In O'Neil v. Hilton Head Hospital, the Fourth Circuit Court of Appeals (which reviews decisions of federal district courts in North Carolina, South Carolina, Virginia, West Virginia, and Maryland) recently decided that an employee's agreement to submit all employment disputes to arbitration prevented her from suing the hospital in court for wrongful discharge under the Family and Medical Leave Act (FMLA).
During a leave of absence in 1994, O'Neil, a respiratory therapist, signed a form acknowledging her receipt of the hospital's employee handbook . The acknowledgment form also contained a provision which provided that as a condition of her continued employment with the hospital, O'Neil agreed to submit any complaints that arose out of her employment to binding arbitration. The hospital discharged O'Neil while she remained on leave, and O'Neil subsequently filed a lawsuit in court alleging that her termination violated the FMLA.
Citing the arbitration clause in the acknowledgment form that O'Neil had signed, the hospital asked the court to stay the proceedings in court until an arbitration panel could resolve O'Neil's complaints. The Fourth Circuit agreed that the arbitration clause prevented O'Neil from pursuing her lawsuit in court.
Initially, the court recognized that the Federal Arbitration Act "embodies a strong federal policy in favor of arbitration, and accordingly, there is a strong presumption in favor of the validity of arbitration agreements." Next, the court noted that nothing in the FMLA suggested that claims for violation of that law are to be exempted from arbitration agreements.
Finally, the court rejected O'Neil's argument that the arbitration agreement was not valid because it was not binding on the hospital. The court noted that the acknowledgment form provided that all decisions of the arbitration board would be final, and the handbook itself contained numerous statements reflecting the hospital's commitment to the arbitration process.
Over the past year, numerous other courts have approved agreements between employers and their employees to submit disputes arising under various state and federal laws to arbitration, although the Equal Employment Opportunity Commission (EEOC) remains opposed to mandatory arbitration.
Before deciding whether to adopt a mandatory arbitration policy foremployment disputes, employers should have a working knowledge of the arbitration process and thoroughly consider the pros and cons of arbitration. In traditional employment litigation, a judge and/or a jury resolves the dispute. In arbitration, a person or panel selected by the parties will resolve the dispute by using a procedure that the parties have agreed upon.
Arbitration has several obvious advantages to traditional litigation as a vehicle for resolving claims of discrimination, wrongful termination, and other employment disputes. In arbitration, disputes are resolved more quickly, as the parties have complete control of scheduling and the amount of discovery that can be done before the arbitration hearing.
Further, arbitration is invariably less expensive than litigation, especially if pre-hearing discovery is limited. Employment claims often involve private and sensitive business and personal issues, and since arbitration can be conducted in private, employers can avoid having to disclose information which would normally be made part of a public record during litigation. Arbitration is normally final - with limited exceptions, awards are not appealable. Finally, mandatory arbitration should lead to sensible, more predictable results and discourage plaintiffs' attorneys from pursuing frivolous cases for their "nuisance" value.
Although these features make arbitration favorable for employers, some unexpected problems may arise. Because of its convenience and informal nature, employees may invoke the arbitration process more frequently than they would choose to pursue litigation. In some situations, it is not to the employer's advantage to resolve the dispute quickly, and in traditional litigation, the discovery process often reveals additional information that supports the employer's defense of its actions. An agreement to submit disputes to arbitration does not change the remedies that the arbitrator may award, and experience may prove that arbitrators are more likely to provide at least some relief, while federal judges often dismiss employment cases before trial.
Nevertheless, we think that in most circumstances, the benefits of arbitration in the employment context outweigh its potential negative aspects. Accordingly, we recommend that employers in the Carolinas seriously consider adopting a mandatory arbitration policy for employment-related claims.