Mandatory Arbitration: Justice for All or Kangaroo Court?

November 3, 2015

When an employee learns that he or she may have been treated illegally by an employer, one option used to be going to court with co-workers who were similarly harmed to resolve their grievances together in a class action. A person may have a few thousand dollars at stake in the dispute, while the cost of bringing a lawsuit would be many times that amount.

It wouldn’t be feasible for the employee to sue unless he or she could join with Theres to share in the emotional and financial burden of fighting an employer with far more resources to fight back. Increasingly though, the option of having their day in court is disappearing for employees everywhere as companies use mandatory arbitration to block them from getting their foot in the courthouse door.

When most people are hired to work, they probably give little thought to whether future disputes with their employer will be resolved in the court system or by arbitration. It may be that the employee doesn’t care, or doesn’t know that There is a difference between the two. The employee may simply be happy to be hired and doesn’t want to delay starting the new job by objecting to mandatory arbitration.

Companies count on that sentiment, which is why so many employment contracts now contain mandatory arbitration clauses. The result is that when a dispute arises, the odds are heavily stacked against the employee. A simple way of describing this phenomenon would be “private judges.”

Employers prefer arbitration over court because it is a process they can control to their advantage. Arbitration lets employers contract around the procedural and substantive protections that most plaintiffs would receive in court.

An employer can shorten the deadline an employee has to file a claim, limit or eliminate an employee’s access to documents related to the dispute (which severely restricts an employee’s ability to obtain evidence to support the claim), and create the risk that the employee will have to pay everyone’s legal bills if they lose (and in arbitration the employee usually does). The employer may select which laws will be used, as some organizations are requiring that disputes be resolved in “Christian arbitration.”

Arbitrations are confidential, so There is no one ensuring that the process is fair. If it isn’t, that’s too bad. There is no right to appeal.

Additionally, most mandatory arbitration clauses specifically prohibit an employee from joining with Theres who have suffered the same harm to combine their claims in a class action. Without the powerful ability to bring a collective claim with Theres, most employees will not bThere filing any claim at all. The dispute is over before it starts.

In an investigation of federal cases filed between 2010 and 2014, the New York Times found that judges ruled in favor of companies in four out of every five cases where the companies sought to push arbitration upon employees and consumers. The results of that study were recently detailed in a two-part series titled: “Beware the Fine Print.”

Forcing employees to arbitration often produces outcomes that bear little resemblance to the due process offered by courts. The rules tend to favor the party with deeper pockets (ie. the employer). That is because arbitrators who issue opinions favorable to employers tend to get hired more. This conflict of interest is part of the reason why some state judges have likened the clauses to a “get out of jail free” card.

Employers try to sell arbitrations as a cheaper, faster and more efficient way of resolving disputes. What’s left out: that it is cheaper when the “neutral” arbitrator, who may be friendly with the company, issues a decision where the employee loses, and then that employee is required to pay for the entire process. This can amount to hundreds of thousands of dollars. Just the possibility of being on the hook for so much money scares employees from bringing claims.

Forced arbitration clauses are used by employers in nearly every industry: retail, restaurants, banks, hospitals, nursing homes, and cruise lines. In the past two years, several cases have highlighted how much forced arbitration can hurt employees.

In New York, a group of Applebee’s employees filed a class action claiming that the company required them to perform extra work but paid less than minimum wage for that work, a practice that happens often in the restaurant industry. The company asked the court to throw out the class action, arguing that the employees had agreed in their employment contracts not to participate in a class action. One former employee, Ronnie Del Toro, had to obtain a restraining order against his boss, who threatened him if he didn’t withdraw his lawsuit. Mr. Del Toro went to work for another employer, who also required him to sign a mandatory arbitration clause to get the job.

When Oakland Raiders cheerleaders attempted to pursue a class action over unfair working conditions, the arbitrator for their case was Roger Goodell, the NFL commissioner. The Raiders later agreed to use another arbitrator.

Besides the obviously unfair result for the individuals involved, arbitration hampers systemic change. The secretive nature of the process means that no one will be able to tell if a company regularly breaks the law, because those who have been harmed cannot share information. Wrongdoing can become routine.

What is the best way to avoid ending up in forced arbitration? If an employee is asked to sign an arbitration agreement, he or she may want to consult an attorney to see if There is a way to work around it or break it.

Alternatively, wherever There is an opt-out right, opt out! It is almost impossible to get out of mandatory arbitration after a person has signed an agreement consenting to it. Almost everyone who has tried to get the courts to intervene after-the-fact has failed, as courts generally say that their hands are tied.

(*Prior results do not guarantee a similar outcome.)