Am I Stuck With An Arbitration Agreement?

Many employees don’t even realize they signed an arbitration agreement at the beginning of their employment and are surprised when the employer attempts to use it to block a lawsuit from moving forward. Our employment discrimination lawyers recently blogged about why we hate arbitration agreements. (See Arbitration Agreements Are Bad For Employees). So, what do you do if you were recently wrongfully fired because of your race/color or gender, or in retaliation for reporting you boss’s ongoing sexual harassment of you; and after you sue your employer, it whips out some arbitration agreement that you don’t even recall signing? Well, that’s when having the best employment discrimination law firm is critical.

There are many ways to fight an arbitration agreement – and some that might actually work. Let’s look at them.

Most likely to have a chance of winning:

1. Agreement Is Contrary To Law: There are certain state or federal laws that prevent arbitrating certain claims. For instance, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act is a federal law that prevents the arbitration of any claims relating to sexual harassment or sexual assault in the workplace. If an employee has a sexual harassment claim and say a race discrimination claim, there is a good argument that the race discrimination claim relates to the sexual harassment claim and is thus, also exempted from arbitration.
2. Lack Of Mutual Assent: Mutual assent or agreement is needed to form a contract. This is best accomplished by showing that the employee never actually signed the agreement. This happens when there are no signed documents that can be produced or where employees deny the signature is really theirs (forgery). When the purported agreement was allegedly signed electronically, this can be challenged by employees denying that they clicked the button to sign or pointing to a manager or HR representative that clicked through all the documents while the employees watched. Questions of fact regarding formation will need to be resolved by a jury, if a jury demand is made. This puts a lot of pressure on the employer and will likely result in the case being settled before the trial.
3. Signature But No Agreement: On occasion, employers have employees sign an acknowledgement that they have received or read the arbitration policy. Such an acknowledgement is not an agreement; it is not assent; and therefore, there is an argument that no contract has been formed.
4. Does Not Cover The Parties: All agreements need to address the parties that are bound by its terms. On occasion the agreement will not cover the parties to the litigation. For example, the agreement may not cover individual managers but only the business entity; it may cover only one business entity, such as a parent company, but not the subsidiary or other related entity. A staffing agency’s arbitration agreement may not cover the employer where the employees are assigned. It is important to recognize that should there be any confusion or ambiguity regarding the parties or the terms, that ambiguity must be interpreted against the drafter of the agreement, which is always the employer.
5. Claim Does Not Fall Within The Scope: Again, the terms of the agreement are key. Some agreements will limit the scope of arbitration to certain disputes or exempts certain claims from the agreement to arbitrate. For example, these agreements will typically exclude Worker’s Compensation claims from being arbitrable, but some agreements will get sloppy and exclude any claims “relating to” Worker’s Compensation claims, which would arguably put workers’ compensation retaliation and disability discrimination (or failure to accommodate) claims arising from the workplace injury outside the scope of any agreement to arbitrate.
6. Employer Breach: Standard contract law (which is based on state law) typically provides that a party in material breach cannot enforce the contract. Therefore, it is important to consider the employer’s obligations under the contract and make sure that it has fulfilled its obligations. For example, if the agreement requires the employer to timely provide the employee with a copy of the agreement, the failure to do so may put the employer in breach and prevent it from enforcing the agreement. Sometimes, the employer’s agreement will present a dispute resolution program which requires the employer to provide certain notices or mediate “any dispute.” Again, if the employer fails its obligations, it may not be able to enforce the arbitration agreement.

Not likely to work, but you can try:

1. Unconscionability: An employee can challenge the agreement on the grounds of unconscionability, arguing that the terms are so one-sided, unfair, or oppressive that they should not be enforced. Courts very rarely find an arbitration agreement unconscionable if it heavily favors the employer and is procedurally and substantively unfair. The best unconscionability argument is where the cost of arbitration to the employee is close to or greater than the value of the underlying claim.
2. Duress or Undue Influence: An employee can claim duress or undue influence when agreeing to the arbitration terms. This could involve demonstrating that the employee was pressured into signing the agreement under circumstances that compromised your ability to make a free and voluntary decision. The threat of not getting the job or being fired if the employee declines to sign will not be considered duress nor undue influence as a matter of law.
3. Incapacity: An employee can assert the lack of the mental capacity to understand the implications of the arbitration agreement when signing it. This could be relevant if there were issues such as mental incapacity, intoxication, or other conditions affecting your ability to comprehend the agreement. Of course, claiming that you showed up drunk or on drugs to the first day of work to sign employment documents will not end up helping your case.
4. Procedural Unfairness: An employee can challenge the arbitration process itself, arguing that the procedures outlined in the agreement are unfair. This could include issues such as biased selection of arbitrators, limitations on discovery, or restrictions on the presentation of evidence. In the very rare circumstance where the employer designates the boss, company lawyer, or the owner’s mother to be the arbitrator, this would likely work.

There is no promise or guarantee that any of these arguments will work. Even when certain arguments should work, some courts will move the case to arbitration because it lightens the court’s docket or under the belief that arbitration is favored as a matter of law.

In order to have the best success when confronted with an arbitration agreement, it would be best for the employee to call Spitz, The Employee’s Law Firm to schedule a free and confidential consultation. (Read: What is the Spitz No Fee Guarantee?). We have highly rated employment discrimination lawyers in Ohio, Michigan, North Carolina, and Kentucky standing by and ready to help you.

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