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Let’s start off with the undisputed truth: Arbitration is bad for employees.

In March 2022, in a bipartisan effort, Congress enacted, and President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act into law that precludes employers from requiring employees to arbitrate disputes related to sexual assault or harassment. In doing so, both sides of the political aisle agreed that arbitration is bad for employees, but chose only to protect sexual harassment victims. However, arbitration is just as bad for employees who suffer race/color, gender, national origin, gender identity, sexual orientation, disability, or age discrimination at the hands of their employers.

Arbitration is often criticized for being disadvantageous to employees due to several reasons, including:

  1. Limited Discovery: In arbitration, the process of gathering evidence, known as discovery, is typically more limited compared to litigation. This can put employees at a disadvantage as they may have less access to crucial information to support their case.
  2. Much Smaller Awards: Several studies have concluded that arbitration awards are, on average 60 to 85 percent less than similar cases decided by juries. These studies include the Journal of Empirical Legal Studies, the Economic Policy Institute, and Connecticut Law Journal.
  3. Confidentiality: Arbitration proceedings are usually private and confidential, which means the details of the case remain undisclosed to the public. While this may be beneficial for employers, it can prevent employees from highlighting potential workplace issues and sharing their experiences publicly. It also means that employers can make potentially offensive or outlandish arguments knowing that they will never face public scrutiny. The lack of public scrutiny in turn often reduces employers’ willingness to settle.
  4. Lack of Redemption: When employees are fired it becomes public knowledge. An email is sent stating that the Employee is no longer with the company or is marched out with a box of personal belongings. A jury verdict or judgment is a public document that employees can point to showing that they were wrongfully terminated. On the other hand, because arbitration finding is completely confidential, employees get no public redemption. Indeed, the employer is still free to tell coworkers, customers, and even reference seekers that the employees were fired.
  5. Lack of Real Consequences: While an employer may have to pay an award, because the award and determination is confidential, the employer has no public or internal pressure to fire the harasser or discriminating boss. For those employees seeking to protect their fellow coworkers or future employees, confidential arbitration blocks that.
  6. Potential Bias: The selection of arbitrators is often a joint decision between employers and employees, but there may be concerns about bias in favor of the employer, especially if the employer is a repeat player in arbitration. Mostly arbitrators are selected from a list of given names of arbitrations with each side striking an option until one name remains. But because most arbitration panels are overwhelmingly former defense attorneys, employers can strike the few plaintiffs’ lawyers, meaning that arbitrator almost always ends up being a former defense attorney. Employees may further worry that arbitrators have an incentive to rule in favor of employers to secure future business.
  7. Limited Appeal Options: Arbitration decisions are typically final and binding, with limited opportunities for appeal. This can be problematic for employees who may feel that the arbitrator made an error or did not consider important evidence.
  8. Lack of Precedent: Arbitration decisions do not create legal precedents in the same way that court decisions do. This means that employees may miss out on the opportunity to contribute to the development of legal principles that could benefit others facing similar issues. At the same time, unlike judges, there is no past published precedent about private arbitrators to be used to aid the employees’ current claims.
  9. Waiver of Class Actions: Many employment contracts and arbitration agreements include provisions that prohibit employees from participating in class-action lawsuits. This prevents employees from joining forces with others who may have similar claims, reducing their collective bargaining power.

Now, if you are stuck with arbitration, a good employment discrimination lawyer may be able to leverage the employer’s costs to force a settlement. Further, the win-rate for employees goes up slightly in arbitration, meaning that arbitrators are more likely to give something, even if that something is a lot less. Depending on the claim, winning something may come with the ability to recover attorneys’ fees, which can also be used to leverage employers into paying a fair settlement.

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What should I do if my employer wants me to sign an arbitration agreement?

First and foremost, you should read it. Employees need to understand what they are signing. Many agreements contain a provision that allows an employee to opt out of arbitration by submitting a withdrawal letter within a certain amount of time. If so, sign it and send in the withdrawal letter after you start.

You can try to simply not sign it and see if the employer follows up. Alternatively, on the signature line, you can write something to the effect of “reject”, “declined,” or “I refuse.” Many times, managers or HR representatives simply look to make sure that something is written on the line without actually reading it. By doing so, you will give your employment discrimination lawyer the opportunity to argue that no contract was entered into because you rejected the contract.

If you need more time to decide, ask for the time and to take a copy of the contract home. If the employer refuses, document that refusal in writing.

No matter what happens, you need to make sure that you are given a copy of all documents that you signed. Again, if the employer will not do so, document your requests and the refusal to give you copies in writing, such as by email or even text message.

Lastly, if you are unsure or confused, consult an attorney that can help you make these decisions. Spitz, The Employee’s Law Firm provides a free and confidential initial consultation. (Read: What is the Spitz No Fee Guarantee?). Our top employment discrimination attorneys are in Ohio, Michigan, North Carolina, and Kentucky are here to provide you help now.

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This employment law website serves as an advertisement. The materials on race, gender, disability discrimination, and sexual harassment in this wrongful termination blog and employee’s rights website are provided for informational purposes only and should not be construed as legal advice. For personalized advice regarding your specific situation, it is recommended to contact our experienced attorneys who can address any particular employment law issues or problems you may have. Please note that using and accessing this employment law website or any links within it does not establish an attorney-client relationship. The legal opinions expressed on this site represent the views of the individual lawyer and may not necessarily reflect the opinions of The Spitz Law Firm, Brian Spitz, or any other individual attorney.

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