October 2008 | Web Exclusive

Dental Law

Employment Arbitration to Avoid Costly Litigation

By Peter M. Sfikas

We have all heard of runaway juries that award a huge amount of money for a minor physical injury, or in the employment context, a substantial amount for termination of employment. As a result, many employers now require employees to agree—as a condition of employment—to arbitrate employment issues such as termination of employment.

What this means to your dental practice is if you terminate an employee, the employee may not file a lawsuit against you. Instead, the employee would be required to file an arbitration complaint under the terms of your arbitration agreement.

For an arbitration agreement to be enforceable, it must not take away any of your employee’s fundamental legal rights. A jury trial is not considered a fundamental legal right. In an arbitration proceeding there is either one or three arbitrators, depending on how many you have provided for in your arbitration agreement. There are many organizations that you may use to obtain arbitrators.

You and your employee will select the arbitrators from the list of arbitrators that you will receive from the arbitration organization. There will likely be health care professionals, business people and lawyers on the list. The organization will select the arbitrators if you and your former employee cannot agree on the arbitrators. The most significant reason for using arbitration is it eliminates a jury trial. In most parts of the country, the jury is going to be biased against you because you are the employer.

It should be noted that a jury trial is not considered a fundamental legal right because the arbitration proceeding is an alternative forum for cases to be resolved. On the other hand, if your arbitration agreement provided that the employee could not obtain punitive damages, it is unlikely that your agreement would be enforced because you have vitiated a right that the employee would have in a court of law.

Another area wherein courts will not enforce arbitration agreements is when the agreement gives the employer the exclusive right to control the pool of arbitrators. In McMullen v. Meijer Inc.  the employee filed a lawsuit against her employer seeking to nullify the employment agreement. The employee argued that the employer had too much control over the pool of arbitrators and therefore the agreement should be nullified. The court agreed with the employee because the employer had exclusive control over the arbitrators. It found that this deprived the employee of a fundamental legal right of a fair hearing before the arbitrators.

It is prudent to use an arbitration agreement to avoid costly litigation in a court of law before a jury that may be prejudice against you simply because you are the employer. The arbitrators will not be as emotional as a jury would be in an employment case. In employing an arbitration agreement it is critical that you select a competent employment lawyer to draft your agreement to avoid denying the employee a fundamental right that would make the agreement unenforceable.

Peter Sfikas practices law with a Chicago law firm and was formerly the Chief Legal Counsel for the American Dental Association. He is also a Fellow of the American College of Trial Lawyers and has been selected as a Super Lawyer by Chicago Magazine. If you have any comments or questions you may e-mail him at psfikas@bellboyd.com.