Mandatory Arbitration: How American Employers Opt Out of the Justice System

Mandatory forced arbitration is a nationwide problem in the employment context that needs to be addressed by lawmakers.  A recent study reported that roughly three-quarters of Americans believe they can sue an employer or company should they be seriously harmed or have a major dispute arise - even if they are bound by forced arbitration terms. And most Americans are unaware of the rights being taken away from them. Approximately two-thirds of those who have had an arbitration agreement enforced against them cannot remember seeing anything about forced arbitration in their Terms of Employment. This is because employers are not required to call arbitration language to employees' attention in any particular way or provide them with any specific information about the true meaning of the often legalistic language contained in an arbitration policy, clause, or handbook provision. So, many employers simply hide the provision in their large employment handbook that employees may or may not be given a copy of and have employees sign a written acknowledgement of having read it along with the 50 or so other documents that they rush new hires through on their first day. An excellent article came out this past week by Carmen Comsti, The Employee Rights Advocacy Institute's Paul H. Tobias Attorney Fellow, highlighting recent news stories of how employers are attempting to opt-out of complying with our nation's worker protection laws. Comsti writes:

"Forced arbitration compels workers to give up their rights to go to court and a trial by jury. It is imposed on workers by their employers requiring them to resolve workplace disputes before they arise in private arbitration rather than in a public court. Forced arbitration is anathema to our public justice system because it occurs in secret, private tribunals in the absence of accompanying legal safeguards such as a written record of the arbitration proceedings, the right to appeal the arbitrator's decision if the law is not applied correctly, or other guarantees that ensure a fair process. Workers often have no knowledge or understanding of forced arbitration provisions, but yet are required by employers to "agree" to it in order to get or keep a job. Forced arbitration reaches nearly every job sector in the country----from retail workers and restaurant employees to uniformed servicemembers and medical professionals. At least 27 percent of America's employers mandate their employees submit to forced arbitration, affecting more than 36 million people, or one-third of the non-union workforce. Despite the growing prevalence of forced arbitration, the injustices that workers suffer from it are only now being brought to the public's attention thanks to recent articles in the press. The following are some examples.

The Raiderettes Take On The Oakland Raiders

The Oakland Raiderettes filed a lawsuit last year against the Oakland Raiders alleging that it routinely violated California labor laws. This was the first in a series of lawsuits initiated by current and former National Football League (NFL) cheerleaders challenging the NFL's entrenched system of long hours, meager pay, and paternalistic work rules. In the Raiderettes' case, the Raiders paid the cheerleaders $125 per home game but required them to participate in practices, rehearsals, meetings, workouts, public events, uniform fittings, and photo shoots without compensation. Their contracts also imposed fines and discipline for minor deviations in physical appearance, such as weight gain and improper hair color.

The Raiderettes, however, may never have their day in court because their contracts force them to arbitrate their workplace disputes----believe it or not----before NFL Commissioner Roger Goodell. Commentators have cast doubt on whether the Raiderettes will receive a fair hearing under the circumstances. A California state court will decide later this year if the contract violates basic legal requirements of fairness and consent or if the Raiderettes will be forced into arbitration.

Federal Court Raises Concerns About Uber's Arbitration Clause Requiring Waiver Of Access To The Courts

In May, a federal court in California ordered Uber to change the wording of an arbitration clause in its contracts with drivers because it is potentially misleading and coercive. Uber drivers filed a lawsuit alleging the company cheated drivers out of their tips and misclassified them as independent contractors rather than employees. After Uber drivers filed similar lawsuits in Massachusetts and Illinois, but before the California case was filed, Uber surreptitiously changed its terms of service with its drivers by adding an arbitration provision requiring them to waive their right to participate in any lawsuit against the company pending in court. Recognizing Uber's unscrupulous attempt to interfere with current and potential drivers' access to the courts, the California federal court ordered Uber to send out corrective notices about the provision to Uber drivers. The federal court will consider the merits of the case once the drivers have been properly informed of their rights to participate in the lawsuit.

U.S. Servicemembers Forced To Arbitrate Workplace Claim

Forced arbitration also has been imposed on our nation's uniformed servicemembers, such as Captain Nicole Mitchell who was discriminated against in the workplace because of her military service. A U.S. Air Force Reserve Officer, Captain Mitchell was deployed for military service every few weeks with the elite "Hurricane Hunters" aircrew to track tropical storm patterns and developments. When she was not fulfilling her military duties, Captain Mitchell worked as a top rated on-air meteorologist for The Weather Channel. After The Weather Channel was purchased by NBC Universal in 2008, new management demoted and later terminated Captain Mitchell for taking time off to perform her duties as a Hurricane Hunter. Captain Mitchell filed a lawsuit against NBC Universal and The Weather Channel in federal court for violation of her rights under the Uniformed Services Employment and Reemployment Rights Act (USERRA), but discovered that her employment contract contained a forced arbitration provision. The federal court enforced the forced arbitration clause and Captain Mitchell's case was sent to arbitration in 2012. Since then, Captain Mitchell has been unable to secure employment as an on-air meteorologist and has been waiting for the arbitrator to hear her case."

Defense Lawyers Seem to Agree

Most business-side employment lawyers I speak to seem to agree, although for different reasons. They point out that research shows arbitration is neither faster nor less expensive than litigation. Couple that with the lack of appellate opportunities when something goes wrong and it really doesn't come out as a better option for companies either.

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Updates:

  • Originally Published 5-27-14
  • Updated:  5-20-15