Courts demand fairness with arbitration provisions

With so much to cover in employee orientation, it is tempting to include a lot of dry legalese in the employee handbook and be satisfied that you have fulfilled your obligation to notify. That position might have to change now in light of recent court rulings concerning arbitration, says Elliot Zemel, JD, formerly an associate at the law firm of Fenton Nelson in Los Angeles, which advises healthcare facilities on regulatory compliance requirements.

"There's an idea that employers can kind of throw the book at an employee and shove whatever they like in that handbook, but now the law will not tolerate the handbook policies being prejudicial against the employee and in favor of the employer," Zemel says. "Specifically with regard to arbitration, hospitals have to re-examine the remedy that they provide for a conflict that could arise with an employee."

Zemel suggests that many hospitals' arbitration provisions could be invalidated by the recent court rulings. Risk managers should review the policies and how they are presented to employees immediately, he says.

Failing to update an arbitration policy could result in a big surprise for the hospital if the policy is thrown out during a dispute with an employee, Zemel says. Arbitration is intended to lessen the potential damage from an employee dispute by avoiding court, but if the policy is thrown out, then all bets are off. "The policy will be stricken from the handbook, and the court will not compel the employee to go to arbitration. You're in civil court," Zemel says. "It's no longer a controlled explosion where you can be confident of avoiding the worst outcome."

The recent changes derive from two California cases. Though in a strict sense they affect only California cases, Zemel points out that California has been a trendsetter for healthcare policies and procedures. (See the story below for more on the two court cases.)

"This could be a new trend nationwide," Zemel says. "California has brought this issue to the fore, and I think we are likely to see courts across the country having the same reactions."

It is important to seek advice and periodically revisit company handbooks and employment policies to make sure they are compliant with recent developments and changes in the law, Zemel says.

"Most importantly, the arbitration policy must be fair and not one-sided," Zemel says. "The courts are against the idea that the employer has the upper hand and can throw anything at the employees, who have to agree. It can no longer be so prejudicial and unfair to the employee."


• Elliot Zemel, JD, Associate, Fenton Nelson, Los Angeles. Telephone: (310) 444-5244. Email: