The Truth About the Franken Amendment

James Sherk / October 16, 2009

When a disgruntled employee files a lawsuit that goes to court his employer must pay tens or hundreds of thousands of dollars in legal fees. Even if the courts reject the allegation as frivolous employers must still pay the lawyers. That allows unscrupulous employees to use threat of going to court to win large settlements from their bosses for baseless claims. Guilty or not guilty, the employer loses money that could have been used to expand operations and hire more workers.

Consequently many employers are turning to alternative dispute resolution methods that cost far less. Many contracts require employers and employees to take legal disputes to arbitration. There an outside arbitrator evaluates the claims and imposes remedies. Arbitrators award employees fair damages in cases of actual injustice while quickly dispensing with merit-less nuisance suits. Instead of legal bills running into the hundreds of thousands of dollars, however, arbitration usually costs only a few thousand dollars. That saves employers the money they need to create jobs while giving rogue employees no leverage to win undeserved settlements. Arbitration protects employees’ legal rights while keeping the economy moving. Everybody wins. Except the trial lawyers. (more…)