What You Need to Know About Arbitration Agreements at Work

You apply for a new job, get the offer, and then come the forms. Somewhere in that stack is an arbitration agreement. It probably looks like just another HR document. And like most people, you might sign it without a second thought. But that short paragraph could seriously affect your legal rights. In California, arbitration agreements are binding contracts, and employees often agree to them without understanding what they’re giving up.

What Is an Arbitration Agreement?

Arbitration is a private process where a third party neutral, usually a retired judge or attorney with prior experience in a particular area of the law, decides a dispute instead of a court. The process is supposed to be faster and more expedient. But when it comes to employment issues, arbitration often favors employers.

Many employers present arbitration agreements as “take it or leave it.” This is called a contract of adhesion. If you want the job, you’re expected to sign. Most people sign without thinking, unaware of the consequences of giving up their Constitutional right to a trial by jury. Unless you’re represented by an attorney at the time, you’re likely not on equal footing. You can ask to review the contract with an attorney, but employers are betting that most people will not.

In some cases, arbitration agreements include an opt-out clause. That means you can reject arbitration if you act within a specific time frame, sometimes within 30 days but sometimes only at the point of signing the agreement. If you see that option, take it. It’s one of the few chances you’ll get to avoid forced arbitration while keeping your job offer.

Why Arbitration Can Hurt Employees

Arbitration might sound fair in theory. But in practice, employees face several disadvantages.

For one, discovery is limited. That means you may not get access to all the documents or witnesses that could support your case. You don’t have the right to a jury, and there’s almost no way to appeal a decision that is not in your favor.

Statistically, employees do not fare well in arbitration. Studies show that workers win less frequently in arbitration than in court, and when they do win, they usually receive lower financial awards compared to verdicts after jury trials – sometimes significantly lower. This is why employers fight so hard to get cases out of court and into litigation; they look at arbitration as a hedge against “runaway” jury verdicts.

Even the purported advantage of a quicker timeline doesn’t always hold true. Arbitration is sold as being speedier and more efficient than court. But in reality, your case may not be heard any sooner than it would in court. And while it’s true that some smaller issues like discovery disputes can be resolved faster in arbitration, and there are fewer attempts to get the case kicked by motion (as opposed to a trial, known as an evidentiary hearing in arbitration), the overall process can still drag on for well over a year, and often times much more.

Know Your Rights and Take Action

Employees rarely get to negotiate arbitration agreements. Most don’t even realize they have signed one until a dispute arises, after their employment has ended. That’s why it’s important to read the fine print before you sign. If there’s an opt-out clause, take advantage of it immediately.

Keep in mind, though, even if you have already signed an arbitration agreement, that still might not be the end of the story. Courts frequently find these agreements are unenforceable for multiple reasons, if, for example, they are substantively overly harsh or one-sided or if the employer failed to follow proper procedures in presenting the arbitration agreement (for example, if the arbitration is not in a language that the employee can read or understand). A lawyer can help you review whether your agreement is valid and enforceable.

And if you’re already in arbitration, don’t face it alone. The employer will have an attorney. You should, too. An experienced employment attorney can help level the playing field and make sure your case is presented clearly and thoroughly. Arbitration is different from court, but that doesn’t mean you have to walk in unprepared.

If you’re dealing with a workplace issue and wondering whether arbitration is the right path, or whether you’re even bound by an agreement, talk to someone who knows the process. Sansanowicz Law Group, P.C. can help you understand your rights and what steps make sense. Contact us to get started.

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Leonard Sansanowicz

Leonard H. Sansanowicz is the principal attorney of Sansanowicz Law Group, P.C., whose practice is devoted to protecting the rights of California employees. He has spent his entire career prosecuting harassment, discrimination, defamation, whistleblower retaliation, wrongful termination, and wage and hour/wage theft claims, both individual and representative actions. His most rewarding and fulfilling work is obtaining justice for his clients.