An increasingly common, but controversial, aspect of employment contracts is known as the mandatory arbitration clause (also known as a forced arbitration clause). These aspects of employment law are poorly understood outside of legal circles. But what exactly is a mandatory arbitration clause and what makes it so controversial?
A mandatory arbitration clause is a clause in a contract which states that the parties to the contract will agree to settle any legal dispute in private arbitration, rather than litigating in state or federal court. Sometimes, the contract could name a specific arbitrator who would be used to settle the dispute. The contract could also allocate the responsibility for paying for the costs of the arbitration.
On the surface, these clauses seem like inoffensive procedural requirements. However, they can have a substantial impact if one side decides to sue the other. First, one of these clauses in effect means that neither party can go to litigation, even if they’d normally want to. Second, private arbitrators are for-profit services that rely on repeat business and may have a bias towards those responsible for their work (i.e. the employers and manufacturers who put arbitration clauses in their contracts). Third, arbitration rulings are legally binding, and very difficult to overturn in court. Fourth, by going to an arbitrator rather than a court, you waive your right to a jury trial. This is often unfair to workers and people who allege discrimination and sexual harassment causes of action because a jury of their peers is often more sympathetic than a single arbitrator and the likelihood of receiving a punitive damage award is drastically reduced when the matter is decided by an arbitrator.
As a result, labor and consumer advocates have called for the ban of mandatory arbitration clauses. They argue these clauses are coercive and prevent people from exercising their full legal rights. Proponents see it as a cost-saving measure that short-circuits costly litigation. Due to these concerns, some states have banned arbitration clauses in all respects.
If you’re negotiating an employment contract, or fighting the terms of your contract, contact the Law Office of Andrew Ross Sack. He has the knowledge and skills you need to protect your rights and achieve the relief you deserve. Give him a call at (516) 526-3319, or visit his contact page.
