Arbitration Agreements & Why You Should Avoid Them

In today’s uncertain economic climate (one in which jurors are finding employers’ termination of their workers increasingly reprehensible and are awarding substantial damages against employers), a growing number of employers are requiring new hires to sign  Binding Arbitration Agreements.

Agreements require that all disputes between the employer and employee, including racial discrimination and wrongful discharge be resolved in an arbitration forum—prohibiting the employee from filing a lawsuit.  Of course, unless the job applicant signs the agreement, she will not be hired.  In states in which an employer’s allowing an employee to keep her job is adequate consideration for a contract, employers are forcing existing employees to sign these Arbitration Agreements as well, under threat of immediate discharge.

These Agreements are often long and complex, containing language that lawyers have difficulty understanding and that employees are entirely unable to comprehend.  Even more distressing, upon receiving these documents employees and new hires are required to sign them immediately and on the spot, with just a few minutes to review them.  Since failure to sign will result either in termination or in withdrawal of the employment offer, most employees do not even attempt to read the Agreement; they just sign it.
Some of these Agreements even prohibit employees from participating in class action lawsuits; incredibly, courts have now begun to enforce such clauses without regard to the chilling effect that these agreements will have on consumers exercising their rights.

Arbitration always favors the employer and, with some statutory exceptions such as violations of Title VII, anti-discrimination and retaliation provisions can be expensive for the employee.  In pitching these Agreements to employees and new hires, employers tell them that arbitration is a quick, efficient and inexpensive way to resolve disputes compared to the long, drawn-out process of a trial.  Judges who agree with this “arbitrate everything” philosophy will give the same assurances, but nothing could be further from the truth.

A jury trial is the best and most fair way to settle most disputes.  Once jurors render a decision, they go back to their lives.  If errors are made at trial, you can appeal.  But with these Arbitration Agreements, employees and new hires have no such right.

Professional arbitrators earn thousands of dollars for each Arbitration and will do everything in their power to earn repeat business from employers who utilize their services.  It is thus in the best interest of the arbitrator to rule in favor of employers so that they can ensure for themselves a steady stream of a highly lucrative income.
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If you have a choice in the matter, never agree to binding Arbitration.  It is not what proponents suggest it is—it is a way to eliminate big jury awards when employers break the law.