Arbitration: Employers - Caveat Emptor

In the past, some employers put clauses in employment agreements – even at-will employment agreements for some lower-level employees – requiring the arbitration of all “disputes” between an employee and an employer. That gained some momentum when the United States Supreme Court, in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), held that arbitration clauses, in general, are enforceable in employment contracts. In Iowa, we saw some activity in 2003-2004, when the enforceability of such a clause was challenged in litigation involving Menard, Inc. – “Menards.” The Eighth Circuit Court of Appeals determined that a contract which required that “all claims and disputes between Menards” and the individual be submitted to binding arbitration was enforceable. Furthermore, the Court clarified that “all claims and disputes” included “statutory claims arising out of” the ADEA, the FLSA, Title VII, the ADA and the FMLA, as well as all contractual claims, tort claims, and any claims or causes of action.” Faber v. Menard, Inc., 367 F.3d 1048 (8th Cir. 2004), reversing Faber v. Menard, Inc., 267 F. Supp. 2d 961 (N.D. Iowa 2003).

It is critically important that employers which propose such agreements understand precisely what may be involved. Currently pending before the Wisconsin Supreme Court is an appeal – also involving Menard, Inc. – of an arbitration decision in which the remedy is being challenged. Menards recruited a female attorney to oversee the company’s in-house legal department. That attorney later claimed she was paid about half as much as a male she supervised. When that male was fired, and the female attorney assumed his responsibilities as well, her pay was not adjusted. After some time, the female informed the CEO and the head of the company’s human resources department that she (the company’s attorney) believed she had a claim under the Equal Pay Act and Title VII of the 1964 Civil Rights Act. She alleged that company officials then . . .

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