Human Resources News & Insights

3 big reasons why arbitration agreements fail in court


An arbitration agreement is supposed to be designed to keep everyone out of court. Then why is it that so many end up being settled in a messy and expensive lawsuit?

The answer comes in examining a series of court cases that explain:

  • Why a supposedly buttoned-up agreement ended up in court in the first place, and
  • Why the employer lost.

Looking at those cases reveals the main flaws in some arbitration agreements, according to the law firm of Baker Donelson:

  1. The agreement was part of a general handbook. When companies try to blend an agreement with other policies, some courts see that as an attempt to camouflage the terms of the agreement from employees. The lesson: Arbitration agreements should be free-standing documents.
  2. The agreement didn’t clearly compel both parties to waive their right to sue. So a faulty agreement might say the employee is waiving the right to go to court, but places no such stipulation on the employer. That’s one-sided and a legal no-no.
  3. The agreement stipulated that employees will have to pay excessive costs  as a condition of arbitrating their claims. An agreement that places a heavy financial burden on an employee is often seen as coercion to keep the employee from actually filing for arbitration. Courts have ruled that employees are expected to pay some reasonable costs or fee. But the key word is reasonable.

For a full review of the relevant court cases and rulings, go to Baker Donelson’s Web site.

Print Friendly

Subscribe Today

Get the latest and greatest Human Resources news and insights delivered to your inbox.


  1. Tort reform. Tort reform. Tort reform.

  2. Amen. Tort reform will remove a litany of excesses and provide more freedom to the employers in their efforts to make money and improve the lives of the employees.
    How many times do we have to put up with a bully or “deadwood” at work because the person can’t be fired. In the good old days – if you didn’t work out, no one hired you.

Speak Your Mind