Forced arbitration agreements are becoming the norm and employees should understand what they’re signing before they waive their rights.
Before you sign your rights away when accepting a job offer, it’s important to remember that many large companies require their employees to sign forced arbitration agreements. This means that the company can use an arbitrator that will protect its interest and ensure a complaint is addressed out of court. Workers’ rights advocates continue to argue that these policies help businesses avoid publicity and escape liability. They also contend that cases of illegal discrimination, wage theft, and sexual harassment are commonly swept under the rug when such agreements are in place.
More than 60 million workers, or 55% of the workforce, have waived their right to sue their employer in public court if they get terminated or face on-the-job harassment because they signed a forced arbitration agreement, according to the Economic Policy Institute. By 2024, the institute predicts that more than four in every five workers will do just this.
Forced arbitration means employees are required to bring any complaints before a third-party who is supposed to remain objective but who often works with employers. The arbitrator is paid based on the time they are required to spend on a case unlike a judge in the courtroom. Also, unlike in court, they do not have to offer extensive support for why they arrived at a decision and once a matter is decided it’s next to impossible to appeal. Employees are less likely to win in arbitration, overall, than in either state or federal court.
What’s more, signing this type of agreement is often a condition of securing employment, so if a potential new hire doesn’t agree with handling matters as outlined, they don’t get the job. This tends to disproportionately impact low-wage workers who are unable to afford an attorney to advocate on their behalf. Many forced arbitration agreements also prevent plaintiffs from joining a class action.
Some businesses enable employees to opt out of arbitration, but often the wording is so obscure they miss this clause. The well-known financial institution, JPMorgan Chase, recently sent an email to its credit card holders with the subject line “Important information regarding changes to your Chase account.” The communication sought to make it nearly impossible for card holders to file a lawsuit against the bank if it violates the law. Though the email gives those customers the ability to opt out, it was very difficult to decipher this is an option amid all of the terms embedded. This is a common practice for those who seek to make it appear as if an employee has every opportunity to disagree.
It’s also common to sign documents without fully understanding the implications of doing so. New hires are often required to also sign confidentiality and/or nondisclosure agreements in the same packet, so if they have to arbitrate at some point and actually win, speaking out could mean they lose their settlement funds. Having to maintain secrecy means the company is more likely to continue engaging in unacceptable practices without worrying about marring its reputation.
The only way to bypass arbitration, in most cases, is to refuse to sign altogether and potentially forgo a position, or to dissect the conditions of employment to find a loophole while still moving forward. Knowledge is power, and employees must understand what they’re getting themselves into before it’s too late.