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What Does It All Mean For You?
In the face of the Circuit City case, our advice is this: all employers should, as soon as possible, carefully analyze how employment agreements with arbitration clauses could lower their employment practices liability risks. This is not a panacea, and it does not apply to every employer or every employee. But properly considered and applied, it is a preventive law device that could be worth hundreds of thousands of dollars in saved legal fees and damages. Here are some points to think about:
- In most jurisdictions, putting a paragraph in your personnel manual requiring that all disputes be arbitrated will not do the trick. It is not that easy. You will need an agreement, signed by the employer and the employee.
- To be effective, an arbitration clause has to be properly drafted. There are various permutations. Will arbitration apply to all disputes, or just certain types of disputes? How will the arbitrator be selected? What qualifications must the arbitrator have? Should there be just one arbitrator, or a panel of three? Will the loser be responsible for the costs? Should mediation be required before arbitration? What are the procedural rules that will apply to the proceedings? How quickly must the case be decided?
- Employment agreements can serve a variety of other purposes. They can be used to create incentives that will help you retain particularly valuable managerial employees. There are many forms of covenants that can protect you when a management employee threatens to leave and take information and customer lists to your competitors. Other provisions can protect trade secrets and intellectual property rights. Inexplicably, many employers have never considered using employment agreements for any purpose, and we think this is a major, strategic error. Use the Circuit City decision as a spur to look at the possibilities in a new light.
Avoiding lawsuits and liabilities is a tough business. You have to use all the arrows in your quiver. The Supreme Court has just handed employers some substantial leverage. We strongly urge you to use it. Contact us if you need assistance.
Counsel Consulting Group LLC helps companies throughout the United States avoid employment and HR-related claims and liabilities. CCG assesses existing policies, procedures and problem areas; it provides customized liability-avoidance training to managers and executives; and it designs and implements business techniques that reduce employment liability risks on a long term basis. CCG also offers specialized workshops for managers and HR executives, customized consulting in focused employment-related areas, and CD-ROM and web-based training alternatives. For more information, contact us at info@powelltrachtman.com and visit our website at www.counselconsulting.com.
Powell, Trachtman, Logan, Carrle & Lombardo, P.C. is a full service law firm with offices in suburban Philadelphia, PA, Harrisburg, PA and Cherry Hill, NJ. Powell Trachtman represents a variety of commercial enterprises, entrepreneurs and business executives in respect to their litigation, litigation avoidance planning, business formation, business transactions, estate and tax planning, and other needs. We are also approved defense counsel for numerous insurance carriers in matters pertaining to professional malpractice, products liability, employment practices, directors and officers liability, and many other fields. For more information, contact us at info@powelltrachtman.com and visit our website at www.powelltrachtman.com.
