Some employees or consumers who find arbitration language in documents sent to them by their company or service provider may think that this means asserting their legal rights will be pointless. There are so many horror stories in the media about compulsory arbitration, particularly of consumer claims. As several Supreme Court justices explained their concern about arbitration in 2010, the fear is that large companies could use their power to choke off victims’ ability to argue their legal rights in courts of law.
Finding an arbitration clause is not the end of the story, however. In many instances, the clause or agreement may not even apply to the type of legal right that a person wants to protect. In other situations, courts may prevent very one-sided agreements that protect one party at the other’s expense from being used to destroy important rights. Legislators are also thinking of ways to regulate arbitration better. And an experienced attorney may be able to use opportunities to mediate or arbitrate a client’s claim to the advantage of the client, rather than viewing them as simple roadblocks or delay tactics.
There are several types of wage claims that might raise these issues. Minimum wage violations and time off-the-clock cases involve workers who get hours docked, written off as locker room time or what have you, or voluntarily work them off the clock under supervisor demand or pressure. Overtime violations involve a failure to pay for hours worked over 40 hours per week, or misclassification of an employee who must be paid overtime as one who is an exempt professional, scientist, salesperson, manager, etc., or even misclassification of employees as independent contractors, gig economy vendors, and so on. Final wage or last paycheck claims involve delays or refusals of pay owed after an event leading to eventual separation from employment. Wage notice and wage statement violations and other recordkeeping violations involve legally required disclosures and accurate records of employees’ hours worked and wages to be paid. Weekly pay claims involve employees who receive biweekly paychecks who were entitled under the law to be paid every week, due to laws protecting manual laborers such as drivers, construction workers, people who operate cashiers or other machines, and many restaurant or catering employees.
The Strict Requirement of Mutual Assent
Sometimes, all that an employer can offer to try to arbitrate a wage claim is a standard form agreement. This may be on a website somewhere, or mass mailed to some group in the past, or contained in a manual or portal at the work site. Courts police the requirement that the employee actually agreed to the terms, after reading or having the opportunity to read them. It is not enough to point to a manual, agreement signed by someone other than the person who filed the lawsuit, or a webpage somewhere.
In contract law, there are a variety of rules that make an apparent agreement to do something nonbinding. For example, compulsion or duress is a basis to resist any contract. Misleading statements or fraud in the steps leading up to the agreement being reached, or maybe in its translation into another language or its delivery and execution, are similar. Unfairness and pressure to surrender to unfair terms is also something that may shock the conscience of the court and lead it to rule out arbitration.
Split Claims and Denials of Motions to Compel Arbitration
In a split claim, some of the legal rights involved do not fall within the arbitration agreement, even if the employer says that some claims do. In such disputes, courts should give the benefit of the doubt on the employee if he or she opposes arbitration, and make all reasonable inferences in his or her favor. The employer in asking for arbitration has to show, as outlined above, that a valid agreement to arbitrate actually existed between it and the employee. Even if there is an arbitration agreement, the court may find that the scope of it does not cover the type of dispute involved, or that some federal rights are nonwaivable and not amendable to compelled arbitration.
Protection of Statutory Rights Against the Threat of Arbitration
The Supreme Court has announced that courts should not tolerate agreements that give up important statutory rights or remedies. It is ok to agree on an alternative method of dispute resolution, but not to rig the process so the employer will typically win regardless of the merits. This rule may allow an employee to avoid arbitration with a process that is rigged by the employer to be biased, that has a speeded-up schedule, that denies the employee punitive damages or his or her attorney’s fees paid for by the employer if he or she wins, or that says the employee has to pay the employer’s attorneys’ fees if he or she loses.
Legislation
Some senators have promoted legislation like the Arbitration Fairness for Workers Act that would limit compulsory arbitration agreements. The Forced Arbitration Injustice Repeal or FAIR Act of 2023 would ban “a predispute arbitration agreement from being valid or enforceable if it requires arbitration of an employment, consumer, antitrust, or civil rights dispute.†And the Part-Time Worker Bill of Rights Act would prohibit discrimination in hourly pay based on total hours worked, promotion chances, or chances to earn paid time off in proportion to hours worked, and give part time workers rights to sue, for damages or court orders “any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and on behalf of†themselves or a class of similar persons.
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