Arbitration Agreements: Common Place in Sports World, But Are They Good for the Common Employer?

If you follow sports news with any type of regularity, you probably can recall a dispute between a player and team which involved arbitration (i.e. Terrell Owens' dispute with the Philadelphia Eagles). Whether it is a dispute over how much money a team must pay a player or whether a team can suspend a player, the dispute is rarely played out in open court. Instead, the parties head to arbitration and have an arbitrator decide the merits. Recently a New Orleans Saints employee brought a lawsuit against the team alleging wrongful termination. The Saints invoked an arbitration clause in the employee's employment agreement and now the dispute will be decided by an arbitrator.

In the employment arena, arbitration clauses are becoming more common. This swing in favor of arbitration likely is driven by preconceived benefits of arbitration. Those preconceived benefits include: moderate costs ("potential" - see disadvantages below), expedited resolution, and confidentiality. While these preconceived benefits generally are true, an employer should keep in mind the disadvantages of arbitration. One disadvantage an employer needs to remember is that an employment arbitration generally requires the employer pay the arbitrator's fees for both parties. An arbitrator's fees can add up quickly in a contentious dispute. Another potential disadvantage is an arbitrator's propensity to "split the baby." This is not meant to be a slight on arbitrators, but the unfortunate truth is, arbitrators make money by repeat business. If the employee's lawyer does not like the outcome, that lawyer as well as other plaintiffs' lawyers will not select that arbitrator. Keep these advantages and disadvantages in mind as you evaluate whether to continue or begin using mandatory arbitration clauses in your employment agreements.