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Recent Developments Make This A Good Time To Evaluate The Pros And Cons Of Using Arbitration Agreements

August 8, 2011

By Jennifer A. Sabovik


Arbitration agreements prevent employees from litigating their claims in front of employee-friendly juries that are prone to award large verdicts against employers. Recently, there have been several significant developments in the enforceability of arbitration agreements.

United States Supreme Court Weighs In
Earlier this year in AT&T Mobility v. Concepcion, the United States Supreme Court held that a clearly written class-action waiver in an arbitration agreement likely will be enforceable under federal law even if that waiver otherwise would not have been enforceable under state law. This may prove to be a very important ruling in light of the increase in class actions (especially wage and hour class actions) being brought by employees.

Modification To Oregon Law
Also, earlier this summer the Oregon legislature passed H.B. 3450, which purports to affect when an arbitration agreement must be presented to a worker and what the agreement must say. Effective January 1, 2012 Oregon law will provide that where an employer is going to require a new employee to sign an arbitration agreement as a condition of employment, the employer must give that agreement to the employee at least 72 hours before the employee starts work. (This advance notice requirement used to be two weeks.)

Additionally, the arbitration agreement must include the following language in boldfaced type:
“I acknowledge that I have received and read or have had the opportunity to read this arbitration agreement. I understand that this arbitration agreement requires that disputes that involve the matters subject to the agreement be submitted to mediation or arbitration pursuant to the arbitration agreement rather than to a judge or jury in court.”

The new Oregon law provides that the failure to comply with these two requirements will allow an employee to void the arbitration agreement.

We note that there is an open question as to whether the Oregon legislature can validly impose these two requirements, at least to the extent that an arbitration agreement is subject to the Federal Arbitration Act. Once the courts rule on the validity of these two Oregon requirements, we will let you know.

This is a good time to evaluate the pros and cons of arbitration agreements. If you would like help to decide whether arbitration agreements may be right for your company, or if you would like to ensure that your existing arbitration agreements comply with current law, please contact us. Please also feel free to contact us with any questions or concerns about any other employment, labor relations, and employee benefits issues.