For almost 20 years, forced arbitration agreements have been buried in legal verbiage in employment agreements requiring employees to submit to binding arbitration for disputes and taking away their rights to go to court. Despite many court cases upholding arbitration agreements, there are still many ways to contest these clauses in employment contracts.
Congress enacted the Federal Arbitration Act almost a century ago to protect private dispute resolution of certain disputes that the parties would normally litigate in the courts. Business organizations began the widespread incorporation of these clauses in employment contracts, consumer agreements and purchase agreements and other business transactions in 1999. Employees and consumers agreed to resolve disputes in confidential arbitration and waived rights to jury trials, appeals and participation in class action lawsuits.
Federal courts have recently upheld many of these agreements such as a Supreme Court case upholding the waiver of filing class action lawsuits. However, there may be grounds to contest their enforcement.
First, an arbitration agreement will not govern any matter outside their scope. For example, one federal court ruled that a person’s wage and hour dispute was not covered by an arbitration agreement contained in a landlord-tenant lease.
A federal court also struck down an agreement that was unfair or oppressive. In that case, employment was contingent upon an agreement that made an employee who earned $15.00 per hour pay up to $10,000 in fees at the beginning of arbitration.
Citing duress is another method. A federal court invalidated an agreement where an adult entertainment club made its workers sign it when a minimum wage and overtime lawsuit was pending against the club and the workers’ ability to perform depended on agreeing to arbitration.
Other methods include making employers strictly adhere to terms on these agreements. In one case, employers are seeking to hold Uber financially responsible for 12,500 individual claims in the amount of $19 million because the U.S. Supreme Court upheld the waiver of class action participation in arbitration agreements.
Social movement campaigns have also forced companies to limit the use of these agreements. Google, Facebook, Microsoft, Uber Lyft, Airbnb and eBay dropped resolution of sexual harassment claims through arbitration following the #MeToo movement.
Employees should review employment contracts with an attorney. A lawyer can present options and pursue ways to invalidate arbitration terms.