Dangers of an Employment Arbitration Agreement

Dangers of an Employment Arbitration Agreement

The Dangers of Signing an Employment Arbitration Agreement

Since the 1980’s there has been a significant shift in the balance of power within the workplace. As employees lose power, their employers gain more power. This power shift is all due to the Supreme Court’s reinterpretation of the Federal Arbitration Act (FAA). The FAA, when it was originally enacted in 1925, only applied to a narrow range of commercial disputes. In the 1980’s, however, the Supreme Court radically expanded the scope of the statue, applying it to all types of disputes. Now, it is common for employers to require employees to sign arbitration agreements in order to receive the job at hand, or to remain employed. Although the trend towards arbitration agreements is great for the employer, the same cannot be said for employees. Follow along to see the true dangers of signing an employment arbitration agreement. 


Stripping Your Rights to Sue in a Court of Law

Essentially, when you sign an employment arbitration agreement, you are signing away your rights to sue your employer in a court of law. Instead, if you have an issue of any kind within the workplace, you must settle the dispute in arbitration. Arbitration is a private process in which the disputing parties agree that a neutral third party can make a final decision about the dispute after receiving evidence and hearing both sides of the argument. 

While it may seem nice and cordial to avoid courts, it actually benefits the employer much more often than it benefits the employee. The rate at which employees win arbitration cases (21.4%) is lower than the rate at which they win federal (36.4%) and state (51%) court cases. In addition, the differences in damages awarded is even greater. The median award in an employee’s arbitration case is only 21% of the median award in federal court cases and 43% of the median award in state courts. Thus, even if you happen to win your arbitration case as an employee, you will win much less than if you were to file a winning lawsuit against your employer. 

Furthermore, some arbitration agreements may include that if the employee loses the case they will have to pay for arbitration fees out of pocket. A clause such as this can serve as a strong deterrent to employees who may be considering bringing up cases against their employer, for fear of the potential costs. Ultimately, deterring employees from speaking out is bad for everyone because it allows businesses to continue operating without having to face the consequences of misconduct. 


Arbitration is an Unfair Forum

Moreover, arbitration is an unfair forum because of the lack of regulation. Though arbitrators claim to be unbiased third parties, the employer is in charge of picking the arbitrator and arbitration forum if an employee files a case. Therefore, arbitrators often have incentive for siding with the employer to gain the employers loyalty and repeat business. Additionally, arbitrators do not have to necessarily follow the law or issue written explanations of how they interpreted the law in relation to the case. Further, arbitration is a secretive forum, not open to the public, thus, results can be kept confidential allowing for potential collusion between the arbitrator and employer. Lastly, there is limited discovery in arbitration which can ultimately deny the employee the means to gather enough evidence to fully support their claim, putting them at a disadvantage. Overall, the structure and rules of arbitration clearly lean towards the benefit of the employer. 


Contacting an Attorney

Before signing an employment arbitration agreement, it may benefit you to see an attorney to help you understand exactly the terms you are agreeing to. Also, an attorney may be able to give you suggestions for negotiating the agreement to better benefit you as an employee. Likewise, if you already have signed an arbitration agreement or have refused to sign an arbitration agreement and have faced discrimination, contact a qualified attorney for the next steps. In New Jersey, there have been multiple attempts to bar employers from using agreements that waive rights and remedies for employees facing discrimination. For more information on the specifics of New Jersey law in relation to arbitration agreements and discrimination, contact David Kaplan. David Kaplan and his team are dedicated to helping citizens who have had their rights infringed upon. Plus, with 30 years of experience and numerous winning verdicts, you can expect nothing but quality legal representation.