Courts in New Jersey and all over the country encourage parties involved in disputes to use alternative dispute resolution (ADR) procedures in order to keep dockets from getting excessively backlogged and free up court resources. Mandatory arbitration clauses are increasingly common in employment contracts. Many employees, as well as their legal advocates, dispute whether these clauses are truly voluntary since employees are often not in a position to negotiate those terms. They also maintain that arbitration tends to favor employers for various reasons. A new law, signed by the president in March 2022, amends the Federal Arbitration Act (FAA) to prohibit the enforcement of mandatory arbitration clauses when employees claim sexual harassment.
Arbitration is a form of ADR in which the parties to a lawsuit present their cases to a neutral third party. That person, known as an arbitrator, presides over a proceeding that resembles a trial in many ways. Data generally support the perception that arbitration favors employers. One possible reason for this is because, while an employee might only encounter an arbitrator once, their employer might have seen that arbitrator many times in other employment disputes. An arbitrator may feel pressure not to alienate a source of consistent business.
If all of the parties to a dispute agreed in advance that the arbitrator’s decision would be binding, the FAA protects the decision from judicial review. A party to the arbitration may petition a court to enforce the award. If the other party tries to challenge the validity of the award, however, the court may not vacate or modify it without evidence of fraud, duress, or misconduct by the arbitrator. This type of mandatory arbitration effectively shuts employees out of the court system.