Many employers have been frustrated by the expense and risk involved in claims brought by employees for violation of their civil rights, age discrimination, race discrimination, sex discrimination, etc. There is a perception that jury awards for minimal (or nonexistent) violations have been excessive. Costs of defending these cases are astronomical.
One means of limiting the possibility of punitive damages or jury awards based on sympathy for an employee is to require mandatory arbitration of an employment related dispute at the time of employment. Under mandatory arbitration agreements, an employee is compelled to arbitrate all issues and statutory employment discrimination claims under rules crafted by the employer.
Moreover, if the arbitration agreement provides for a panel of three arbitrators, the employee may be compelled to pay the cost of his own arbitrator and one-half of the cost of a neutral. Such provisions in employment agreements have been characterized as “cramdown” arbitration agreements because if the employee refuses to sign the agreement, the employee either may not be hired or may be terminated. The Supreme Court recently ruled on the validity and enforceability of such “cramdown” arbitration agreements. On March 21, 2001, in Circuit City Stores v. Adams, the basic validity of these clauses was affirmed.
From an employer’s perspective, limiting the possibility of damages for civil rights claims, precluding punitive damages and compelling arbitration in a sympathetic forum is attractive. From the employee’s perspective, serious consideration should be given to accepting a job if such limitations are presented.
— Bill Brennan