Many employers ask employees to sign arbitration agreements, in which they give up their right to sue in court over job-related issues such as wrongful termination
, breach of contract
, and discrimination
. This may not seem like a big deal when you are starting a new job and do not foresee any legal disputes but if your rights are later violated at work, that arbitration agreement might come back to haunt you.
What is an arbitration agreement?
Typically, arbitration agreements are given to employees to sign when they are hired. These agreements usually state that both parties, employee and employer, agree to resolve their legal issues before a private arbitrator instead of civil court. Often time an arbitration agreement can require that this process take place in a specific jurisdiction and can also redefine or restrict some statutory issues. There are many different arbitration companies to choose from, but the American Arbitration Association
are two of the larger ones that are routinely appointed in arbitration agreements.
Enforceability in California
Generally speaking, in California, an employer can require its employees to agree to arbitration as a term of employment
if the agreement is drafted and implemented properly. However, there are some protections and arbitration agreements are routinely struck down by courts if they are not properly drafted. If an agreement has too many unfair or one sided terms, California courts may refuse to enforce the agreement or sever the unfair terms. For example, recently a California court held in Ajamian v. CantorCO2e
, that an arbitration agreement was not enforceable because it required the employee to waive statutory damages and remedies and only allowed the employer to recover its attorney’s fees if successful, not the employee.
Do not ignore these agreements if you have a dispute with your employer. Many people think that these agreements can be ignored or that are simply a legal formality. Under California arbitration law, if you ignore the agreement, a court could find you in breach of the agreement. Thus, no matter how strong your claims are, you will not be able to proceed though arbitration or in court, and you will be unable to get any remedy for your dispute.
Disadvantages of arbitration
You may wonder why it matters where your claims get heard, as long as they are heard somewhere. An arbitration differs from a court case in many ways, several of which can work against employees. With arbitration, your claims are heard and decided by an “arbitrator” who is paid by one or both sides to listen to the evidence and witnesses. That means there will be no jury to hear your story — and juries are often sympathetic to employees. In addition, the arbitration process limits the amount of information each side can get from the other. In employment cases, this generally hurts the employee, because the employer is usually the one who has most of the documents and information relating to the employee’s case. Finally, an arbitration usually cannot be appealed, which makes arbitration awards more final than court verdicts. If you think the arbitrator’s decision is unfair or wrong, you will not be able to argue your case before a higher court.
Advantages of arbitration
An arbitration does have some advantages over a court trial. The arbitration process is more cost-effective and less time-consuming than court trials. Cases in arbitration are heard and decided much more quickly than court cases, which can take several years from start to finish. While arbitration is a formal process, the rules and procedures are less onerous than those of a court of law. This can make the process easier for all involved, especially employees who are not used to litigation. Arbitration also affords more privacy for the parties. Unlike court actions, arbitration proceedings and arbitrators’ decisions are not normally made public.
Do I have to sign the arbitration agreement?
If your employer asks you to sign an arbitration agreement, you can refuse, however it may put your job in jeopardy. If your employer will not let you outright refuse to sign an arbitration agreement, it may allow you to negotiate certain terms of the agreement to make it more fair to you. Although an employer may not agree to your requests, it is unlikely you will be fired for asking. Negotiating your agreement to arbitrate is no different from discussing your salary or benefits. Just like the employer, you are simply negotiating for your best interest.
Here are some provisions that can help create a more balanced arbitration process.
- Choice of arbitrator. You should get as much say in choosing the arbitrator as the employer. Given the power of the arbitrator you will want to have rights equal to those of your employer in the selection process.
- Disclosure of information. A potential arbitrator should have to disclose information about his or her business and personal interests so you can make sure that the arbitrator is not biased in favor of the employer. You and the employer should have the right to reject any arbitrator who has a conflict of interest.
- Costs of arbitration. Because the employer is the one who wants to use arbitration, the employer should have to pay for it.
- Remedies available. Make sure that you can receive all of the remedies that you would have available if you had filed your claim in a court of law. For example, the agreement should not prohibit you from seeking punitive damages or damages for emotional distress.
- Attorney representation. You should have the right to be represented by an attorney throughout the arbitration process.
But I did not know I agreed to arbitration
Employees often sign arbitration agreements unintentionally. Some employers give new employees piles of paperwork to fill out on their first day, and some employees, in turn, sign documents without reading them. Although many employers are straightforward and present the arbitration agreement to employees openly in a separate contract, others bury arbitration agreements in other documents, such as an employment contract, a hiring letter, or an employee handbook. Make sure that when you sign a contract, letter, handbook acknowledgment form, or any other document from your employer, you agree to all the terms of the document — even the ones that you may not have read. Do not sign any document acknowledging you’ve read something unless you actually have read it and understood it completely.
You can still use government agencies to help fight discrimination
If you sign an arbitration agreement and your employer discriminates against you, you can still complain to a government agency, such as the federal Equal Employment Opportunity Commission (EEOC) — and the agency can decide to sue the employer in court on your behalf. The arbitration agreement you signed applies only to you; it doesn’t apply to an agency that wants to step in and enforce the law.
Arbitration is a very tricky area because the law is still developing. You should consult a knowledgeable attorney before to trying to resolve any dispute where you have an arbitration agreement. If you have questions before or after entering into an employment contract, contact the Orange County and Riverside Employment Law
firm of Don Ho, LLP.
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