Mandatory Arbitration in Employment Contracts

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Arbitration in Employment Contracts

Forced Arbitration in Law Firms

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.