Consider the Addition of Arbitration Clauses to Employment Agreements

September 11, 2018 | Seann D. McAleese

In our June 6, 2018 blog post we discussed the case of Lewis v. Westjet Airlines Ltd. and concerns around workplace harassment and discrimination claims being advanced through class action litigation. Obviously the cost and scale of damages for employers, not to mention potential adverse publicity, is much greater in the class action context. We have also seen overtime, wages and other employment-based claims being pursued through the courts via class actions, while at the same time garnering significant media attention.

One option to mitigate these risks, insertion of arbitration clauses in employment agreements, generated considerable interest and attention last month as a result of a recent U.S. Supreme Court decision. The case of Epic System v Lewis arose from an attempt by employees to sue their employer for unpaid overtime. Their employment agreements contained provisions which required individual arbitration rather than collective action through the courts. Although a split decision, the majority of the Court found that such clauses are enforceable under Federal law in the U.S. These provisions were already fairly common south of the border where over half of non-unionized workers are subject to such alternative dispute resolution clauses. They are not nearly as common in the Canadian context.

As discussed in our May 31, 2018 Breaking Ground: MT Construction Law communique, regarding the standard of judicial review, Canadian employers can proceed with some confidence in the finality of litigation resolved pursuant to an arbitration clause in a commercial, employment or other business related agreement. Courts will generally uphold an arbitrator’s award provided it was “reasonable”. Arbitrators in Canada have long been deciding labour and employment cases, including applying related statutes, and will be accorded significant deference if their decision is challenged.

Aside from avoiding costly, time consuming class actions, the resort to arbitration is private, thereby avoiding potentially adverse publicity, is far more expeditious, and proceeds on a timetable managed by the parties rather than the increasingly over-burdened civil court system. Access to a more expeditious mechanism for resolving employment-related disputes may also be critical where the employer is seeking to enforce non-competition / non-solicitation provisions to prevent a former employee form engaging in wrongful competition.

In short, implementing arbitration clauses as the preferred dispute resolution mechanism is certainly worthy of consideration for employers in this era of increasing class action employment litigation.

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