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Employment Arbitration Agreements

It has become a common practice for employers to include an employment arbitration agreement in most employment contracts these days, but many employees are unsure about what they are signing.

If you have signed an employment contract in the past 15 years, the chances are good that you also signed away your rights to sue your employer if you get fired for bad reasons or feel that you have been discriminated against at work. You are probably wondering how this happened. Well, to put it short, your employer probably included an employment arbitration agreement in your employment contract. If you signed this agreement, then you agreed not to pursue any legal action against your employer in court. Instead, any disputes that you have with your employer must be settled through a process known as arbitration. Arbitration is an alternative to filing a lawsuit and often has many different implications than a full blown case before a judge or jury.

Downsides of Arbitration

Let's start with the definition of arbitration. If you have a complaint that will go through arbitration, it generally means that it will not be heard by a court or a jury. Instead, your complaint will be heard by a neutral third party, called the arbitrator (these are generally retired judges or attorneys). This person is hired (either individually or through an arbitration service) to hear both sides of the case and make a decision. Because you signed the employment arbitration agreement, the decision of the arbitrator is generally binding on both you and your employer.

  • Disadvantage 1: Unlike a trial, where you may be able to opt to have your case heard by a jury of your peers, your dispute will be heard and concluded by the arbitrator. Arbitrators are, in general, fair and will follow the laws exactly. However, sometimes employees prefer to have their cases heard by juries because the juries are often more sympathetic to employees.
  • Disadvantage 2: Parties going through arbitration, in general, get to request less evidence and documents from the other side than if the dispute had gone through a trial. In most situations, this will hurt the employee because it is the employer that will have access to more of the evidence and documents needed during the dispute.
  • Disadvantage 3: Arbitration decisions cannot, in general, be appealed. This finality is very unlike court decisions that are routinely appealed to higher courts to take a second look at a case. Employees that do not like the results of arbitration, or think they are unfair, generally cannot get a higher authority to take a look.

Upsides of Arbitration

Despite the disadvantages of arbitration, there are also upsides and advantages to the process as well.

  • Advantage 1: Arbitrations are generally much less formal than a court trial, which could save you money in terms of preparing and filing documents.
  • Advantage 2: Because of their informality, you may not even need to find and hire an attorney for an arbitration process.
  • Advantage 3: Arbitrations generally proceed and finish much more quickly and efficiently than court trials do. Where arbitration may take a few weeks or months, a court trial can realistically last more than a year.

Be Careful What You Sign

As mentioned, it has almost become common practice for some employers to include employment arbitration agreements inside of standard employment forms and documents. Because of this, many employees often sign these agreements without realizing it during the course of completing employment paperwork. Employees often do not know that they have signed away their rights to bring a lawsuit because the employment arbitration agreement was included as a clause within an employment contract, or in an employee handbook.

In short, read everything before you sign it. Read through all the clauses in an employment contract before signing it. Also, if you get a paper that says you have read and understand everything contained in an employee handbook, be sure to read and understand everything before putting your name down in ink. Lastly, you can also ask your new employer if any of the documents you are signing contain an employment arbitration agreement.

Be Careful About Not Signing

The next thing that you must consider is whether or not you would actually not sign your rights away. Keep in mind that your employer may rescind your job offer if you refuse to sign the arbitration agreement. In addition, at-will employees can potentially be fired for refusing to sign as well.

But you should always think about your bargaining power as well. If a certain employer has been courting you for months, chances are that they would be willing to give up the arbitration agreement in order to get you on board.

You last option is to agree to sign the agreement, but with certain modifications. This is discussed below.

Fair Arbitration Agreements

It will probably happen to most of us that our employer will be unwilling to forgo the arbitration agreement. After all, these agreements are most often in the best interests of the employer, not the employee. Even though your employer may not be willing to get rid of it altogether, you may be able to negotiate to make it fairer to you. After all, this way you are just looking out for your interests.

If you feel concerned about an overly-broad or restrictive arbitration agreement, you may want to talk with an attorney before attempting to negotiate. Lawyers are often good at finding things that should be changed within arbitration agreements. In general, these are some points that you may want to attempt to negotiate:

  • The arbitrator. In determining which arbitrator to use in the arbitration process, be sure that you have just as much control as your employer will. To this end, be sure that both you and your employer get to throw out at least one arbitrator, without having to provide any reasons. Remember that the decision of the arbitrator will most likely be final, so it is important for you to have a say in who makes this decision.
  • Disclosure of information by the arbitrator. Although it seems underhanded and borderline fraudulent, it often happens that the arbitrator between an employee and an employer often has some interest in seeing the employer come out on top. Because of this, you should be sure to include a term in the agreement that allows you or your employer to request that the arbitrator disclose all information that could relate to some interest he or she may have in the dispute. For example, if the arbitrator is a shareholder of your employer's business, then he or she may be biased in favor of your employer. You and your employer should have the right to reject an arbitrator that has a conflict of interest.
  • Costs. Because your employer wants the arbitration, be sure that your employer is the one that is going to pay the costs of the arbitration.
  • Do not give up any of your remedies. Again, because your employer wants all disputes to be settled in arbitration, be sure that you are not limited to awards and remedies that are normal to arbitration. Be sure that you can still seek damages for emotional distress and punitive damages.
  • Do not give up your right to an attorney. If you brought your dispute in court, you probably would have been able to retain an attorney to represent you. Be sure that you can still have an attorney represent you in arbitration.

Discrimination and Other Agency Remedies

Because the arbitration agreement you sign only applies to you and your employer, you may still be able to take your employer to court for some reasons. For example, if you feel that your employer discriminated against you, you are free to go to the Equal Employment Opportunity Commission (EEOC) and make a complaint. The EEOC can, if they find adequate reason, sue your employer on your behalf because the arbitration agreement only applies to you, not to federal or state agencies.

Next Step: Get a Legal Evaluation

While the concept of arbitration sounds slightly confusing, it doesn't need to be. You can learn about the law in your state and see how it applies to your situation with the click of a button. An experienced employment lawyer can answer your questions and evalutate your claim. 

Next Steps

Contact a qualified employment attorney to make sure your rights are protected.

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