A troubling trend has emerged at the workplace. Instead of ensuring their pay practices follow the law, more and more employers are subjecting their workers to “forced arbitration” to protect the company from lawsuits.
Forced arbitration is a legal tactic that is presented as a mutually beneficial procedural for resolving disputes. But, in reality, it functions to prevent employees from joining together to bring class actions, moves disputes behind closed doors and out of the public’s view, and incentivizes employers to break the law. Why ensure compliance when you can insulate yourself from serious liability?
Thankfully, the tactic has recently come under scrutiny.
Last month, our firm filed a brief in federal court challenging a Pizza Hut franchise’s use of forced arbitration. Arbitration is commonly implemented, but not widely understood. Even courts have based many of their decisions on assumptions about arbitration that turn out to be not true. Our brief challenges these unfounded assumptions.
What is forced arbitration?
Arbitration is a private, and usually secret, “court” where instead of a judge, who is usually elected locally or vetted by Congress, there is an “arbitrator.”
Instead of the government, cases are managed by corporations (like the American Arbitration Association, the “AAA”) that exist solely to administer arbitrations.
Arbitrators are often lawyers who, in addition to arbitrating part-time, primarily work for corporations and employers in their regular jobs. Even full-time arbitrators often have long careers working at large law firms that serve the interests of big business. Guess where the arbitrator’s sympathies lie?
The arbitrator is paid by the employer (the defendant) in a case. Because employers—not employees—are repeat arbitration customers, guess who arbitrators favor? Unsurprisingly, it looks like the customer is always right: employers win arbitrations more than 75% of the time and employees rarely obtain monetary damages.
A form of “natural selection” weeds out any arbitrator who is anything less than employer-favorable. After all, an arbitrator that is pro-employee or even just fair-minded is unlikely to get repeat work (and, thus, make the hefty fees associated with acting as an arbitrator, which are often $200 – $400 per hour).
Once in arbitration, there is little ability to appeal (often none), the proceedings are usually secret, there is no right to a jury, discovery is limited in a way that benefits employers, and there is usually no ability for employees to work together (like they can in a class action).
Why would any employee agree to this arrangement?
That’s the “forced” part of arbitration. The arbitration agreements are often a condition of employment—an employer might not let you work for them unless you agree to it. And even if that’s not the case, these documents are one of many in a pile of papers or a series of webpages that a new hire is hurried through before their first shift.
Some sign their rights away without reading the documents over. But even if one does read the agreement, without legal counsel it is difficult to understand, and a reader who is unfamiliar with arbitration will likely be misled by the statements contained in the agreement. Many employees only realize something is amiss when it is too late—when a worker realizes their employer might have broken the law.
Not only is the process unfair, but the arbitration agreements are unfair too. Hallrich Inc.’s arbitration agreement includes a provision that was previously found “prohibited and unenforceable ” by a federal court (discussed at page 37 of our brief ). Undeterred, Hallrich did not remove the provision, which misleads workers about when they can bring a claim.
Other arbitration agreements state that the employee has to pay for the company’s attorney’s fees and court costs if the employee challenges the agreement. Amazingly, some courts enforce those provisions, making it too risky for employees to challenge arbitrations. The chilling effect of these provisions is stopping the law from developing and giving employers a free hand to harm their employees.
Are courts stopping this abusive practice?
No. Unfortunately, courts have increasingly deferred to agreements until we reached the point where they are now a breed of “super-contracts” that are essentially unassailable (discussed on pages 14-20 of our brief).
The extreme deference to arbitration is a fairly recent phenomenon and is not based on the history or text of the law (discussed on pages 16-20 of our brief).
Is anyone stopping this?
Yes. Congress recently passed a law prohibiting arbitration in sexual assault and harassment cases . And, Congress is also (slowly) advancing the FAIR Act, which is aimed at ending forced arbitration in employment, consumer, antitrust, and civil rights lawsuits.
In the meantime, our firm is fighting arbitration agreements and fighting in arbitration. Because of the nature of the cases we bring and how we pursue them, we have seen a lot of success in representing clients in arbitrations, despite the grossly unfair playing field. Although our clients have done well in arbitration, we have to wonder how much better they could have done in a fair forum.
For now, we will keep bringing cases on behalf of our arbitration clients. So, even if you signed an arbitration agreement, you should contact us about enforcing your right to minimum wage. In the future, we hope to either defeat the agreements in court or watch as Congress finally eliminates forced arbitration in the employment setting.
Actions you can take:
- If you are presented with an arbitration agreement as part of your employment, reach out to us. We would be happy to discuss it with you.
- Call your Representative and Senator and tell them to support the FAIR Act. Go to the Senate’s website and use the “Find Your Senators” drop down menu and go to the House’s website and use the “Find Your Representative” zip code search to contact your representatives in Congress.
- Do not let arbitration intimidate you. If you have a case, we are equipped to pursue it in arbitration on your behalf, so do not hesitate to call our law firm.
ADVERTISING ONLY: The information on this blog is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
Past results obtained by Biller & Kimble, LLC are no guarantee of future results. Each case or matter is different and must be judged on its own merits.