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Jun 5, 201811:49 AMOpen Mic

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Supreme Court approves arbitration agreements that preclude participation in class action lawsuits

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Drafting effective arbitration provisions suitable to an employer’s particular circumstances should be done with careful consideration. While courts now may scrupulously enforce arbitration clauses, their utility as actual dispute resolution procedures depends on a variety of factors. Among the items that should be included are the following: (1) procedural rules to be followed, such as arbitration rules promulgated by the American Arbitration Association; (2) procedure for selecting arbitrators; (3) time limits for completing arbitration; (4) limits on discovery and other litigation practice; (5) specifications of arbitrator qualifications specific to the employer’s circumstances; (6) choice of law and venue provision; (7) strict confidentiality requirements; and (8) limitation on appeal rights.

In the end, the advantages to employers of avoiding entanglement in class actions with employees are very significant. Almost all of the statutory bases that underlie employee class actions involve potential attorney fee-shifting, multiple damages, or exemplary damages, with potentially large numbers of individual employees bringing aggregate claims. The Supreme Court’s Epic Systems decision opens the door for employers to utilize arbitration provisions that will effectively protect against class action involvement. Employers who are not presently incorporating such provisions into their employment agreements or requiring such agreements to be signed as a condition of employment should consider doing so.

The enforceability of agreements to arbitrate under the Federal Arbitration Act does not require that such provisions be incorporated into comprehensive written employment agreements. Instead, employers may request new employees to sign a stand-alone agreement to arbitrate disputes relating to the employment. Employers may also require existing employees to sign an agreement to arbitrate as a condition of continued employment. Any employer wishing to require current employees to sign such agreements should consult with legal counsel to ensure that proper steps are taken to support the validity and enforceability of the agreement.

Rich Bolton, an attorney with Boardman & Clark, has over 20 years of business litigation experience in such areas as business torts, unfair competition, intellectual property disputes, restrictive covenants, dealership termination, and contract matters. He also has an extensive background in employment and civil rights litigation, and is experienced in federal court practice and procedure.

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