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Arbitration Agreements: Critical In Reducing The Risk Of Class Action Litigation

Thursday, August, 29, 2013

Many employers across the country make use of arbitration provisions with employees to reduce the likelihood of class action litigation.  This limits the chances of future expenses, exposure and agony of litigation.  Recently, the United States Supreme Court passed down a decision in which it recognized support for companies that use and enforce these types of opinions.  This makes it easier for employers to compel arbitration of claims related to employment.  Employers concerned about the possible challenges of managing litigation with employees in the future would be wise to take this opportunity to review existing arbitration agreements or to develop new ones.


Arbitration agreements have grown in popularity since the Federal Arbitration Act was put into place in 1925.  This act is seen by many experts in the field as Congress’ intent to establish a national policy supporting arbitration, since this act made arbitration finding in state and federal courts.  Arbitration has been heralded largely as a success story since many cases going through the process are encouraged along quickly and efficiently, leading to resolution much faster than traditional litigation.


From the perspective of both attorneys and those parties involved in arbitration, there are many benefits to using this form of alternative dispute resolution.  It’s more flexible and less expensive than traditional litigation while allowing parties to achieve resolution much more quickly.  Parties can additionally agree to keep the terms and proceedings of arbitration private and confidential, which is a tremendous advantage for those employers who want to maintain some layer of privacy in their legal dealings.


Another reason that employers should stand poised to develop arbitration agreements is that in recent years, collective action suits alleging wage violations under the Fair Labor Standards Act have been on the rise.  This is partly due to the ease of obtaining class action certification in particular areas and the potential to recover large awards.  Developing arbitration agreements, however, can serve to protect employers and allow for disagreements to be conducted through a more beneficial process.