Private Resolution of Public Disputes: Employment, Arbitration, and the Statutory Cause of Action

Abstract

The Supreme Court recently reaffirmed its commitment to honoring arbitration clauses in employment agreements. In Rent-A-Center v. Jackson, the Court found that courts should treat arbitration agreements in the employment context in the same manner as arbitration agreements found in any commercial contract. The Rent-A-Center result was not surprising. In recent years, the Supreme Court has faced the issue of mandatory arbitration agreements numerous times and, in virtually every case, favored arbitration. The Court has proved willing to cast aside or ignore precedent in its pursuit of a pro-arbitration policy.

In favoring arbitration clauses in employment agreements, the Supreme Court has relied on general contract principles. Essentially, the Court has found that, if an employee has agreed to have his statutory discrimination heard in a private forum, then that employee should stick with the deal.

But relying on general contract principles to decide a matter involving the employment relationship is disingenuous. In fact, the standard employment agreement bears little relationship to the traditional contract. It is not the employment agreement, but statutes that furnish the majority of the duties and obligations of an employment relationship. Numerous areas of the employment relationship are constrained by public law and therefore not subject to contract. The typical employment agreement governs relatively minor areas — things like salary and benefits. The most important aspects of the employment relationship — occupational safety and health, minimum wage, overtime pay, discrimination — exist independently and cannot be waived in contract.

There is a particular aspect of the employment relationship that, while open to contract, remains subject to constraints imposed by the law. A noncompete agreement permits an employee to contract with his employer to not work for a competitor following the termination of the employment relationship. This right to contract away the right to compete is, however, narrowly construed by the court system. A court may not enforce a noncompete agreement unless the agreement meets a standard of reasonableness. I propose that this same analysis be applied to arbitration agreements. It is my position that a pre-dispute, mandatory arbitration agreement should not be enforced unless it meets certain requirements that together make the agreement reasonable. This standard of reasonableness will protect the interests of all parties: the employer, the employee, and society as a whole.