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Forced Arbitration in Law Firms

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For decades, most big law firms have required new attorneys and other employees who become part of the firm to sign a mandatory arbitration agreement as a condition of employment. By signing a mandatory arbitration clause when someone is hired, the employee forfeits their right to settle any disputes with their employer in court. Instead, the dispute is handled through binding arbitration, overseen by a (supposedly) neutral, third-party arbitrator.

Last summer, this all started to change because of one tweet. It began when parts of a mandatory arbitration agreement from BigLaw firm Munger, Tolles & Olson, LLP were leaked. The leaked portions of the agreement were tweeted by a Harvard Law lecturer, and they were subsequently retweeted hundreds of times. Several media outlets also picked up and reported on the leaked documents.

The documents showed how the firm’s forced arbitration clause protected them from lawsuits over issues such as sexual harassment and racial discrimination. This created an immediate and overwhelming backlash against the firm and their mandatory arbitration policy. Within a day, Munger caved and announced that they would end the policy. Soon after, the cause was picked up by the Pipeline Parody Project, a group of Harvard students whose mission is to put an end to harassment and discrimination in the legal field. Since the PPP got involved, several other BigLaw firms have announced that they will end forced arbitration policies.

Forced Arbitration vs. Litigation in Employment Contracts

Law firms are not alone in their widespread use of mandatory arbitration clauses in their employment contracts. It is estimated that more than 60 million American workers across a wide range of industries work under a similar type of agreement, and many do not even realize it. These clauses are seen as advantageous for employers for a number of reasons:

  • No Right to a Jury: The Civil Rights Act of 1991 gives employees the right to have discrimination claims heard by a jury of their peers. Arbitration does not provide employees with this opportunity. With arbitration, the dispute is heard by an arbitrator who is supposed to be neutral. Unfortunately, this is not always the case. For example, some arbitrators regularly handle employment disputes for the same organizations. When this is the case, it is very reasonable to question exactly how neutral they really are.
  • Discovery is Limited: During a court trial, both sides exchange information, evidence, and lists of witnesses in what is known as the “discovery” phase. Parties who are going through arbitration are generally limited in their ability to request information from the other side. This makes it more difficult for an employee who has been harassed or discriminated against to prove their case.
  • No Right to an Appeal: With arbitration, the arbitrator acts as the judge and jury. In general, their decisions are final and cannot be appealed. So, if you are unhappy with the decision of an arbitrator, there is no available legal mechanism to have your case reviewed by a higher authority.
  • Recoverable Damages are Limited: Even if an employee does win their arbitration proceeding, the forced arbitration contract they signed often limits the damages that they are able to recover.

Arbitration can be a viable form of alternative dispute resolution (ADR), and it certainly has its place. For example, parties to a dispute may voluntarily choose to try to resolve their dispute through arbitration. This allows them to settle their dispute in a less formal setting and save time and money vs. taking the dispute to court. But when an employee is forced to agree to mandatory arbitration to settle a dispute as a condition of employment, they have very little choice except to sign the agreement if they want the job.

In the wake of the #MeToo movement, law students across the country are starting to realize how unfair forced arbitration clauses are. And the backlash against BigLaw is likely only the beginning. Sooner or later, the rest of corporate America is going to have to confront this issue and make appropriate changes that protect their employees and ensure their right to a safe work environment.

Harassed or Discriminated against in the Workplace? Call Our Skilled Alabama Employment Law Attorney

If you have been subjected to harassment or discrimination at your place of employment, you have legal rights, even if you signed a forced arbitration agreement. Attorney Kira Fonteneau understands the frustration employees feel when their civil rights have been violated, and she has been an aggressive advocate for the working people of Alabama for the past 13 years. Kira can take a look at your case and advise you of your legal options, so you can make the most informed decision on how you wish to proceed. For a consultation with attorney Fonteneau, call our office today at 205-564-9000, or send us a message through our online contact form.

What are the Most Common Violations against Tip Earning Employees?

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Waiters, waitresses, bartenders, delivery drivers, and many others in the hospitality industry depend on tips for their living. In fact, many tipped employees earn more in tips than they do with their hourly wage. These workers are typically paid no more than minimum wage, and in many cases, establishments pay them below minimum wage.

Federal law and the laws of most states (including Alabama) allow employers to pay tip-earning employees less than the minimum wage, as long as these employees earn enough in tips to at least make up the difference, and as long as the employer is in compliance with the Federal Labor Standards Act (FLSA). When an employer counts an employee’s tips toward its obligation to pay minimum wage, this is known as a “tip credit.” In order to take a tip credit, an employee must earn at least $30 per month in tips.

Although employers are required to be in compliance with federal wage and hour laws, many of them engage in routine violations. According to a study by the Economic Policy Institute of the 10 most populous states, wage theft by employers is rampant, and it costs employees billions of dollars each year. Wage theft can come in many forms; such as overtime violations, forcing employees to work off the clock, denying workers meal breaks, taking illegal deductions from wages, misclassifying employees as independent contractors, and many others.

Among tipped employees, there are several ways employers frequently violate the law. Here are some of the most common legal violations against tip earning employees:

Illegal Tip Pooling

Tip pools are common in many establishments. This is when an employee contributes all or part of their tips to a pool that is then divided among a certain group of employees. Federal law allows employers to implement tip pooling whether they pay their employees a full minimum wage or not. However, there are some strict guidelines about who is allowed to participate in the pool. Employers, supervisors, and managers are not allowed to be part of a tip pool under any circumstances.

There is another important distinction between employees who have direct interaction with the customers, and those who work behind the scenes, such as bus boys, dishwashers, and cleaning staff. The FLSA was clarified in 2018 to say that only employers who pay full minimum wage and do not take a tip credit are allowed to establish a tip pool that includes “back house” staff. If you work for an establishment that does not pay a full minimum wage (in lieu of your tips), and they have a tip pool with employees that do not interact with the customers, your employer may be in violation of the FLSA.

Forced Payment for Uniforms

Another area in which employers sometimes engage in violations against tip-earning employees is with their uniform. An employer is not allowed to force an employee to pay for a mandatory uniform. In many establishments, this is pretty straightforward. If you are required to wear a specific uniform that displays the company’s logo, colors, etc., you should not be forced to pay for it. There are some gray areas, however, when it comes to requirements of certain styles of dress that may be required. For example, if the entire wait staff is required to wear a tuxedo with bow ties, and the shirt and ties must be a certain color, this could be considered a uniform.

Over-Deducting for Credit Card Processing Fees

Many employers deduct a percentage of tips an employee receives by credit card to cover the cost of the credit card processing fee. Generally, employers are allowed to do this in most states as long as the amount deducted does not put the employee below the minimum wage, and as long as the employer does not profit from this deduction. Employers who engage in this practice are on very dangerous legal ground, however. This is because of the complexity of credit card processing fees.

With many merchant processing services, an establishment pays the interchange fees for a credit card transaction. These fees may vary from as low as under 1% on most debit cards to as high as 4% for credit cards with rewards programs (such as cash back and airline miles). If, for example, an employer automatically deducted 4% of the tips an employee received through electronic (credit and debit card) transactions, they may very well be illegally profiting from the deduction.

Excessive Non-Tipped Work

Tip-earning employees frequently engage in work that does not earn them tips; such as cleaning tables, sweeping the floor, washing dishes, and many others. If an employee spends more than 20% of their work day performing non-tipped activity, an employer may not take a tip credit for that employee. In addition, employers must pay at least the minimum wage for any non-tip work a tip-earning employee performs.

Contact Alabama Employment Law Attorney Kira Fonteneau

If you are a tipped employee in Alabama and you believe your employer has engaged in wage theft against you, it is important for you to speak with an employment law, so you fully understand your legal rights and options. Attorney Kira Fonteneau has aggressively advocated for working people in Alabama for the past 13 years. Kira was recently named president of the Alabama ACLU, and she has helped numerous workers obtain justice during an employment dispute. For a consultation with attorney Fonteneau, call our office today at 205-564-9005. You may also send us a message through our web contact form.