In our last post, we discussed the importance of reading employment agreements carefully before signing them. In that post, we explained that signing these documents without proper review and understanding could jeopardize a person's legal options in the wake of a dispute.
Unfortunately, the situation we examined in that post is hardly an isolated one. In fact, there appears to be a growing trend toward having employees sign agreements that will limit their legal options in the event of a dispute with an arbitration clause. According to this New York Times article, the move is no longer just the preference of larger corporations; smaller start-ups are increasingly using arbitration clauses as well.
For an employer, arbitration can be a great dispute resolution tactic. It prevents class-action lawsuits and typically requires that all sides keep the outcome confidential.
From an employee's perspective, however, arbitration may not be so beneficial -- or expected. This can be especially true for people who work for smaller, more nimble and creative companies and expect to be treated differently than they would be treated at a huge corporation. It prohibits the sharing of experiences and can leave them without any option to appeal.
Arbitration can essentially put the ball in the employer's court, protecting them from the potentially huge payouts awarded in court and shielding cases in secrecy.
Meanwhile, employees expecting to hold an employer accountable for actions like wrongful termination or discrimination through litigation are often disappointed to learn that their case won't be resolved in court when parties have agreed to arbitration. It will be resolved privately, by a party who may not have a strong legal background; in cases when the ruling is binding, the decision by the arbitrator is final.
Because of this, it is essential that employees and prospective employees carefully read employment agreements and be sure they identify and understand any arbitration clause that may be included. Legal representation in any matter involving employee rights and arbitration can be crucial, whether you are considering arbitration, looking to avoid it, have questions about the process or are about to go through it.