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What is an Arbitration Clause?

In May of 2018, the United States Supreme Court issued its opinion in Epic Systems v. Lewis, holding that an employer may lawfully require its employees to agree, as a condition of employment, to resolve all workplace disputes on an individual basis in arbitration. In a significant win for employers, the Court’s decision paves the way for the majority of workers in the United States to be forced to sign away their right to pursue workplace disputes on a collective or class basis. Available data suggests that, unless Congress acts, more than 80 percent of workplaces will subject their workers to mandatory arbitration with class and collective action waivers within six years.

Mandatory arbitration clauses require workers to relinquish their right to take their employer to court for all types of employment-related claims, forcing workers into a private process that overwhelmingly favors employers. Arbitration clauses are often included in the company orientation and personnel materials a worker receives when beginning a new job. Because these arbitration clauses are usually buried in a sea of boilerplate language, many people who are subject to them do not realize that they exist or understand their impact. If the worker refuses to sign an arbitration agreement, they are often refused employment.

Juries are considered more sympathetic to workers’ claims, and more willing to award larger sums in damages to workers in these cases. The threat of a high jury award also gives workers leverage in negotiating larger settlements because employers want to avoid trial. Employer therefore have a large incentive from preventing work-related legal disputes from reaching court. Decisions reached in arbitration often have fewer options for appeal.

Workers depend on collective and class actions to enforce many workplace rights. Employment class actions have helped to combat race and sex discrimination and are fundamental to the enforcement of wage and hour standards. Without the ability to aggregate claims, it is very difficult for workers to find legal representation in these matters. This is particularly true for low-wage workers, whose cases are unlikely to involve large enough awards to attract attorneys to invest time in the case. Class and collective action suits allow workers to pool their claims, making the case worth pursuing.

Pending legislation in the Untied States Congress, however, aims to reverse the broad interpretation courts have taken in recent years of the applicability of mandatory arbitration agreements. Lawmakers in the House of Representatives voted in September to pass the Fair Arbitration Injustice Repeal (FAIR) Act, a sweeping bill that bans employers from requiring workers to resolve legal disputes in private arbitration.

Arbitration clauses make pursuing a case against your employer significantly more difficult, but not impossible. If you think you are being paid below the state or federal minimum wage contact us today. Forester Haynie has won millions of dollars in lost wages for pizza delivery drivers.

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