- Arbitration Agreements Must be Fair to Both Sides
- May 6, 2003
- Law Firm: Ford & Harrison LLP - Atlanta Office
As mandatory arbitration agreements grow more popular, employers should be aware that some courts have found such agreements to be unenforceable if the agreements are "unconscionable". The Fourth Circuit Court of Appeals recently invalidated an arbitration agreement in Murray v. United Food And Commercial Workers International Union, holding that the agreement was one-sided and unenforceable.
In Murray, the employee signed an arbitration agreement when hired by the employer (UFCW), which required the parties to use an arbitrator chosen from a list of arbitrators provided by the employer. The Fourth Circuit held that the arbitration agreement was unenforceable because there were no constraints on the employer in deciding who would go on the list of arbitrators. The court noted that this could give the employer an advantage in arbitration. The arbitration agreement also stated that the arbitrator had no authority to contravene the authority granted to the employer's president. The court held that this language might be construed to make the arbitrator's decision unenforceable, if the arbitrator ruled against the employer.
Employers who implement mandatory arbitration agreements should examine these agreements carefully to ensure that they can withstand judicial scrutiny of the fairness of their terms.