Many employment agreements these days say that in the event of a dispute, both sides will go to arbitration. But this raises a question: Sometimes, if an employee files a lawsuit, the employer will respond in court, perhaps thinking it can get the court to dismiss the suit quickly. Only later will it insist on going to arbitration instead. So…is this valid, or does an employer that spends a long time fighting a lawsuit give up the right to stop in mid-stream and start over in a different forum?
That’s not entirely clear, but two federal appeals courts recently addressed the issue. In one case, a Ricoh employee claimed he was fired because he reported fraud at the company. Ricoh responded to the lawsuit, but five months later it demanded that the case go to arbitration.
A court in Denver said this was okay, because Ricoh had engaged in only “minimal litigation activity” during the five months and it didn’t intentionally give up its right to arbitration.
In another case, though, a Philadelphia court said a company that waited 15 months to demand arbitration waited too long.
In that case, an employee sued a jewelry company for discriminating against him because of his sexual orientation and national origin. The court said that even though his employment contract said that arbitration was his only remedy, it would be unfair to enforce the contract at that point because the company’s delay would have cost the employee 15 months of wasted litigation expenses.