Rethinking arbitration clauses

Over the years, the use of arbitration clauses in employment contracts has become more common. These clauses specify that in the event of a dispute between an employee and employer, the matter will go to arbitration, not court.

However, arbitration agreements are controversial. Employers often see the benefits of using arbitration clauses, including keeping certain matters private and avoiding the cost of litigation. Employees, on the other hand, argue that these clauses unfairly benefit employers and perpetuate a cycle of workplace violations.

Google makes important decision

In response to the criticism by employees, some companies are choosing not to use arbitration clauses. One such company is Google. It recently announced it will no longer use arbitration to prevent employees from suing the company. It also will allow employees to join class-action suits.

The decision reportedly comes in the wake of criticism and protest regarding sexual assault and harassment claims at Google. Most recently, employees walked in protest of the way the company mishandled sexual harassment claims against a former executive.

What will other companies do?

Whether Google's decision sparks similar decisions among other companies remains to be seen. However, many people see it as a step in the right direction. Without arbitration, it can be easier for employees to hold an employer accountable for violations like harassment and discrimination and the Court's decision sets a precedent for subsequent cases. Arbitration decisions do not set any precedent, which means that even if an employee prevails against the employer by proving a hostile work environment, for example, the next employee - under the identical facts - could be defeated.

(This is actually true in all types of business contracts that contain an arbitration provision, which is the primary reason most businesses require the other side to enter into it.)

That said, before you make any decisions regarding the use of these clauses in your own business, it is important to consider your specific needs and interests and discuss your options with an attorney.

Like any contractual clause, arbitration clauses can be effective in some cases but not others. Consider your motivations for requiring arbitration as well as the message it might send to your employees. Think about whether such a clause is actually necessary as well as how you can ensure it is enforceable. Based on your objectives, you and your attorney can determine whether an arbitration clause in employment agreements is best way to protect your company while keeping your employees happy.

Ideally, the need for dispute resolution clauses will never come up. However, conflict can and does arise in businesses. Knowing how to respond in a timely and effective manner can help employers avoid costly missteps and unfortunate publicity.

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