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7 Reasons Arbitration Harms Employees

Posted September 28th, 2020 by in Civil Litigation.

If you are an employee in the United States, you probably have given up your constitutional right to access the courts and receive a trial by a jury for claims against your employer, or will soon do so. Many, if not most, large employers impose arbitration agreements (sometimes misleadingly referred to as “policies”) on their employees. When an employee agrees to arbitration, they are generally agreeing to have their claims against their employer heard and decided confidentially by a single former judge or lawyer or a small panel of them, with no meaningful right to appeal.

Contrary to what many might expect, courts have held that arbitration agreements are generally lawful (with some exceptions). Courts also permit employers to require employees to accept an arbitration agreement as a condition of employment. As a result, across the United States, growing numbers of employees have to choose between giving up their day in court and going without a job. And, because many courts will enforce arbitration agreements against employees who didn’t read or understand them when they entered into them, many employees are not even aware that they have given up these rights until it is too late.

Given employers’ wide-spread adoption of arbitration agreements, employees should be aware of the reasons that accepting an arbitration agreement is against their interests. The following are merely a few:

1. On average, employees are less successful in arbitration than in court. While the secrecy around arbitration makes it difficult to compare outcomes, some studies have been done. According to a 2009 article, one researcher conducting a relatively small study found that employees’ win rate in arbitration was just 19.7%, substantially lower than win rates in court, and that the average projected recovery for employees in arbitration was between 7.9% and 16.2% of the average expected outcome in similar court cases (this was a very rough estimate because, unlike in court, the results of arbitrations are generally not available to the public). The author concluded that “the overall picture shows a large gap in the average expected outcomes in arbitration and litigation.”

2. No “jury of your peers”. In an arbitration, unlike in court, the finder of fact is usually one person or a panel of three, who is either a former lawyer or a former judge. Unlike a jury of peers, which might represent a cross-section of the community and a diverse range of perspectives, this individual has only one lived experience. That experience includes a high level of education, a high annual income, and years of work at a white-collar job. Arbitrators are also overwhelmingly white and male.

3. The repeat player problem. Unlike judges and jurors who stand to gain nothing by finding in favor of either party, an arbitrator needs parties to choose him in order to have a job. In arbitration agreements, employers usually specify the arbitrator or arbitration association that will supply the arbitration. In arbitration, the parties either agree to an arbitrator or pick one by striking from a small list provided by the arbitration association they are using. Employers and businesses have no incentive to pick an arbitrator or an arbitrator association that frequently rules against them. Arbitration agreements can even designate the place where cases are to proceed, in effect allowing employers and businesses to select their favored jurisdictions.

4. Arbitration hides important information from the public. The press generally has a right to be in court and to report on cases. The press is generally not allowed in an arbitration, and arbitrators may prohibit even publishing the documents filed in the arbitration. Many arbitration agreements require even prevent the employee from speaking about the proceedings or publishing documents on file in the case. This means that the public may never know if an employer or business is found to have violated employees’ or consumers’ rights. It may never know if a business lies to an arbitrator, or if evidence surfaces regarding other unlawful activity affecting other employees or the general public. Courts have raised other concerns about the impact of this confidentiality on employees, including that this could prevent employees from effectively investigating their claims or could even make pursing their claims more expensive https://law.justia.com/cases/california/court-of-appeal/2018/a153390.html and that it could hamper their abilities to prove patterns of discrimination or take advantage of prior rulings. https://caselaw.findlaw.com/wa-supreme-court/1077368.html.

5. No or minimal right to an appeal. In general, an arbitrator’s decision cannot be overturned, even for serious errors, as long as the arbitrator was arguably construing or applying the law or contract. This means that if an arbitrator misunderstands the law and applies it incorrectly to rule against an employee, there is usually no recourse. In court, an employee can often appeal wrong decisions and have them overturned.

6. Minimal discovery tools. Employees tend to start out their cases with less of the relevant information than employers and businesses, who usually know what they did. A critical tool for employees in court is the ability to conduct discovery to force the defendant and third parties to provide evidence to the employee so they can prove their case. In arbitration, parties may not have the right to depose third-parties at all, and other discovery tools usually available in court may be limited.

7. No Class Actions. The vast majority of arbitration agreements prevent employees and consumers from bringing class actions. In many cases, this deprives employees of the only practical avenue to challenge unlawful actions by employers and businesses. In essence, arbitration agreements insulate employers from liability for wide-spread violations of civil rights and wage and hour laws.

Arbitration makes it harder for employees to prevail in employment lawsuits. It’s that simple. This is not to say that arbitration agreements are always enforceable. Our firm has had some success in challenging them, but it is an uphill battle.

An employment lawyer can help employees to opt out of arbitration clauses that permit this, but it is also important that employees make their voices heard. Many lawmakers recognize the problems inherent in forced arbitration and are open to amending the Federal Arbitration Act to eliminate it, but they face fierce opposition from business interests, and risk losing funding and support if they side with employees. Employees interested in banning forced arbitration should reach out to their elected officials to make sure their voices are heard above the din of lobbyists and special interests. Workers can also push back against their employers directly. Last year, walk-outs and protests in California and around the world persuaded Google to drop its forced arbitration agreement. This strategy could prove successful in many other workplaces.

Danielle Fuschetti is a Senior Litigation Counsel in the San Francisco office of Sanford Heisler Sharp who works primarily on matters ranging from private negotiations to class action lawsuits.
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