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Q: My company recently went through some very expensive litigation with a former employee. As a result, we have been considering having our employees sign arbitration agreements to keep the costs down on future disputes.

I heard there have been some changes to the law on when employees can enter into arbitration agreements. Can you explain what those changes are?

A: Certainly. First, as you now know, litigation, particularly jury trial litigation, in the state and federal courts is very expensive. Many employers successfully have adopted arbitration agreement policies to cut those costs. However, this year the Legislature made a significant change to when employees may enter arbitration agreements. Under the new law, which takes effect Jan. 1, arbitration agreements between employers and employees are only valid if the employee is informed of the need to enter an arbitration agreement at least two weeks before starting work and in connection with a written job offer – or upon a bona fide advancement if he or she is already employed. After the first of the year, an employer no longer will be able to simply decide it wants to have arbitration agreements and then go sign up all of its employees.

Q: If the new law doesn’t take effect until Jan. 1, does that mean we can have all of our employees sign binding arbitration agreements right now?

A: Yes. That is exactly what it means. Although you will have to comply with the new law for any employees hired after the first of the year, there is nothing preventing you from requiring your current work force to enter into arbitration agreements right now.

Q: Many of our employees, particularly those at minimum wage or slightly above, start on the same day they are offered the job. How are we supposed to comply with the new law?

A: That is the question that many employers are struggling with. Legally, if employees start the same day they are offered their jobs, then any arbitration agreements they sign at that time likely will be unenforceable. Yet, it is unrealistic from a business perspective to require a two-week waiting period between the offer and the start date for most of these positions.

You’ll face two major barriers. One: Many times you will need a new employee to start right away because the previous employee just walked off without giving you notice. Two: Many employees seeking minimum wage positions will be unwilling to wait two weeks to start working.

Unfortunately, the reality probably will be that you will not be able to enter into enforceable arbitration agreements with many of these employees.

Q: What about bona fide advancements? What does that mean?

A: Although this term previously has not been applied to arbitration agreements in Oregon, there is no reason to think the preexisting case law relating to bona fide advancements with respect to noncompetition agreements will not be applied to the new provisions relating to arbitration agreements. Under existing noncompetition law, bona fide advancements are basically significant promotions. Although there is not an explicit and concrete definition of a bona fide advancement, it is generally accepted that it involves a change in compensation, responsibilities and title. In other words, a 50-cent per hour raise probably is not going to constitute a bona fide advancement.

Q: If we enter into arbitration agreements with our current employees but are unable to enter into them with new employees because of the change in the law, don’t we run the risk of being accused of discriminating against the current employees?

A: There is nothing that would prevent you from having some of your employees sign arbitration agreements while others do not, so long as the decision as to which employees enter the agreements is not made based upon a protected class status (i.e. race, religion, age, disability, etc.).

Here, the difference would be because of a change in the law, so it would certainly not constitute discrimination on your part.

Q: If we are unable to enter into arbitration agreements with our new employees, is there anything we can do to try and limit the litigation expenses if one of them brings a lawsuit against us?

A: An arbitration agreement would be preferable, but you could enter into a jury trial waiver agreement with the new employees. The employees would still be able to use the court systems to bring claims against you, but they would have given up their right to a jury trial.

Instead, the case would be heard by a judge. This can save significant expenses on cases that proceed all the way to trial.

However, few cases actually make it to trial, and jury trial waivers are somewhat disfavored. Accordingly, you have to make sure you do them right or you could end up spending more money fighting about whether the waivers are enforceable than you would on a trial.

Mitch Baker is of counsel at the Portland office of Fisher & Phillips, one of the United States’ largest law firms that represent employers in labor and employment matters. Baker specializes in labor and employment law and employment discrimination. He can be reached at 503-242-4262 or [email protected]. Fisher & Phillips’ Web site is at www.laborlawyers.com.