What is a Mandatory Arbitration Agreement and Should You Sign It?

For many workers here in San Francisco, the Bay Area, California or elsewhere, starting a new job is both an exciting and nerve-wracking time. The employee has new faces and names to learn, new strategies and techniques to master and often a plethora of paperwork to scan through and sign during the onboarding process. With increasing frequency, one of those documents U.S. workers are asked to sign is a mandatory arbitration agreement. It might seem like just another piece of paper when you are enthusiastically starting a new job, but if your rights are later violated, signing it could be something you regret.

When one signs a mandatory arbitration agreement, one signs away one’s fundamental right to a jury trial. This right is enshrined in the 7th Amendment to the U.S. Constitution. Senator Richard Blumenthal (D-Conn) denounces forced arbitration as “one of the systems that is truly rigged against consumers and workers,” and as “unfair, unjust and un-American.” Arbitration is similar to a trial in that there is a decision maker (the arbitrator) who decides issues as a judge would. But there is no jury, there is no mandate for impartiality, and generally only minimal discovery is permitted. In addition, there are no safeguards to prevent an arbitrator from being biased in favor of or against one of the parties.What is a Mandatory Arbitration Agreement and Should You Sign It?

Mandatory employment arbitration is very different from the labor arbitration system used to resolve disputes between unions and management in unionized workplaces. Labor arbitration is a bilateral system jointly run by unions and management, while mandatory employment arbitration procedures are unilaterally developed and forced on employees by employers. Employers have a substantial advantage in mandatory arbitration because the process is confidential and discovery is very limited. It has been proven that, compared to a jury of peers, arbitrators–primarily white men from privileged backgrounds–award significantly less in damages to wronged employees.

According to the Economic Policy Institute, a nonprofit partisan think tank created to include the needs of low-and middle-income workers in economic policy discussions, 60.1 million American workers no longer have access to the courts to protect their legal employment rights and instead must go to arbitration. Most employees recognize that declining to sign the agreement could put one’s new job in jeopardy. This is more often the case for low wage earners, who feel that they do not have the power to negotiate with their new employers. Some arbitration agreements permit employees to opt-out of the arbitration agreement, however, this often requires additional steps that are outlined in the agreement and must be followed carefully. If opting out and not signing the arbitration agreement are not available options, consider negotiating the terms of the arbitration agreement. Negotiating the arbitration agreement terms is similar to negotiating one’s benefits or salary.

The following terms should be considered:

1/. The cost of arbitration should be shouldered by the employer, after all they are the one calling for arbitration.
2/. Choice of arbitration services. Often an arbitration agreement will require that the parties use a specific company to arbitrate their dispute. AAA, JAMS and Judicate West are companies that provide such services. Research demonstrates that on average, AAA arbitrators award the lowest awards, while Judicate West award higher awards. Consider negotiating what company you’re agreeing to use in an event of a dispute.
3/. Damages. Make sure the agreement does not prohibit one from seeking punitive damages or damages for emotional distress, and allows you to recover your attorney fees and costs.
4/. Attorney representation. You should have the right to be represented by an attorney throughout the arbitration proceeding.
5/. Venue. Make sure the arbitration proceeding takes place in your state and close to your workplace and/or home.
6. Evidence. Review what discovery you will be permitted to conduct should a dispute arise. Many agreements attempt to limit discovery to only 3 depositions, and a handful of discovery requests and/or interrogatories. Under the Federal Rules of Civil Procedure (FRCP), each party is entitled to 10 depositions, while under the California Rules of Civil Procedure (CCP), there are no limits on depositions. Push to have the number of depositions and discovery increased so they parallel either the FRCP or the CCP.

If you have any questions about your arbitration agreement, contact us at 415-453-4740. We have had success in fighting arbitration agreements and even have a published California case where a client of ours who was sexually harassed was not forced to arbitrate her case because of deficiencies in the agreement.

A Leading Discrimination and Workplace Law Firm in the Bay Area

The California Civil Rights Law Group specializes in representing employees experiencing sexual harassment, race harassment, disability discrimination, LGTBQ discrimination, pregnancy discrimination, whistleblower retaliation and/or wrongful termination. We have experience representing individuals against large corporations in jury trials and arbitrations. If you have experienced inequality in the workplace, reach out for an attorney consultation in either our Oakland/East Bay or San Anselmo/Marin County office.

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