Business owners know that employment litigation is expensive, time-consuming, and disruptive to business operations. To make matters worse, juries are often sympathetic with individual employees who file claims against their employers, resulting in large verdicts intended to punish the employer rather than compensate the employee for actual damages.
In light of the costs and risks associated with modern day jury verdicts, more and more companies – including single and multi-chain restaurants – are requiring employees to sign either a “jury waiver” or an “arbitration agreement.” Both agreements have the potential to reduce legal costs and avoid runaway juries. This article summarizes the issues that employers should evaluate when deciding whether to incorporate such agreements into their employment documents.
To avoid jury trials, restaurants sometimes ask employees to contractually agree – before any dispute arises – to waive their right to a jury trial. In return, the restaurant also waives its right to a jury trial in any dispute with the employee. The primary rationale for a jury waiver is that a judge is much less likely than a juror to let his or her emotions factor into an award of damages.
Although the Seventh Amendment of the United States Constitution ordinarily protects the right to a jury trial for civil litigants in federal court, courts have upheld jury waiver clauses in federal employment cases (e.g., cases brought by employees alleging discrimination, harassment, and/or retaliation in violation of federal statutes such as the Civil Rights Act of 1964, commonly known as “Title VII”). However, since the Seventh Amendment does not apply to the states, whether a civil litigant can lawfully waive their right to a jury as to state law claims is subject to the law of each state.
At least nine states that have directly examined the enforceability of pre-litigation jury waiver clauses found them to be valid: Alabama, Connecticut, Florida, Missouri, Nevada, Rhode Island, Tennessee, Texas, and Virginia. Unfortunately for Georgia restaurateurs, Georgia is one of only two states (along with California) that do not follow the majority’s approach. In contrast to the constitutions of many states, the Georgia Constitution expressly guarantees the right to a jury trial, and a separate Georgia statute (O.C.G.A. § 9-11-39) sets forth specific circumstances in which a party may waive the right to a jury trial after litigation has commenced. But all is not lost, as most employment cases in Georgia alleging discrimination or harassment are brought under the federal law; therefore, the jury waiver is still applicable to those types of claims brought against a restaurant in Georgia.
Arbitration agreements are also effective mechanisms to resolve employment disputes more efficiently and affordably than traditional litigation. Like jury waivers, arbitration eliminates the jury, which in turn eradicates jury sympathy for an employee that could lead to unpredictable awards for punitive damages and emotional distress damages. There are numerous benefits to arbitration. First, in comparison to traditional litigation, in arbitration agreements, the employer and employee can agree to minimize the cost of litigation by limiting discovery (e.g., interrogatories, document production, and depositions). This limitation in turn may lead to an earlier resolution of the merits of the case. Additionally, the parties can agree that the arbitrator who is selected must have employment law experience, which increases the possibility of an appropriate result.
One of the most important aspects of a properly drafted arbitration agreement is that the parties can prevent class actions and collective actions. Currently, lawyers for employees are filing large numbers of collective actions to recover minimum wages and overtime pay as collective actions, which allows similarly situated employees to join the case. A collective action provides employees and their lawyers with significant leverage against employers; therefore, employers should seriously consider an arbitration clause which prevents such claims.
Additionally, an arbitration agreement can provide for confidentiality of the arbitration process and results. Employers do not want the negative publicity associated with a lawsuit filed by an employee and likewise, the employee does not want publicity of the dispute because they fear that the facts will hurt their chances to secure future employment.
While both federal and state laws generally foster a strong policy in favor of arbitration, the enforceability of arbitration agreements is not guaranteed. Thus, employers should consult experienced employment attorneys to assist them in preparing arbitration agreements.
Georgia businesses seeking to escape jury trials are encouraged to consider the risks and benefits associated with jury waivers and arbitration agreements. Given the obstacles to enforcing jury waiver clauses in Georgia – as well as the fact that most federal employment statutes contain “caps” which limit the amount of compensatory or punitive damages that may be awarded, thus reducing the risk of a high jury verdict in claims arising under federal law – businesses in Georgia should seriously consider arbitration agreements.
If you would like more information regarding these issues, please contact Stan Wilson (email@example.com) or John Bennett (firstname.lastname@example.org) of Elarbee, Thompson, Sapp & Wilson, LLP (404) 659-6700.