Does your company use arbitration agreements to resolve disputes with employees? It’s often an effective way to go. Arbitration’s usually faster, simpler and cheaper than the traditional drawn-out legal journey that can end in a courtroom. But – like virtually every facet of employment law – arbitration agreements aren’t without their pitfalls.

Courts have begun to look long and hard at these agreements, and have overturned a number that’ve been deemed too one-sided in the employer’s favor.
Here’s a look at three recent court decisions you need to know about, courtesy of the attorneys at national employment law firm Baker Donelson.

Jones v. Halliburton
In this case, a female employee brought suit against her employer and several former co-workers, alleging she’d been gang-raped while on assignment in Iraq.
The company claimed the employee was obligated to take her claim to arbitration under the terms she’d agreed to in her employment contract.
The court disagreed. The incident, which took place at employer-provided housing, occurred after work hours – when neither the woman nor her alleged attackers were on duty.
The Court ruled the woman’s claims were not “related to employment.” Her injuries weren’t suffered in the workplace, so the incident fell outside the terms of the arbitration agreement.
Cite: Jones v. Halliburton

Davis v. Joseph J. Magnolia
This case involved an African-American employee who sued his employer for discrimination and retaliation. Again, the employer asked the judge to order the case to arbitration.
The court declined, noting that the arbitration agreement was contained in an employee manual provided after the incidents giving rise to the complaint began.
What’s more, the judge said the agreement was too company-friendly – the manual stated that the policies outlined were subject to change at the company’s sole discretion. The agreement to arbitrate didn’t hold up.
Cite: Davis v. Joseph J. Magnolia, Inc.

Dieng v. College Park Hyundai
Here, an arbitration agreement between former car salesmen and their former dealership was found enforceable.
The case involved a group of car salesmen who alleged they hadn’t been paid promised commissions and overtime.
Unlike the agreement in Davis v. Joseph J. Magnolia, the arbitration agreement was issued separately from employee handbook.
The court also noted that the agreement was equitable – it required both the employer and the employee to arbitrate disputes.
Cite: Dieng v. College Park Hyundai

Lessons learned
The take-away from these decisions for employers? According to Baker Donelson, arbitration agreements must:
•    indicate a “meeting of the minds” between employer and employee
•    provide “consideration” for the employee – in other words, the pact can’t tilt too far in favor of the company, and
•    the agreement can’t be “unconscionable” – so restrictive as to be unreasonable.