NCPA - National Center for Policy Analysis

How Valid Are Pledge Not To Sue Employment Contracts?

November 3, 2000

At the heart of Circuit City v. Adams, a case scheduled to be heard by the Supreme Court next week, is whether employers have the right -- as a hiring condition -- to require employees to sign a pledge not to sue them.

The case concerns a worker who signed such a pledge and then brought harassment charges against Circuit City after he complained of being hazed by other employees.

Over the past 10 years, replacing lawsuits with arbitration procedures has caught on among businesses anxious to pare legal costs and reduce their exposure to unpredictable juries.

  • The General Accounting Office estimated in 1997 that 19 percent of companies used arbitration to sort out employee grievances -- though not all made it mandatory.
  • One large provider, the American Arbitration Association, says it administers programs at 500 companies, covering more than five million employees.
  • Companies that require arbitration say the process is fair, inexpensive, faster and less traumatic that legal suits for all concerned.
  • Surveys show that many employees who air their grievances before an arbitrator come away satisfied.

But in recent years the Equal Employment Opportunity Commission has taken several companies to court for requiring workers to sign arbitration agreements as a condition of employment. Different jurisdictions have handled the cases differently. In most cases, however, courts have found the agreements enforceable as long as the rules do not put employees at extreme disadvantage.

Source: Mary Williams Walsh, "Court Considers If Employer Can Force Pledge Not to Sue," New York Times, November 3, 2000.

 

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