What is Forced Arbitration?

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Starting a new job can be exciting, stressful, and wonderful all at once. There may be many new things to learn, and perhaps there is even an onboarding process with training sessions and introductions to coworkers and superiors. You might not be thinking about how your time with your new employer might end.

Many employers and other companies resort to mandatory arbitration for legal disputes. Keep reading to learn more about what forced arbitration is, its recent history, your rights, and why companies have forced arbitration.  

If you need to clarify what your rights are with arbitration, talk to the Zinda Law Group attorneys at (800) 863-5312. Our experienced lawyers will be able to give you a free case evaluation.

What are Arbitration agreements?

In contracts between two or more parties, each party typically retains the right to pursue a claim against the other party if the other party breaches the contract by not meeting the agreed upon terms. In arbitration, however, a neutral third party (not a judge, but usually a lawyer) is the arbiter who assesses the case and reaches a judgment.

The process of arbitration looks somewhat like a settlement without the possibility of going to trial. Also, the parties do not come to an agreement between each other. The arbiter comes to a decision for the parties.

“Binding arbitration” means that the parties must accept the arbiter’s decision, which can be enforced by a court if one of the parties does not comply. “Non-binding” arbitration means that the parties may accept the arbiter’s decision as a recommendation.

What is forced arbitration?

Many people neglect the fine print. Companies can fit an almost comical amount of text into their terms of agreement, and sometimes a company has good reason to make its text so inaccessible: The more information the company packs into its contract, the less likely potential employees are to read before eagerly signing to start the job.

Forced arbitration, often called mandatory arbitration, is one such sneaky term of agreement in the small print. These agreements mandate that should an issue arise between two contracting parties, the parties agree to resolve a dispute in front of an arbiter rather than in court. They also can require both the parties to waive their right to appeal the decision the arbiter makes.

Employers often create mandatory arbitration provisions for contracts with employees. Banks, credit card companies, and other companies selling products and services might also put forced arbitration provisions in contracts to protect themselves from lawsuits.

What are my rights with arbitration?

You are entitled to certain rights regarding the mandatory arbitration clause, though it may not seem that way. Companies and employers will often point to the fact that the employee voluntarily signed the contract, and you have certain rights within the arbitration process itself.

Your Right to Voluntarily Enter Arbitration Contracts

In your lifetime, you have likely seen your phone or favorite website update its terms of service; before you can continue using the device or website, you must agree to the updated terms. Similarly, you may have had a contract for employment that outlined various responsibilities and agreements of either party. Chances are that in all of these cases, you scrolled through and leafed past those terms to check the box and sign your name.

Unfortunately, you could very likely be bound by the terms you skimmed, including forced arbitration provisions. Companies and employers bury these provisions and anticipate that you will rush through reading the terms of agreement. They posit that if you disagreed with the mandatory arbitration clause, you simply could have refused to use the product or take the job.

Even serious complaints from employees often do not survive arbitration clauses, including sexual harassment claims, employment discrimination, rights to minimum wage and overtime payment, and rights to maternity and medical leaves. While that does not mean employees cannot recover for those cases, it can limit how much an employee could recover compared to what that employee might receive with a court trial.

Your Rights During Arbitration

During arbitration, you may use the assistance of an attorney. Additionally, procedural rules that both parties must follow during arbitration can protect you. There are also very limited rights to appeal in some cases and limited rights to an arbitration committee that acts as a sort of jury for the case.

Can I still sue with an arbitration agreement?

Someone who has signed a contract with an arbitration clause cannot typically sue. There is plenty of case-made law and legislation to back the enforcement of mandatory arbitration, and the trend continues to worsen for employees and consumers.

It has been settled for a while that employers and other companies can enforce mandatory arbitration clauses against individuals. In 2012, the National Labor Relations Board (NLRB) ruled in its assessment of employer D.R. Horton, Inc., that mandatory arbitration claims may not prevent class actions from reaching a court. 

However, the U.S. Supreme Court overturned that ruling in 2018. Now, contracts prohibiting lawsuits have the full force of the law, even for class actions.  

Why do companies have forced arbitration?

Forced arbitration benefits employers and companies because it can protect them from lawsuits, especially class actions, which could render large payouts to the adverse parties. The more employees the company hires, the more expensive class actions could become. It follows that larger employers are more likely to include mandatory arbitration clauses in their employment contracts to avoid large payouts from class actions.

Industries that are likely to include mandatory arbitration provisions include education and health, business services, manufacturing, and construction, among others.

Criticism and Controversy

You might correctly suspect that there are critiques of forced arbitration, starting with the fact that it prevents some victims from having their day in court, which goes against a highly valued American ideal. Additionally, it may be difficult to ensure that the arbiter is truly neutral. Mandatory arbitration may also be used to promote unconscionable contracts, which are contracts that oppress one party by imposing unfair bargaining and unfair terms.

One of the most disturbing ways that mandatory arbitration can hurt employees has cropped up in response to movements addressing sexual harassment in the workplace.

Impact on Women

There is ongoing conflict between state legislatures’ attempts to combat sexual harassment in the workplace and the Federal Arbitration Act (FAA). The FAA allows mandatory arbitration for issues of sexual harassment as well as for most other issues; it preempts state law since it is a federal law, so any efforts that states make in this direction are for naught as long as the FAA remains unchanged. However, it is not impossible for the FAA to change; legislation was introduced and approved in 2019 to limit forced arbitration under some circumstances.

Should I hire an attorney for arbitration?

While you are not required to hire an attorney for arbitration, it could be helpful for you to build your case to the best of your ability. It is likely that you are going up against an employer or company in arbitration. Either of these will probably have its own professional legal counsel.

You may want to consider some of the following factors when you decide whether you will hire an attorney to help with arbitration.

How the Decision Will Affect Your Life

If you are facing arbitration because of something that happened at work, there is a chance that your employment or a great deal of money is on the line.

The Difficulty of Building Your Case for the Arbiter

Arbitration is a chance to make your case known to the arbiter, but you only have one chance to make that case. Once the arbiter reaches a decision, you must live with it. Because of this, you will want to build the best case possible.

Lawyers know how to make a strong case because it is their job. They are familiar with how evidence and the law can be used to show the decisionmaker that your argument is better than your opponent’s. Zinda Law Group personal injury lawyers have prepared and argued many similar cases for our clients, and we may be able to do so for you too.

The Other Party’s Familiarity with Arbitration

If you are going into arbitration with a large employer or company, it is likely that the other party has gone through arbitration before. They may have made mistakes in the past and learned from them, but this is likely your first time undergoing the process.

Since they are familiar with arbitration, large employers and companies also have legal teams that know how to find an arbiter who is more company-friendly than individual-friendly. Having your own legal help can even things out.

Give our arbitration attorneys a call

If you are unsure about the mandatory arbitration clause in your contract and would like the guidance of a legal advocate, our skilled lawyers are willing to see how they can help you with your case. Call the Zinda Law Group attorneys at (800) 863-5312 to schedule your free consultation

Our compassionate lawyers want to do what they can to help you through the arbitration process. We have a No Win, No Fee Guarantee so that you will not pay us unless we win your case for you.

Meetings with attorneys are available by appointment only.