narrow circumstances, utilizing the same
standard courts apply when deciding
whether to confirm an arbitration award.
We Agreed to Arbitrate?
claimant, is happy to be in arbitration
rather than court. What happens if a
respondent disagrees and, therefore,
refuses to pay his or her share of the
arbitration fees and costs? The employer
should be able to obtain a default against
respondent, correct? Not so fast. The
arbitration body might simply suspend the
proceedings. Alternatively, it might order
claimant (your client) to pay respondent's
share of the arbitration expenses upfront,
with those outlays being dealt with as part
of any final award. (See AAA Employment
Arbitration R-47.) Moreover, under those
circumstances, your client's refusal to
pay respondent's share may also result
in a finding by the arbitration body that
your client waived its right to proceed
in arbitration and that the matter should
proceed in court (which is what your
client wanted to avoid in the first place).
Documents In Advance of
the Hearing?
Act ("FAA") deals with discovery from
non-parties in arbitration. Paraphrasing,
it provides that the arbitrator may
summon in writing non-parties to appear
at the hearing as witnesses and to bring
documents with them. The question
that arises is whether arbitrators may
to produce documents in advance of the
hearing.
Whether a court will enforce a pre-
hearing subpoena depends upon the
circuit. Some courts, including the Sixth
and Eighth Circuits, have held that the
power to order pre-hearing document
production is implicit in the power to
order the production of documents at a
hearing. Others, such as the Second and
Third Circuits, disagree, finding that
Section 7 of the FAA unambiguously
limits an arbitrator's subpoena power to
instances in which the non-party actually
appears at the hearing. Other courts,
such as in the Fourth Circuit, generally
will not allow pre-hearing discovery
from non-parties without a showing of
hardship or special need. The bottom
line is consider your circuit's law when
deciding whether to include an arbitration
clause in an agreement and if you should
incorporate a choice of law provision. If
you believe a breach of an agreement will
lead to a proceeding in which you will
need access to voluminous documents
from non-parties to review in advance of a
hearing, make sure your circuit does not
allow arbitration's goals of efficiency and
reduced costs to trump your discovery
needs.
Charges Being Filed Against the
Company?
have the right to engage in concerted
activities for the purpose of collective
bargaining or other mutual aid and
protection. Therefore, employees have
challenged arbitration agreements that
preclude them from filing a collective or
labor practice charges pursuant to Section
8(a)(1) of the Act. While the law still
remains somewhat unsettled, with most
courts enforcing those provisions, NLRB
judges have been finding that these class
action waivers violate federal labor law
under the NLRB's D.R. Horton decision
and have ordered employers to cease and
desist from maintaining these class or
collective action waivers.
Documents Back Or Enjoin
Our Former Employee?
be sure to have a carve-out allowing
your client to go to court for injunctive
relief. The `finality rule' generally limits
judicial review by a district court to
final arbitration awards, but courts
usually will enforce interim awards by an
arbitrator to preserve the integrity of the
arbitration process. (See FAA 9 U.S.C.
§10(a) (1)-(3).) However, arbitrators
have no power to enforce their decisions.
Therefore, an interim award requiring a
former employee to return the company's
documents, or to abide by a non-compete
agreement pending the arbitration of that
claim, can only be enforced by a court
willing to entertain an application prior to
the conclusion of the arbitration.
in a number of important and well known
respects. However, there are other
important issues for you and your clients
to consider both when deciding whether
to include an arbitration clause and when
drafting the agreement.