Know Your Rights:  Arbitration and Dispute Resolution Agreements

Note: The information provided below is for educational/ informational purposes only and should not to be taken as legal advice. If you believe you have experienced employment violations contact an attorney.

Do you remember every form you signed when you were hired at your job? 

We’ve all been there: you’re handed a stack of paperwork to fill out before you can get started at your new job. You rush through your W-4, EDD, direct deposit information, and a few forms specific to the company.  A lot of us don’t feel like we have time to look over everything we sign. This post will highlight one of the big surprises often lurking in that paperwork: arbitration agreements.

“What’s an Arbitration Agreement?”

If you have a cell phone plan, a credit card, cable or Internet service, you’ve probably signed arbitration agreements with each of those companies when you first signed up. Arbitration agreements are also incredibly common in the modern workplace, but employees are frequently surprised to learn that they have signed one.

n arbitration agreement is a contract between you and your employer. The terms vary, but generally, it requires that any dispute arising from the job will be handled by binding arbitration, rather than in a court of law. Often, they also limit the types of claims you can bring—some arbitration agreements prohibit participation in class actions against the employer, for instance—as well the procedures that will be available to you.

Long story short:  Signing an arbitration agreement with your employer can limit your ability to bring a lawsuit against them in a court of law (more on that in a minute).

“Back up… What is arbitration?!”

If you’re asking yourself “what does arbitration even mean?” you aren’t alone.  When most of us think about lawsuits, we think of taking someone to court. We picture a judge, maybe a jury, and all the rules that come with it. But that’s not the only way people can resolve their legal disputes.

Parties can choose to handle their dispute outside of a courtroom by using what is generally called “informal dispute resolution.” Informal dispute resolution is an umbrella term that can refer to both arbitration and mediation.  

Both methods involve asking a neutral third party—an arbitrator or a mediator—to lead the process (although there are key differences in what authority each has).  Many mediators and arbitrators are retired judges or former lawyers.

There are pros and cons associated with each, but unfortunately, the cons of arbitration often weigh most heavily on the employee.

Mediation:       Often used alongside a legal proceeding in a courtroom, as a way of providing a more informal setting to get the parties to come together and negotiate towards settlement. The mediator is more like a referee than a judge; they don’t issue rulings, and their goal is to help the parties determine an outcome for themselves. Mediation may or may not be binding, depending on the circumstances/choice of the parties.

Arbitration:      Arbitration is an alternative to going to court. Instead of a judicial proceeding, both parties agree to give authority to an impartial third party—the arbitrator—to decide the outcome. An arbitrator a lot like a judge: they evaluate the evidence presented by both parties, consider the relevant laws, and issue a final, legally binding determination.

For example:

Maria sues Burger Co. for sexual harassment. In a courtroom proceeding, Maria has a right to have a jury of her peers decide whether she has provided enough evidence to establish that the harassment happened. The jury also decides how much money to award her in damages.

In arbitration, the arbitrator is judge and jury. They have broad discretion to decide how much money to award, if they find in Maria’s favor. Often, there is no way to “appeal” or ask for reconsideration of an arbitrator’s determination, and courts are only allowed to review an arbitrator’s final decision in limited circumstances.

“Help! I signed an arbitration agreement – do I still have a case?”

Arbitration agreements are often upheld by courts, and you should know that generally, in the eyes of the law, people are bound by the contracts they sign. You should always take the time to read what you are signing. If you don’t understand what you’re signing, ask for explanations, and see if you can take it home and review it with a friend, family member, or attorney. Also, be on the lookout for “surprise” terms that might be buried among a bunch of other terms. Your signature is powerful—use it carefully!

However, if you have already signed an arbitration agreement, all is not lost—there are several bases for challenging them. At Matern Law Group, PC we have extensive experience successfully invalidating arbitration agreements. Even if your case is ordered to arbitration, we have the experience to ensure your rights are protected during the process.