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Employers should take note that over the past several years the U.S. Supreme Court has consistently upheld arbitration clauses in employment contracts. The Court’s consistent rulings in favor of arbitration agreements have changed employment law in many states, most notably in California, which has a long history of the courts being hostile to arbitration agreements.
Essentially, the Supreme Court has ruled that the Federal Arbitration Act (FAA) preempts state law and allows the enforcement of arbitration clauses in contracts. Typically, the arbitration clause allows the employer to choose the forum and a mutually-agreeable, neutral arbitrator (usually a retired judge or lawyer) to avoid the protraction, emotion and risk of a jury trial.
Arbitration offers several attractive benefits when compared to litigation for employers. Generally, arbitration offers employers greater confidentiality, reduced discovery expense, quicker proceedings, and a final decision for both parties.
One area where an arbitration clause may be less favorable to an employer’s interest is obtaining timely injunctive relief against a former employee, which may be important if the employer is attempting to enforce a non-compete clause. The arbitrator can issue injunctive relief, but lacks the ability to issue a temporary restraining order and cannot find a party in contempt for failing to follow the aforementioned injunctive relief granted. This delay could expose the employer to potential economic damage until the arbitration process is complete. Properly crafted, arbitration agreements can be utilized to address non-compete claims by including an exception allowing the employer to pursue injunctive relief through the courts.
If you would like to learn more about using arbitration agreements and their potential benefits please feel free to contact me at 732.395.4251 or asica@thealsgroup.com.