illegal, unconscionable, or abusive (Holley, Jennings, & Wolters, 2012).

Applicability. Employees may argue that a given arbitration clause is not applicable, or the involved dispute is not within the scope of the arbitration clause and the employees’ employment agreement (Holley, Jennings, & Wolters, 2012). For instance, in Hargraft Schofield LP v. Fluke , the contract of the employee had been renewed several times. The very first employment agreement had a compulsory arbitration clause, with the second one having no arbitration clause, and the third and fourth merely extending the terms of the preceding employment agreements. The fifth employment agreement had a clause that integrated the terms contained in all the four employment agreements. The court ruled that the arbitration clause in the first employment agreement was not applicable since the second employment agreement superseded the first one and since no allegations were made with regard to the first employment agreement.

Enforceability. Employees also have the right of arguing that an arbitration clause is unenforceable, regardless of its existence (Holley, Jennings, & Wolters, 2012). For example, in Houston v. Exigen, the employment agreement contained an arbitration clause that required employment-related disputes to be solved through binding arbitration in California. However, the arbitration clause was not applicable to claims or disputes relating to the misappropriation or misuse of proprietary information or trade secrets of the employer. The Court held that the clause was unenforceable since the existence of at-will termination of employment corrupted the entire employment agreement. The Court further determined that the clause was invalid by noting that it was offensive in that it barred employees from bringing lawsuits in the province while their employer was still capable of pursuing its former and current employees.

Effect that claims based on specific state or federal laws have on arbitration provisions in employment contracts

Many employers usually perceive arbitration as an efficient and inexpensive alternative to court litigation for resolving disputes such as discrimination claims. While arbitration tend to be widely embraced as an efficient alternative mechanism for dispute resolution, courts still require arbitration agreements that cover statutory employment claims to be procedurally and substantively fair and conscionable to be enforced (Mathis, Jackson, Valentine, & Meglich, 2016). Under the Federal Arbitration Act, written agreements for arbitration are generally valid except when contained in contracts of employment of railroad workers, seaman, or other class or employees engaged in interstate commerce (Mathis, Jackson, Valentine, & Meglich, 2016).

However, claims based on the Equal Employment Opportunity laws have significant effects on arbitration provisions in employment contracts, with the Equal Employment Opportunity Commission (EEOC) having the right to bring suit against an employer on behalf of an employee who is party to an enforceable arbitration agreement (Mathis, Jackson, Valentine, & Meglich, 2016). For instance, in Waffle House, the employee agreed that any claim or dispute regarding his employment would be resolved through a binding arbitration proceeding. The employee was subsequently fired and filed a petition against the employer for discrimination with EEOC (Carper & McKinsey, 2012). When the EEOC filed a suit against the employer, Waffle House, in a federal court, the employer argued that its arbitration agreement precluded the EEOC from filing a suit with the court for damages on behalf of the employer (Carper & McKinsey, 2012).

However, the Supreme Court ruled that any arbitration agreement between an employer and an employee cannot eliminate the right of the EEOC, which is a non-party to the arbitration agreement, to sue for different kinds of relief it otherwise would have been able to pursue (Carper & McKinsey, 2012). The Court noted that the EEOC was specifically empowered by different statutes, such as the Age Discrimination in Employment Act and the Title VII of the Civil Rights Act of 1964, to bring suit in federal court and subsequently seek compensatory damages, back pay, reinstatement, punitive damages and injunctive relief (Carper & McKinsey, 2012). The court reasoned that a private agreement between an employee and an employer cannot limit the powers that are vested in the EEOC by the established statutes (Carper & McKinsey, 2012).

Claims of racial discrimination, gender and even pregnancy could render provisions of the arbitration clause null. Failure also to inform the employee as it is in the case of Liz within a reasonable time is enough ground to invalidate the arbitration clause. In summary, the case of Ralph will be heard through an arbitration and since he refused to take the drug test, he is less likely to win the case. However, Liz’s case will likely be a court case and unless there are reasonable grounds for the restructuring and failure to notify her, then Liz stands a chance of winning the case and even being awarded damages.

References Carper, D. L., & McKinsey, J. A. (2012). Understanding the law. Mason, Ohio: South-Western Cengage Learning. Holley, W. H., Jennings, K. M., & Wolters, R. S. (2012). The labor relations process. Mason, OH: South-Western Cengage Learning. Mathis, R. L., Jackson, J. H., Valentine, S. R., & Meglich, P. (2016). Human Resource Management. New York: Cengage Learning. Smit, R. H., & Thacher, S. (2013). Comparison of international arbitration rules. Huntington, New York: Juris.