Can a Mandatory Arbitration Clause Govern Discrimination Claims?
The answer is “yes, but . . .”: Over the years, the federal courts have stretched the scope of the Federal Arbitration Act to allow an employer, by a proper arbitration agreement, to compel the arbitration of discrimination claims brought under Title VII, the ADEA, the ADA, and the Equal Pay Act. Arbitration can provide a much faster and more cost-effective way to address these often volatile and expensive claims. These claims may be covered by a broader arbitration provision in an employment agreement. Arbitration can be a significant advantage to the employer.
Why the “but”? Courts have refused to recognize arbitration provisions in employment discrimination claims in certain circumstances; for example, when countervailing factors exist such as:
- Lack of mutuality – e.g., the arbitration clause applies to the employee but not the employer’s counter-claims.
- Inclusion in the employee handbook only – if the handbook is not a contract and there is no legal consideration for the agreement.
- Ambiguity – inclusion of discrimination claims need to be specific, not inferred.
There are other exceptions as well, and it’s important to note that an arbitration clause generally cannot prevent an employee from filing a charge of discrimination with the EEOC. But a mandatory arbitration requirement for federal discrimination claims can be established by an employer if drafted and implemented correctly.
Takeaway: An employer should give serious consideration to adopting agreements that allow for the mandatory arbitration of federal discrimination claims. The process of getting there has its legal complexities, but it may be well worth seeking legal counsel for analysis, advice, and drafting.