Enforceability of Pre-Dispute Clauses in Employment Agreements

I. Introduction Employers continually turn to arbitration to resolve disputes with those within the employment relationship. Over the years, the enforceability of pre-dispute arbitration clauses contained in employment agreements has been a controversial issue in American Jurisprudence. Proponents of arbitration clauses assert the potential benefits of arbitration; among many, arbitration is quicker, cheaper, avoids excessive jury verdicts, and is private. Those who oppose arbitration clauses claim the clauses limit due process rights of employees, limit the ability for the employee to conduct adequate discovery, and often include provisions that tilt the system against employees. As courts become progressively more overburdened, alternative dispute options for employment agreements gain increased national attention. Throughout the twentieth century, courts regularly invalidated arbitration clauses in the employment context. In 1991, the Supreme Court significantly departed from previous precedent and ruled that arbitration clauses in employment disputes are enforceable. Today, arbitration agreements (except for those in the transportation industry) are enforceable so long as certain due process conditions are met. First, this paper will discuss the current state of the law including policy considerations that are currently debated among scholars regarding arbitration agreements. Second, this paper will discuss requirements for an enforceable arbitration agreement.

II. From Gilmer Onward: Current Arbitration Clause Issues

A. The Current State of the Law –FAA, Gilmer and Circuit City In 1925, Congress enacted the Federal Arbitration Act of 1925 (FAA) with the intent to eliminate judicial hostility against arbitration agreements. The FAA authorizes arbitration except “to