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The dirty secret hidden in your new hire paperwork that blocks your future rights as an employee
What Is A Mandatory Arbitration Agreement?
Arbitration agreements require legal disputes to be resolved through arbitration instead of the U.S. court system. Originally, they were used between two business entities that knowingly agreed to handle disputes this way because arbitration is often faster and cheaper than litigation.
However, in recent decades, employers have started using these agreements with employees — often in new hire paperwork — because it protects them from legal liability even if they knowingly violate an employees rights. These agreements allow employers to avoid accountability, as employees often don’t realize what they’ve signed until it’s too late.
What Does It Mean If I Have An Arbitration Agreement?
It means your employer has preemptively protected themselves from being sued in court for any wrong they may do to you during your employment. This could include disputes regarding inaccurate pay, civil rights violations and unsafe working conditions.
If you have a mandatory arbitration agreement you cannot file a lawsuit against your employer in the US court system and all legal disputes must go through arbitration, which I’ll explain in more detail below.
The only current exception is sexual harassment violations as the #MeToo movement resulted in the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA) becoming law in March 2022. As a result, employers can not force sexual harassment cases into arbitration even if a current mandatory arbitration agreement exists between the employer and employer.
How I Learned About Arbitration Agreements
I learned about arbitration the hard way, when it was too late for my own fight.
When I was signing my new hire paperwork I never imagined I’d pursue legal action against my employer and I had no idea it was legal for that employer to even ask me to give up my civil rights protections. In fact if you would have asked me if an employer could do such a thing before this fight started, I’d guess that my response would have been confusion at a question that didn’t make sense. Why would our country grant individuals protections that they’d then allow employers to take away?
And that is why I’m writing this post -- to warn others, so at the very least you know the situation you’re in and can make an informed decision about your next steps.
How Do Arbitration Agreements Limit Employee’s Rights?
Mandatory Arbitration Agreements typically deny the following rights:
The right to a court trial: Your case will not be decided by a judge or jury in the US court system
The right to class-action lawsuits: Many agreements include explicit language that block an employee from participating in a class action lawsuit with other employees who were harmed in the same way. This creates an immediate and significant barrier to fighting discrimination, because it can make it more difficult for low-wage workers to find representation even when discrimination or wrongdoing is widespread.
The right to appeal: Arbitration is legal and binding. This is especially problematic when you consider the data shows certain arbitrators favor employers who use them frequently.
A complete discovery process: Often discovery for both sides is far more limited in arbitration compared to court cases
What’s so wrong with Arbitration Agreements?
A major issue with arbitration is that arbitrators and arbitration organizations are not federally regulated, meaning there are no standard qualifications for becoming an arbitrator. As a result someone with far less training, experience, and accountability than a judge can make a legally binding decision on whether your civil rights were violated.
If you'd like, you can review arbitrator qualifications here:
JAMS, one of the most commonly used arbitration agencies, is made up mostly of retired judges and lawyers. However, about one-third of JAMS arbitrators have an ownership stake in the company creating a serious conflict of interest.
Why does this matter? Because employers often choose which arbitration service will be used in their agreements and naturally, they pick the service where they are more likely to win. This creates an incentive for arbitrators to rule in the employers interest.
It's also worth noting that this conflict of interest was only discovered when City Beverages lost an arbitration case against Monster Energy and had the legal resources to uncover that JAMS arbitrators had financial ties to the company. Had this been an individual employee who lost, they would probably not have had the financial resources to uncover this information and the conflict would have remained hidden.
For more details on this case, you can read about it here.
Outside of that, it should be clear that it's not what the employee would knowingly or willingly agree to by the fact that arbitration agreements are mandatory and almost always enforced by the employer, not the employee.
How Arbitration Enables Widespread Violations
Employers want to avoid class-action lawsuits because they are expensive, attract media attention, and can seriously damage their reputation. Unfortunately, by allowing employers to preemptively shield themselves from the lawsuits they desperately want to avoid, the legal system has also enabled employers to violate workers’ rights on a large scale without accountability.
An example may be the best way to demonstrate this — Imagine a company steals $1,000 from 100,000 employees.
In a class-action lawsuit, lawyers are incentivized to help the victims of discrimination and take the case, because they’ll easily be able to recoup their investment from the total damages of $100 million
However, in forced arbitration, each worker must file and win a separate case and at just $1,000 per case, it becomes cost prohibitive for an attorney to help the victims even if they want to.
This makes it far harder for employees to fight back. And even if some employees do fight back and win, arbitration is private, so the company avoids not only the significant financial risk of a class-action lawsuit, but the damage to their reputation through public exposure.
What Can I Do If I Have An Arbitration Agreement
Well first, I’d recommend writing to your state and federal representatives to let them know you want a law that blocks employers from using these agreements to escape accountability for the harm done to employees. If the law was changed to protect employees against sexual harassment there is no reason the law couldn’t be changed again to expand employee protections beyond sexual harassment.
After that, you need to make sure you build a strong case demonstrating the discrimination you (and potentially others) are experiencing. My arbitration agreement didn't keep me from fighting when my rights were violated and it shouldn't prevent you from fighting either. If you need help with that, sign up for JustiProof for guided support on building your discrimination case.
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