Chipotle Faces Arbitration Due to a Class Action Lawsuit

In recent years, many employers have drafted policies compelling their employees into arbitration - requiring employees to resolve any employment-related disputes via a private arbitrator (or arbitrators) rather than in court before a judge or a jury. Arbitrations can be beneficial for employers as they are generally cheaper than litigation and remain confidential which can allow employers to keep potentially embarrassing facts from public disclosure. Employers also prefer arbitration because in this forum employees may be required to waive their rights to class-action lawsuits – they are forced to arbitrate their claims individually and cannot “team-up” as a class of aggrieved employees.

The article references a thorny situation with the Chipotle restaurant franchise, which required its employees to enter into arbitration and was faced with a class-action lawsuit which it mandated be resolved through arbitration. The employees’ attorney responded to this compelled arbitration by initiating separate arbitration demands on behalf of each employee. This caused Chipotle to be responsible for the arbitration costs of each employee’s action in addition to its own attorney’s fees. Those aggregated costs proved daunting for Chipotle and led them to seek court intervention though their own policies had compelled arbitration initially. Chipotle was chastised by a judge for taking this contradictory position.

Simply put, the arbitration fees that an employer might face - especially in a class action context – can be steep. Arbitration provisions, which are usually adopted by employers in their templates for offer letters and/or handbooks can, thus, be less than helpful when applied to the wrong situation. Small businesses should be mindful not to place too much trust in the various samples that may be available online when crafting their own policies. If such policies can prove problematic to such a large company, imagine how they might harm your business! #BLGadviceforsmallbusinesses

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