In our previous post, we mentioned the ongoing dispute between the National Football League and former players suffering from brain damage due to repeated head injuries. As we noted, the league is hoping to settle the cases even though it believes the dispute should be handled in mediation under the collective bargaining agreement.
Contractually mandated mediation or arbitration is not an uncommon thing to encounter nowadays. The basic idea behind these contractual provisions, of course, is to avoid the costs, publicity and hassle of handling business disputes in court. One of the benefits for businesses is that they are able to select neutral decision makers who are educated in the issues the business typically faces.
The enforceability of mediation and arbitration clauses is an important issue to consider in the drafting process. Under the Federal Arbitration Act, federal law governs the enforceability of arbitration agreements for certain types of transactions. The enforceability of these agreements in other circumstances is governed by state law. Some state laws reflect federal law, while others diverge from it. Because the law of enforceability differs from state to state, the issue of which state law governs in these transactions is an important one.
Among the various issues that can arise in the enforcement of arbitration agreements is that of unconscionability, which refers to the fundamental fairness of an agreement. If, for example, an arbitration agreement unduly favors an employer over employees, it may be deemed unconscionable.
In our next post, we’ll pick up on the issue of unconscionability in arbitration agreements.
Sources: Alliance for Education in Dispute Resolution, “The Federal Arbitration Act,” Accessed Dec. 10, 2014.
The Wall Street Journal, “Judge Orders Mediation Between NFL, Players Suing Over Head Injuries,” Kevin Clark, July 8, 2014.
Huffington Post, “Unconscionable Employment Arbitration Agreement Held Unenforceable,” Brad Reid, Nov. 8, 2014.