What is Employer-Mandated Arbitration?

Federal and state anti-discrimination laws allow employees who have been discriminated against at work to have their day in court. The underlying principle is that employees who have been treated poorly because of their membership in a protected class (race, age, ethnicity, or religion, to give a few examples) should be able to use legal action to get justice. Unfortunately, employees are not always guaranteed their day in court after a discrimination complaint. 

This is due to employer-mandated arbitration. Arbitration is another way of resolving a dispute that could otherwise be the subject of a lawsuit. Arbitration is considered to be employer- mandated when an employee must agree to resolve certain disputes in arbitration—outside of court—or lose their job. 

So, for example, a newly-hired employee may be presented with an employment agreement that includes mandatory arbitration for any employment-related claims. The employee is not required by law to sign the employment agreement and, by extension, the mandatory arbitration provision. However, the employer is not required by law to formally hire the employee if they are not willing to sign a mandatory arbitration agreement (this may change with changes in public opinion). More than half of non-union employees in the private sector today are covered by some form of mandatory arbitration. 

How Does Arbitration Work?

The arbitrator is supposed to be a neutral third party who is tasked with making a decision on a particular dispute. In some cases, arbitrators are not required to be attorneys. Like a judge, an arbitrator listens to both sides, considers evidence, and makes a decision. It is different from mediation, another alternative dispute resolution method, because the arbitrator is less likely to encourage negotiations between the disputing parties and instead acts like a judge would in court. The decision of an arbitrator can be legally binding or non-binding, and in certain circumstances, the decision can be appealed to a court of law.

Is Arbitration Always Bad?

The answer to that question depends on the party you’re asking. Several aspects of arbitration typically favor the employer over the employee: 

  • In arbitration, both parties are limited in the information and documents they can request from the other side. This usually puts the employer at an advantage because the company already has a wealth of information at its disposal. 
  • Subpoenas (a legal order requiring someone to testify or produce information)  are typically more difficult to enforce in arbitrations, so it can be harder to secure the attendance of a witness who may be reluctant to testify without a court order.
  • Employers often have “preferred” arbitration providers. A natural conflict of interest arises in this situation, as the arbitration providers might feel pressured to rule in favor of the company to continue receiving business from the employer.
  • Employer-mandated arbitration is often legally binding. Furthermore, the grounds on which an employee can appeal the arbitrator’s decision are narrow. 
  • Many agreements to arbitrate also include a provision shortening the allotted time-period you have to file a claim. For example, the agreement could cut the time you have to bring an employment discrimination claim from three years to six months, depending on the applicable law.

Should You Sign a Mandatory Arbitration Agreement?

Ultimately, you must weigh the advantages and disadvantages of signing such an agreement. Having a job is certainly a necessity, but you should always proceed with caution when giving away some of your rights. Depending on how much leverage you have, you might be able to convince your future employer to restructure the agreement in your favor. 

At any rate, do NOT walk into arbitration or otherwise handle a workplace discrimination complaint without quality legal counsel. If you have an employment discrimination claim and you signed an arbitration agreement, you must act quickly to protect your rights.  Our team is ready to do whatever it takes to obtain justice in your case. Contact Carla D. Aikens, PLC today to schedule your free consultation.

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