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Arbitration

What is Arbitration?

Arbitration is a private court system for disputes. In arbitration, an arbitrator decides the case, not a judge, not a jury. Arbitration is an “informal” system with few of the legal protections that Courts have developed to ensure a fair result. And there are no appeals because an arbitrator failed to follow or apply the law or made a legal error.

“Forced Arbitration” refers to situations where workers are made to sign an arbitration agreement drafted by a company as a condition of taking a job. In the last decade, the Supreme Court has vastly expanded the ability of companies to force workers to litigate any claims against their employer in arbitration under disadvantageous conditions. Because the Supreme Court has stated that, “arbitration agreements must be enforced according to their terms,” the company that drafts such an agreement can often write itself advantages and protections that it would never have in court. Chief among these advantages is that companies are permitted to demand that employees waive their right to bring or participate in a class action.

Can an employer prevent class actions against itself?

The Supreme Court has allowed companies to avoid class action lawsuits by upholding arbitration clauses which contain class action waivers. Effectively these rulings mandate that employees go it alone against large companies. Even though wage hour laws often permit, and even encourage, class and collective actions, the Courts permit companies to write themselves out of these laws.

Not surprisingly, companies are demanding that workers sign arbitration clauses as a condition of getting a job in rates never seen before. As a result, many workers have been completely shut out of the court system for legitimate grievances. The Supreme Court decisions requiring individual arbitration have largely renderered discrimination laws, the National Labor Relations Act, ERISA and other worker protections, including the “New Deal” wage hour laws such as the FLSA, ineffective. These worker protection laws were opposed by business when they were enacted and the arbitration system can seriously undermine the effectiveness of these worker protection statutes.

Wage hour lawfirms such as GSD have begun fighting back against this flagrant attempt to restrict workers' rights, by filing mass arbitrations on behalf of large groups of cheated workers, instead of filing a single class action. While barring class actions has obvious benefits for the employer, each arbitration proceeding is extremely expensive for the employer (who must pay the hourly fees of each assigned arbitrator), thereby negating the supposed benefit to the employer in preventing class actions in the first place.

How does arbitration work?

Arbitration is touted as a quick remedy, but unfortunately, that may not be true. The employer typically must pay the arbitrator’s fees, which some argue tends to bias arbitrators in their favor. There are fewer “discovery” rights which often hurts workers because most of the key documents are in the employer’s possession. Arbitrators are not nominated by the President and confirmed by the Senate. They are usually lawyers who are informally hired by the arbitration company. By some estimates, more of the arbitrators for the leading arbitration companies are employer-side, rather then worker side, lawyers. Workers’ ability to secure witnesses and injunctive relief may also be more limited than in court.

Does an arbitration clause prevent bringing wage hour claims?

No. Statutory claims can still be brought after an employee signs an arbitration “agreement.” The primary benefit that companies obtain through class waivers is that fewer workers will bring such cases on their own when they have to fight companies alone. By forcing employees to waive class actions, the employers defeat the cost savings that workers obtain by bringing a group of claims together and they make it harder for workers to find competent lawyers willing to take their claims.

However, because employers typically must pay the fees of an arbitrator, in some cases employers have an incentive to settle these cases as a group, meaning that those who do file an arbitration case may actually have greater bargaining leverage due to the arbitral forum. Thus, the remedy of arbitration is a two-edged sword that can sometimes be used effectively by workers to defeat overreaching employers.

I don’t know if I signed an arbitration clause.

If you have a written contract, we can check. If you don’t remember whether you signed an arbitration clause or not, a case can be filed in court which will then determine whether there is or is not a valid and enforceable arbitration agreement.

Some arbitration clauses are invalid. And some workers are exempt from arbitration entirely, such as interstate truckers.

GSD handles arbitration cases as well as handling cases in court. And in appropriate cases, GSD will file scores to hundreds of arbitrations against derelict employers.

GSD never pressures anyone to sue. Calls to GSD are free and confidential. Call us

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