Many employers use employment arbitration agreements to see that workplace claims are decided by arbitrators rather than courts. The law of arbitration—the circumstances under which an agreement to arbitrate rather than litigate is enforceable—is increasingly complex. A case pending before the U.S. Supreme Court, American Express Co. v. Italian Colors Restaurant, has drawn considerable attention to the issue of class action waivers. Although the case involves antitrust claims, most commentators believe it will have ramifications for other types of arbitration. Unfortunately, last week’s oral argument suggests that the court is divided on the issue, as it is on many.
Employment arbitration, on the other hand, got a substantial boost from the Second Circuit, an influential federal court, last week. In Parisi v. Goldman Sachs the court held that Goldman Sachs could compel a former employee who sued for sex discrimination to pursue her claim through arbitration rather than in court. The plaintiff, a former managing director, had tried to bring a class action claim to show that Goldman Sachs had a pattern or practice of treating female employees less favorably than their male counterparts. The Second Circuit said she couldn’t because she had signed a valid arbitration agreement.
Employers prefer arbitration over litigation for a lot of good reasons—confidentiality, greater cost control, the ability to select the decision maker and certainty. The Goldman Sachs decision teaches that another advantage can be avoiding expensive class action lawsuits. It’s a good reminder of the value that a well drafted arbitration agreement can bring employers.