Employers' Use of Mandatory Arbitration Clause Limits Employee’s Access to Justice

Many employers require that their employees sign a mandatory arbitration clause as a condition of employment. Under these agreements, workers whose rights have been violated are not allowed to pursue their claims in court, and instead must submit to mandatory binding arbitration.

What is Arbitration?

Arbitration is a dispute resolution process that is an alternative to filing a lawsuit. Arbitration was intended to be a streamlined and cost effective way to deal with a legal dispute, and is typically overseen by a panel of arbitrators or, in some cases, a single arbitrator. The process of choosing the arbitrator(s) is usually outlined in the arbitration agreement. Typically an employee signs a mandatory arbitration clause as a condition of employment. The mandatory arbitration clause is often contained in an employee handbook that an employee acknowledged receiving.

The specific rules for arbitration may vary, but evidence is usually presented to the arbitration panel through documents and witness statements. The difference between arbitration and a court case is that in arbitration, the formal rules of evidence are not enforced. This streamlines the process and makes it quicker than a courtroom trial.

Once the arbitration hearing is over, the panel members will deliberate and deliver a decision to the parties within a specified amount of time.

Employers Increasingly Use a Mandatory Arbitration Clause in Employment Agreements

The trend towards requiring employees to sign a mandatory arbitration clause began in 1991 with the United States Supreme Court decision in Gilmer v. Interstate/Johnson Lane.

The following year, just over 2% of United States workers were subject to an employment agreement that contained a mandatory arbitration clause.

By the early 2000s that percentage had increased to nearly 25% of the American workforce who was prohibited from bringing their claims in court due to a mandatory arbitration clause.

Today, the number of employees subject to a mandatory arbitration clause has dramatically increased, as more than 55% of American workers are subject to a mandatory arbitration clause.

A Mandatory Arbitration Clause Means Less Risk for Employers

This trend towards mandatory arbitration has weakened the position of workers and bars access to courts for people whose rights have been violated, including people who wish to bring claims based on violations of Title VII of the Civil Rights Act, the Americans with Disabilities Act (ADA), the Family Medical Leave Act (FMLA), and the Fair Labor Standards Act (FLSA).

The continued expansion of the use of mandatory arbitration is troubling, as employers are now seeking to use mandatory arbitration to prohibit employees from bringing class action lawsuits. This is problematic because many employment practices impact large groups of people and can only be successfully litigated in the context of a class action. Moreover, arbitration decisions have no precedential value and are only binding upon the parties to the arbitration.

On October 2, 2017, the US Supreme Court heard oral argument on whether employers could include class action waivers in mandatory arbitration agreements. If the Court sides with employers in these cases, it will signal to businesses that the last barrier to opt out of class actions has been removed. This would encourage businesses to adopt mandatory employment arbitration and class action waivers.

Employers with larger work-forces are the ones who typically include a mandatory arbitration clause in their employment agreements. Extrapolating from available data, surveys estimate that more than 60 million non-union American workers are now subject to a mandatory arbitration clause at work.

Why Is Arbitration Bad?

One of the downsides to arbitration is that an un-elected person, who may or may not have formal legal training, gets to set the terms of the arbitration. The arbitrator can limit the plaintiff in ways that make it virtually impossible to win. In some of the more egregious cases, arbitrators have ruled that the plaintiff would not be allowed to conduct any depositions or introduce witnesses. This is detrimental in an employment law case where employees often need to rely on witness testimony to describe what happened. Even in less extreme cases, the arbitrator can limit the plaintiff’s ability to gather evidence, request documents, or interview witnesses.

A mandatory arbitration clause also precludes court involvement in the resolution of disputes, which creates a private system of justice. Arbitration has no judge, no jury, no appeal process, and no way to make the results of an arbitration binding on anyone except the parties. It has almost zero precedential value.

Arbitration means less financial risk to employers who violate the law. Research shows that arbitration overwhelmingly favors employers, to the detriment of employees’ rights.

Rather than simply encouraging employees to take their claims to arbitration, the presence of a mandatory arbitration clause in an employment agreement means that employees simply do not bring the claim at all. Attorneys who represent employees are less likely to take cases that are subject to a mandatory arbitration clause because arbitrated claims are less likely to succeed than cases brought in court. And if damages are awarded, they are usually substantially less than the damages awarded by a jury for a similar case.

Growing evidence shows that mandatory arbitration produces results that are vastly different than cases that are litigated. These results are disadvantageous to employees, who are being deprived of their right to due process by giving employers the advantage of setting the terms of the arbitration.

Rather than having their rights adjudicated by the court system and decided by a jury of their peers, employees’ claims are being decided by a panel of arbitrators designated by agreements written by employers who require employees to sign mandatory arbitration agreements as a condition of employment. In short, American workers are being deprived of their right to have their case decided in a trial by jury.

Questions About Your Employment Agreement? Contact the Employment Lawyers at Brady & Associates

If you have questions about a mandatory arbitration clause in an employment agreement, contact the Kansas City employment lawyers at Brady & Associates today. Call (913) 696-0925, or complete our online form.