Many new employees sign their company’s policy handbook without careful scrutiny because they don’t want to appear uncooperative in their new job. In the excitement of being hired, questioning specific clauses or fine-print, is not something that is at the top of their agenda. In most cases, policies will not come back to bite them, if everything goes smoothly and neither side has any cause to question their behavior or practices. However, the recent plethora of harassment cases in the workplace makes it more necessary to study the fine print.
More American companies are inserting mandatory arbitration clauses in their company’s policy handbooks and agreements with employees. This has jumped from 2% of non-unionized employees in the nineties to more than 50%. The ability to seek redress from a supposedly neutral party appears, at first glance, to be beneficial to both sides. Allowing employees and employers to submit their disputes to arbitrators prevents litigation in the already overextended judicial system. This process is often long and expensive, greatly favoring the employer. It also allows claims to be made that would not be justified in a regular court.
Firms have more legal resources, connections and money to take on protracted judicial processes. Monetary settlements in arbitrated cases are, on the average, less generous than those that are allocated by courts. However, it is worthwhile to analyze the benefit to cost ratios in these cases.
Unfortunately, employees are not always treated by arbitrators as they would in court decisions. Arbitrators are not subjected to reviews and appeals. Their decisions are final and no records of arbitration decisions or procedures are kept in the public domain. The proceedings may also be subject to confidentiality clauses, which prohibit the employees to go public to ferret out repeat offenders. In this way, victims are silenced and misbehaving perpetrators are free to continue their transgressions against others.
It is common practice for companies to seek the services of the same arbitrator in multiple cases. This represents repeat business that may lead to a certain bias towards the party that pays the bill. Any time a commercial bond is formed it tends to influence even the most fair-minded individual. On the other hand, it would be rare for the same employee to do likewise, as multiple conflicts with employers may classify the employee as a troublemaker and subject them to dismissal when the opportunity arises.
To add to the employers’ advantage, mandatory arbitration clauses are often paired with bans on employees’ rights to pool their financial resources through a class action suit. The argument that this avoids frivolous claims is being legally disputed.
In general, a low-cost ability to settle employee issues should be welcomed, providing that they are fair to both sides. Undoubtedly, there are many ethical firms and arbitrators that impose sensible rules and policies for the fair treatment of employees. Some of the improvements that can be easily incorporated in employee contracts and policy handbooks are as follows:
Transparency and consent
Every employer owes each employee the courtesy and obligation of providing full disclosure of all the clauses. The focus should be on those articles that may not be easily understood or are obfuscated by legalese language. Through some type of questionnaire, the employees can demonstrate that they fully understand what they are signing, before giving their consent. Going through arbitration or court procedures is time-wasting and costly for both parties. Transparency makes it more likely that disputes can be settled inhouse.
Both sides would be wiser if they insisted on regulations that prohibit the repeated use of a single arbitrator or arbitration firm. The selection can be subjected to a random selection of capable experts in this field. Avoiding any bias that favors the employer’s side of the argument may be difficult to accept for some, but good governance is more in demand now by investors and stakeholders.
The existing arbitration process is mainly a verbal one. There is no requirement for a written justification of rulings. This is a lackadaisical approach to judgments because it makes it very difficult to question a decision or to seek an appeal at a later date. Both sides should have the ability to challenge legally questionable rulings when they become known. A paper trail would allow for a proper analysis of the judgment to be made on which a legal case can be built.
Poor ethical behavior can damage a company’s reputation and share value in the long run. One way of providing proof of the company’s commitment to values is to disclose the number of arbitrated settlements and how they were resolved. The motivation for more transparency should not be solely guided by the possibility of litigation and bad publicity. Ethics should be an intrinsic part of every company’s culture.
A balanced approach to the way company rules and policies are applied can greatly reduce the number of employee issues that reach the arbitration stage. By carefully screening out any bias or uneven application of rules, employees will be less prone to seek settlements beyond the company walls. Lax previous enforcement by managers should be noticed and corrected before stricter actions are taken. Coaching of the managers in employee handling skills should be an ongoing process, which uses actual past cases to show how the situation should have been handled.