You may or may not be forced to arbitrate a dispute with an employer, depending on the circumstances. Normally, if a clause requiring arbitration is fair and has been negotiated between the parties, then it will be upheld. If it has been forced upon you as an employee and you were forced to agree to it as a precondition of accepting or keeping your job, it will likely not be upheld.
There are a couple of situations where arbitration clauses arise. The first is in employment applications or handbooks. It is becoming more and more common for employers to insert language about arbitration into an employee handbook or an employment application. The language frequently says that if an employee has an employment dispute, he or she has to go to arbitration, waives the right to a jury trial, must pay for a portion of the costs of arbitration, and may only be awarded limited damages. These clauses often typically say that the employee can be sued for violating any of the employer’s rights, and that those types of disputes do not have to be arbitrated.
Obviously, a clause requiring arbitration of any of the employee’s disputes but allows litigation for an employer’s dispute is unfair. Employers like arbitration instead of a lawsuit, because arbitration is private and they don’t face negative publicity. Also, typically arbitrations result in lower damages than jury trials.
If you were presented with an arbitration clause that was vastly preferential to your employer and were forced to sign it as a precondition of employment, there’s a good chance it will not be upheld in court. In order for a written agreement, including the employment agreement containing the arbitration clause, to be upheld, it must meet several tests, including a fairness test. If the contract is between two parties of unequal bargaining power, and one party (in your case, you, the employee) is given the contract and told to sign it or you will not be hired, that could be considered an oppressive or unconscionable contract. It will most likely not be upheld.
However, if you are negotiating an employment contract and you have the power to negotiate each provision with your employer, and the contract requires arbitration, that provision may be upheld. In general, contracts that have been fairly negotiated between the parties, with each party getting the chance to approve or strike through provisions, will be upheld.
In particular, courts have ruled that employment claims can be forced to arbitration if there is an enforceable arbitration clause in effect. In order to be enforceable, an arbitration clause must clearly show that the employee is waiving his or her right to a jury trial. The clause must be mutual – it can’t require that the employee go to arbitration while allowing the employer to sue. The arbitration clause cannot place financial burdens on the employee that would not be faced in a court case. The arbitration clause cannot limit the employee’s right to obtain evidence, such as documentation or testimony from witnesses. Finally, the arbitration clause must give the employee the same type of relief that would be available in court.
Whether or not a mandatory arbitration clause would be upheld in an employment agreement is very fact dependent, and should be reviewed by an attorney who is knowledgeable in employment law. Call Micha Star Liberty, Oakland employment law attorney, at 510-645-1000 or 415-896-1000. She works with both employees and employers on employment law issues, and will be happy to provide you with a free consultation on your case. Call today to learn more or to schedule your free consultation.