How the Supreme Court Ruling in Epic Systems v. Lewis Affects the Arbitration Provisions in Employment Contracts

     The employment attorneys at Nardone Limited in Columbus, Ohio want to ensure our clients execute the proper employment agreements, so their business interests are protected. Specifically, we want to protect our clients from liability that arises from potential employment disputes. As part of managing a successful business, most owners will likely go through the process of hiring new employees. One main aspect of the hiring process is the employment agreement, and specifically, the arbitration provision included within the employment agreement.

     Including an arbitration provision within an employment contract is extremely important, especially in light of the recent United States Supreme Court (the “Supreme Court”) decision in Epic Systems v. Lewis. In Epic Systems v. Lewis the Supreme Court upheld the enforcement of mandatory bilateral arbitration clauses in employment contracts. Nardone Limited’s blog article titled, “Supreme Court Update: Landmark Pro-Employer Ruling Issues, which Confirms Enforceability of Mandatory Employee Arbitration Clauses that Ban Class Actions”, explains in detail this recent Supreme Court decision. The Supreme Court’s decision was a huge win for employers and drastically affects an employer’s exposure to potential liability. In light of this recent Supreme Court decision, many employers are now asking: “How does the decision in Epic Systems v. Lewis affect my business?”

Impact of the Epic Systems v. Lewis Decision on Employers

     As stated in Nardone Limited’s prior blog, the decision in Epic Systems v. Lewis will result in fewer employment class action lawsuits, and a decrease in liability exposure for employers. An employment agreement that contains a mandatory bilateral arbitration provision will force an employee to arbitrate any potential claim against the employer instead of filing a lawsuit. But, to obtain the benefit from this decision, employers will need to review and revise their employment agreements to ensure that the employment agreements contain a mandatory bilateral arbitration provision and that the arbitration provision complies with the Federal Arbitration Act. It should also be noted that not all employers will benefit from mandatory arbitration provisions. Small businesses, such as dental practice owners, will not benefit from arbitration provisions in their employment agreements. Thus, employers should always contact an experienced employment attorney to determine if an arbitration provision should be included in their employment agreements.

Nardone Limited’s Recommendations to Employers

     Most employers should include a mandatory bilateral arbitration clause/provision in their employment contracts with employees. This will ensure that all claims or issues that arise from the employment relationship will be subject to arbitration, instead of a public lawsuit filed against the employer. The arbitration provision should be detailed, and given the Supreme Court’s decision, the arbitration provision must comply with the Federal Arbitration Act. Here are some recommendations to consider when including a mandatory bilateral arbitration clause in an employment contract:

  • Ensure that the arbitration provision is a bilateral, or individual, arbitration provision. A bilateral arbitration provision will only allow for an arbitration proceeding between the employer and the employee and will not allow for other employees with similar causes of actions to join that arbitration. This will minimize the exposure and potential liability for the employer and will allow the employer to arbitrate and address the issues of one specific employee.

  • The arbitration provision should include language that the arbitration decision is binding upon all parties. Including “binding arbitration” language will make the decision of the arbitration binding for the employer and the employee and will also make the decision final.

  • Include language that states the specific claims or issues that will be subject to arbitration. For example, the employer can include language stating the employee will be subject to mandatory arbitration if the employee violates the non-compete or non-solicitation provisions of the employment contract.

  • The employer can also include language regarding the cost of the arbitration proceeding and who will be responsible for paying that cost. Arbitration can be expensive, so an employer offering to split the cost of arbitration, or even offering to cover the cost of the arbitration, may make the employee more willing to agree to the arbitration provision. As stated previously, arbitration is in the employer’s best interest as it will minimize exposure and liability, thus, paying for the cost of arbitration will ultimately benefit you as an employer.

  • If the employer would like to add an arbitration provision to the employment contracts for current employees, the employer is able to do so. First, the employer should draft a detailed arbitration agreement and make that arbitration agreement an addendum to the employee’s employment contract. The employer should meet with an experienced employment attorney to ensure that the arbitration provision is valid and enforceable. Then, the employer should meet with the employee and explain the arbitration provision the employer would like the employee to sign. If the employee is hesitant, the employer can offer an incentive for the employee to sign the arbitration provision, such as more time off or a bonus of some kind. Again, arbitration provisions are in the employer’s best interest, and in light of the recent decision, it is best to have an enforceable individual arbitration provision included in employment contracts.

Contact Nardone Limited

     If your business has questions about arbitration agreements and the language that should be included in employment agreements, contact the attorneys at Nardone Limited. The employment attorneys at Nardone Limited are well versed in employment agreements and arbitration provisions. The employment attorneys at Nardone Limited can also handle a full spectrum of employment law issues, including business disputes and litigation, drafting employment agreements and restrictive covenants, and consultation on employment law issues. If you need advice or representation in an employment dispute before the EEOC, the OCRC, or regarding potential labor and employment litigation, feel free to contact Nardone Limited.