It’s the moment you dread: A document marked LAWSUIT arrives at your desk. An employee has sued the company in court claiming sexual harassment or maybe failure to pay overtime wages. The lawsuit even includes threats of class action.
The U.S. Supreme Court has now issued a business-friendly ruling that gives employers the freedom to work out problems privately. It ruled that companies may include in their employment contracts provisions that limit aggressive and costly lawsuits—including class action lawsuits.
Savvy companies, including big-time accounting firm Ernst & Young, use simple arbitration agreements in their employment contracts. These arbitration agreements prohibit employees from banding together and running to court to assert federal labor law violations. Rather, the agreements require that employees—current and former—engage in a private, low-cost arbitration process on an individual basis.
Arbitration allows employment-based complaints to be resolved by a streamlined process where an arbitrator (like a judge) hears both sides and issues a binding decision. The types of lawsuits that may be limited to individual arbitration include claims for overtime pay, claims of discrimination, and claims of sexual harassment. This is a major win for employers. No matter the size of the company, binding arbitration agreements and class action waivers can protect from serious legal risk.
The benefits of arbitration are great for employers and employees alike:
- Arbitration is much faster than traditional courtroom litigation, which can take years
- Arbitration is confidential and allows sensitive issues to be discussed openly
- Arbitration is less expensive compared with courtroom litigation and months of discovery
- Arbitration is solution-oriented and allows parties to peaceably resolve their disputes in a way that can actually save a relationship rather than create lawsuit hostility
- Arbitration avoids pressuring employers into high-dollar payouts to avoid even higher-dollar litigation costs
- Arbitration allows employees to be heard in a fair, impartial environment
But arbitration protections do not apply automatically—and they must be carefully written to ensure they comply with detailed legal requirements. Done correctly, however, careful planning and contract drafting can limit one of the most draining costs and growing risks to employers.
Employers often pride themselves in providing an open and diverse workplace where employees can thrive. Open fights can disrupt the workplace and drain funds that could be otherwise spent on workplace improvements. Smart companies like Uber and Starbucks make easy dispute resolution a priority. Their employment agreements include litigation waivers and mandatory mediation and arbitration clauses, but they also include clear prohibitions on improper workplace behavior and resources for any employee who believes she or he is a victim of improper behavior.
Many employees are grateful to have clear complaint procedures. Done properly, an employee handbook can provide a safe path for reporting misconduct. These provisions can empower employees who are fearful of public litigation, which can have long-term career impacts and untold costs. We recommend that employers implement a multi-step process for handling complaints, which ends in arbitration if not resolved beforehand. Our processes follow methods approved by the Supreme Court. Major arguments between parties are avoided and decisions are reached in a reasonable time rather than years.
Logistics and trucking companies face especially steep risk of employment-based lawsuits. The industry is known for high levels of sexual harassment claims and long hours that can result in overtime and other claims. Yet many logistics companies are slow to update their employment agreements to protect from these risks. Our experience indicates that less than 20% of logistics companies have adequate protections, compared with nearly 60% of companies in other major industries that have updated their employee contracts, handbooks, policies, and procedures.
As mentioned earlier, proper contract drafting by an experienced attorney is critical. Small errors can result in big costs. Common errors include:
- Failure to inform employees properly of arbitration requirements
- Inconsistent employment materials that invalidate protections
- Outdated contracts
- Unclear harassment policies and procedures
- Wage and salary errors that lead to federal law violations
The workplace is constantly changing. Employees are increasingly outspoken about problems they encounter. Plaintiff’s lawyers are vying for business to bring high-dollar class actions and strongarm swift settlements. Employers desire to help root out bad behavior and give employees a chance to be fairly heard. To achieve these common goals, logistics companies must update their policies and procedures to remain fair to employees, competitive in the industry, and protected. Thankfully, the recent rulings by the Supreme Court help. Action, however, is required to not to be caught without these new protections.
Please do not hesitate to contact us if we may assist with updating your Employee Handbook, Driver Manual, and/or contracts.