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Employment Arbitration Agreements

It has become a common practice for employers to include an employment arbitration agreement in most employment contracts these days, but many employees are unsure about what they are signing. This article evaluates arbitration agreements, including whether you should sign a contract with an arbitration agreement and what to do if you need to sue your employer.

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Can I Sue My Employer If I Signed an Arbitration Agreement?

No, you can't sue your employer in court if you signed an arbitration agreement.

If your employment contract includes an employment arbitration clause, then it means you agreed not to pursue any legal action against your employer in court. Instead, any disputes that you have with your employer must be settled through a process known as arbitration.

Arbitration is one of the alternative dispute resolution techniques that serve as an alternative to filing a lawsuit. It often has many different implications than a full-blown case before a judge or jury.

Downsides of Arbitration

Some of the downsides of arbitration include the following:

  • Unlike a trial, where you may be able to opt to have your legal claim heard by a jury of your peers, your dispute will be heard and concluded with a neutral third party called the arbitrator. The arbitrator's decision is, in general, fair and will follow the law. However, sometimes employees prefer to have their cases heard by juries because juries are often more sympathetic to employees.
  • Parties going through arbitration, in general, get to request less evidence and documents from the other side than if the dispute had gone through a trial. In most situations, this will hurt the employee because it is the employer that will have access to more of the evidence and documents needed during the dispute.
  • Arbitration decisions cannot, in general, be appealed. This finality is very unlike court decisions that are routinely appealed to higher courts to take a second look at a case. Employees who do not like the results of arbitration, or think they are unfair, generally cannot get a higher authority to take a look.

Upsides of Arbitration

Despite the disadvantages of arbitration, there are some upsides to the process. These include:

  • Arbitration is generally much less formal than a court trial, which could save you money in attorney's fees and in terms of preparing and filing documents.
  • Because of the informality, you may not even need to hire an employment attorney for the arbitration process (though in many cases it is a good idea).
  • Arbitration generally proceeds and finishes much more quickly and efficiently than court trials do. Where arbitration may take a few weeks or months, a court trial can realistically last more than a year.

Be Careful What You Sign

As mentioned, it has almost become common practice for some employers to include employment arbitration agreements inside of standard employment forms and documents. As an employee, you may not know that you have signed away your rights to sue because the employment arbitration agreement is usually included as a clause within an employment contract, or in an employee handbook.

So, read everything before you sign it. Make sure to read through:

  • All the clauses in an employment contract
  • Your employee handbook, particularly if you are asked to sign a paper that says you have read and understood everything contained in the employee handbook

Ask your new employer if any of the documents you are signing contain an employment arbitration agreement.

Be Careful About Not Signing

The next thing that you must consider is whether or not you would actually not sign your rights away. Keep in mind that your employer may rescind your job offer if you refuse to sign the arbitration agreement. In addition, at-will employees can potentially be fired for refusing to sign.

But you should always think about your bargaining power. If a certain employer has been courting you for months, they might be willing to give up the arbitration agreement in order to get you on board.

Your last option is to sign the agreement, but with certain modifications. This is discussed below.

Fair Arbitration Agreements

Even though your employer may not be willing to get rid of the arbitration clause altogether, you may be able to negotiate to make it fairer to you. After all, you are just looking out for your interests.

If you feel concerned about an overly-broad or restrictive arbitration agreement, you may want to talk with an attorney before attempting to negotiate. Lawyers are often good at finding things that should be changed within arbitration agreements.

In general, these are some points that you may want to attempt to negotiate in your arbitration agreement:

  1. The arbitrator: In determining which arbitrator to use in the arbitration process, be sure that you have just as much control as your employer will. To this end, be sure that both you and your employer get to throw out at least one arbitrator, without having to provide any reasons. Remember that the decision of the arbitrator will most likely be final, so it is important for you to have a say in who makes this decision.
  2. Disclosure of information by the arbitrator: Be sure to include a term in the agreement that allows you or your employer to request that the arbitrator disclose all information that could relate to some interest he or she may have in the dispute. For example, if the arbitrator is a shareholder of your employer's business, then he or she may be biased in favor of your employer. You and your employer should have the right to reject an arbitrator that has a conflict of interest.
  3. Costs: Because your employer wants the arbitration, be sure that your employer is the one that is going to pay the costs of the arbitration.
  4. Do not give up any of your remedies: Again, because your employer wants all disputes to be settled in arbitration, be sure that you are not limited to awards and remedies that are normal to arbitration. Be sure that you can still seek damages for emotional distress and punitive damages.
  5. Do not give up your right to an attorney: If this was a court case, you would have been able to retain an attorney to represent you. Be sure that you can still have an attorney represent you in arbitration.

Discrimination and Other Agency Remedies

Because the arbitration agreement you sign only applies to you and your employer, you may still be able to take your employer to court for certain reasons. For example, if you feel that your employer discriminated against you, you are free to go to the Equal Employment Opportunity Commission (EEOC) and make a complaint. The EEOC can sue your employer on your behalf because the arbitration agreement only applies to you, not to federal or state agencies.

Next Steps: Get a Lawyer to Help

While the concept of arbitration sounds slightly confusing, it doesn't need to be. You can learn with the click of a button. An experienced employment lawyer can answer your questions, advise you about the law in your state, and see how it applies to your situation.

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