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Dear <<First Name>>,
A tactic that is increasingly being used by employers to avoid court challenges to their bad practices is to insert a “mandatory arbitration” clause into their application form, or even a check box agreeing to arbitrate disputes in on line applications. These contract provisions typically require that any dispute with the employer cannot be filed in a court of law, but must instead be submitted to a third-party arbitrator who will decide the case. The arbitrator’s decision is final, and may not be appealed in most cases.
Most employment lawyers think that forced arbitration is a bad deal for workers, especially low wage workers who don’t have union representation. While arbitration can sometimes be helpful to quickly resolve disputes among parties with equal bargaining power, for clients of NWJP it has significant drawbacks. Usually, the parties split the costs of the arbitrator, and this can be quite expensive. On the other hand, using a judge in court is free. Worse, most arbitration clauses do not permit class or group actions; each dispute has to be handled in a separate proceeding, making the overall costs far greater. In theory the arbitrator’s fairness is supposed to be assured by the fact that the parties to the dispute jointly choose the arbitrator, but the way the system actually works has built-in biases against low wage workers. Large employers, as institutional users of the system, are likely to be frequently in the market to hire an arbitrator, but most non-union workers will only need an arbitrator once. An arbitrator who wants to be picked frequently will not want to make decisions that anger employer groups. Since there is no ability to appeal, there is no way to correct a decision that doesn’t comply with the law. Individual arbitration decisions aren’t really precedential in future cases, and other workers are much less likely to know about outcomes that are favorable to workers, and employers who lose arbitrations are under less pressure to correct their bad practices. Since a professional arbitrator decides the case, workers lose the right to present their claims to a jury of their peers.
However, arbitration is highly favored by the courts, and under the Federal Arbitration Act, courts will almost always enforce an arbitration agreement and dismiss a lawsuit that is filed in court if it is covered by an arbitration agreement. Usually, unless the arbitration agreement is not enforceable under state law on grounds that don’t discriminate against arbitration, the case will be stayed or dismissed in favor of arbitration.
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