Devil’s in the Details: Mandatory Arbitration & Your Employment Documents

Mandatory arbitration provisions in employment documents that employees must sign if they want to begin work represent the hallmark of unequal bargaining power, with employers demanding, in effect, that employees abandon legal protections as a pre-condition to collecting a paycheck.

These clauses are sometimes hidden within the piles of paperwork that employees sign when they start a new job. But the devil is always in the details. These little clauses can eviscerate your right to sue in court, much less bring a class or collective action that could address the injuries of all employees suffering from similar employment practices.

Demanding arbitration as the means for resolving disputes has been long understood to benefit the employer at the expense of the employee. Arbitration is a private forum, there is no judge or jury. The arbitrator is paid by the parties. This makes it much different from a court of law, where the halls of justice are open to all regardless of their financial ability.

It also makes arbitration a forum where arbitrators become de facto salesmen, pitching their arbitration skills to companies that provide them repeat business. The entire scenario is rigged against justice.

Labor Just Stepped in to Protect the Rights of ALL Workers from Mandatory Arbitration!

Thanks to the vigilance and persistence of the National Labor Relations Board (“NLRB”), these forced arbitration provisions may be a relic of the past. In several decisions, the NLRB has found that these arbitration agreements unlawfully infringe the rights of employees to engage in “concerted activity.”

In the decisions invalidating mandatory arbitration provisions in employment contracts, the NLRB reasoned that collectively adjudicating employment claims is a powerful and effective means of ensuring the employment protections written into the law are being followed. After all, what good are employment laws if the mechanisms to enforce them are eroded through little hidden clauses in employee on-boarding documents?

The decisions of the NLRB have the power to change legal doctrine to the benefit of employee protection.  This impact is perfectly demonstrated in the recent Ernst & Young decision, wherein the U.S. Ninth Circuit panel vacated the trial court’s order compelling individual arbitration in an employees’ class action. The employees had alleged that Ernst & Young misclassified them to deny overtime wages in violation of the Fair Labor Standards Act and California labor laws.  Ernst & Young had demanded mandatory arbitration in its employment documents. As a condition of employment, the employees were required to sign agreements that contained a “concerted action waiver” requiring the employees to pursue legal claims against Ernst & Young exclusively through arbitration, and arbitrate only as individuals and in “separate proceedings.” That practice turned out to be unlawful.

The Ninth Circuit held that an employer violates § 7 and § 8 of the National Labor Relations Act by requiring employees to sign an agreement precluding them from bringing, in any forum, a concerted legal claim regarding wages, hours, and terms of conditions of employment. The panel held that Ernst & Young interfered with the employees’ right to engage in concerted activity under the National Labor Relations Act by requiring the employees to resolve all of their legal claims in “separate proceedings.” The panel concluded that the “separate proceedings” terms in the Ernst & Young contracts could not be enforced.  Moreover, the panel held that the Federal Arbitration Act did not dictate a contrary result.

The NLRB has been a powerful force in ensuring employee protections are not eroded at the expense of corporate profits. The United States Ninth Circuit has followed the reasoning of the NLRB and now, every employee in California is better protected.

Read the papers your employer gives you carefully, if you have any questions, contact an experienced labor and employment lawyer at Vision Legal, Inc., who understands arbitration and knows how to fight mandatory arbitration agreements.