Barring the Courthouse Door: Employees Harmed by Mandatory Arbitration

An employee’s ability to have legal disputes heard and resolved in a court of law is an important right. Unfortunately, employers have been chipping away at this right for years by requiring employees to submit to a practice called mandatory arbitration. This term, frequently slipped into a lengthy employment agreement or employee handbook, has the result of constraining employee’s legal rights. Employees often must agree to arbitration in order to keep their jobs – and may not even realize they are losing the right to be heard in court.

What Is Arbitration?

Arbitration is a way for parties to resolve disputes outside of the court system. Rather than bringing a complaint in court, the parties bring their legal claims to a private arbitrator. There are many differences between a party’s rights in court and their rights in arbitration:

Discovery: Discovery is when parties are able to collect information about their claims. A party’s right to discovery is usually limited in arbitration.
Arbitrator: Paid by one or both parties to the disagreement. The arbitrator may not be an attorney, and may not be knowledgeable about the area of law that the case concerns.
Appeal: If the arbitrator mis-applies the law, or a party disagrees with their decision, they may not have any right to appeal as they would in a court of law.
Class Actions: Many mandatory arbitration clauses ban employees from joining together to assert their rights – a crucial tool for employees seeking to protect their rights. (See Attorney Larry Johnson’s blog post on the importance of class actions for employees).
Transparency: Arbitration is often confidential, preventing the public from learning about potential legal violations.

Mandatory Arbitration Harms Employees

Arbitration was developed as a way for parties on equal footing, such as two corporations, to resolve disputes efficiently. But that initial purpose has been distorted as the use of arbitration expands. In 2010, about one-third of the non-union workforce, or 36 million employees, were subject to mandatory arbitration agreements with their employer. Mandatory arbitration is bad for employees because it takes what should be public concerns – an employer possibly engaged in wage theft, a discrimination dispute, a company’s failure to pay overtime – and shrouds the legal investigation into those claims in secrecy. Rather than giving employees their day in court to vindicate their legal rights under the Fair Labor Standards Act or anti-discrimination laws, mandatory arbitration clauses push these disputes into a private proceeding that may lack the safeguards of the law. Many employees may not even realize they have no right to bring a dispute to court. Some courts have held that by simply continuing to show up to work, without ever signing an arbitration agreement, an employee has agreed to be bound by it.

Senate Considers Law to Make Arbitration More Equitable

Senator Al Franken and Representative Hank Johnson recently introduced the Arbitration Fairness Act of 2015 in Congress. This Act would make it unlawful for employers to impose arbitration on employees unless employees have knowingly and voluntarily agreed to arbitration after a dispute arises, or as part of a collective bargaining agreement. Arbitration would still be an option for employees and employers – but one that employees would have the chance to agree to, rather than having it forced on them. If you have questions about mandatory arbitration in your workplace, or mandatory arbitration clauses in a work contract you have accepted or are considering, please contact us to discuss your situation.