New Bill Seeks to End Mandatory Arbitration Contracts

Vox reported in Mid-November 2018, that the federal House of Representatives is considering a new law which will ban businesses from forcing workers to sign mandatory arbitration clauses before they could be hired. New York Representative Jerrold Nadler and other House Democrats introduced a bill called the Restoring Justice for Workers Act. The bill would ban companies from forcing employees to give up their rights to sue in court before juries in favor of forced arbitrations.

Due to recent Supreme Court decisions and federal arbitration laws, many companies require that workers sign agreements that any employment disputes they have been heard by a panel of arbitrators. This means claims for sexual harassment, discrimination, wrongful termination, wage loss, and other employee rights are heard by arbitrators instead of a judge and jury.

The arbitration process generally favors the employers – that’s why they want these mandatory contracts. The arbitration process favors employers because:

  • Juries tend to be more sympathetic to employees
  • Juries tend to award more money for employer wrongs than arbitrators
  • Jury decisions can be appealed. Arbitration decisions are usually final
  • The ability to obtain crucial evidence is more limited in arbitration cases – in part because there isn’t a judge to oversee what documents the employer needs to disclose. In many employee rights cases such as discrimination cases, it is essential that the employee show how the employer has been treating other employees.

Employers are using these arbitration clauses for other reasons too. For example, employers are restricting the ability to file class action cases before juries.  A recent Supreme Court case even made it harder to file a class action case before an arbitration panel.

The new bill would prevent employers from requiring that workers give up their right to file claims before judicial courts and requiring that employees waive their class-action lawsuit rights.

Employees have little bargaining power unless the employer really desires the employee. Experienced professionals and managers may have some bargaining power. The average new worker has virtually no ability to bargain. They either sign the mandatory arbitration contract or they don’t get the job.

A similar version of the House bill was introduced in the Senate. It is currently unlikely that the bills will pass given the current state of politics in Washington DC. Many non-union workers are subject to the agreements including workers for Walmart, Starbucks, Uber, Macy’s, and McDonald’s. Mandatory arbitration between businesses may be fair but, they generally favor businesses when individual employees want to assert their employee rights.

Vox reported that a few companies such as Google and Facebook have agreed to drop the forced arbitration requirement for sexual harassment claims.

California tries to level the playing field

The state of California has tried to level the playing field through its decision in the Amendariz case. The California Supreme Court held that arbitration contracts of employee rights (that normally can’t be waived – such as rights set forth in statutes) cannot be unconscionable. The contracts must also protect employees in the following ways:

  • The contract cannot limit any statutory remedies the employee would otherwise have
  • There can’t be restrictions on discovery including the ability to depose witnesses and obtain documents
  • The arbitrator(s) must explain their ruling including presenting their findings and conclusion
  • Employees cannot be required to pay the cost of arbitration – win or lose. If the employer wants the arbitration process, it must pay for it.

The California employment lawyers at Stephen Danz & Associates have been fighting for employees and workers for more than 40 years. We are ready to try cases before juries, state and federal agencies, and arbitrators. We understand the federal and state rules of arbitration. For help with your employee rights case, call us at (877)789-9707 to schedule an appointment. Se Habla Espanol.