Arbitration Agreements in Employment Contracts: Be Careful What You Sign

If you must sign an employment contract to get a job, it is likely to contain an arbitration clause requiring you to resolve any contract disputes with your employer through arbitration instead of traditional litigation.

Arbitration is an alternative dispute resolution method in which a neutral third party hears and decides legal disputes. Arbitration is typically binding, limiting the right to appeal a dissatisfactory decision.

There are advantages to arbitration, such as lower costs, quicker decisions, and privacy. However, arbitrator decisions do not create precedents. You can’t count on similar resolutions of similar cases through the arbitration process. There is also less of a discovery process in which each side gathers evidence from the other. This potentially reduces your ability to gather evidence needed to support your case.

Once executed, an employment contract in Florida is legally binding, including one with an arbitration clause. An experienced Tallahassee employment contract attorney at Cruz Law Firm can review your employment contract and help you understand an arbitration provision and your legal options.

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To Sign or Not to Sign: Navigating Arbitration Agreements

In arbitration, workplace disputes are submitted to one or more arbitrators who make a binding decision to settle the dispute. Arbitrators are specially trained and experienced neutral third parties. Many are retired judges. The arbitration process is like an informal court case. Each side presents evidence and testimony. The opposing sides may cross-examine the witnesses. Lawyers represent the employee and employer and present their cases.

Both parties must agree to have the arbitrator hear their dispute and to abide by the arbitrator’s decision. The consent to submit workplace disputes to arbitration is often obtained when an employee is hired. An out-of-work job candidate who is told they can sign an employment contract containing an arbitration agreement or decline the job may not feel like they are volunteering.

State and federal courts, including the U.S. Supreme Court, have repeatedly upheld the validity of mandatory arbitration clauses. Florida law says that “an agreement … to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.”

A federal law enacted in 2022 makes it illegal for employers to require employees to arbitrate disputes related to sexual assault or sexual harassment.

Impact of Arbitration Agreements on Employee Rights

By signing an employment arbitration agreement, you give up your right to go to court and have a jury trial to resolve job-related issues such as wrongful termination, breach of contract, or hostile work environment. Instead, you agree to submit any future dispute to arbitration rather than to a court of law.

Arbitration can be a valid way of resolving disputes, but research has found that mandatory arbitration has a tendency to suppress claims. There is also evidence that mandatory arbitration produces outcomes different from those of litigation, to the disadvantage of employees.

The positive points of arbitration for the employee include

• Privacy: Court trials are public proceedings. Anyone can attend or access records of the trial through the court system. Arbitration is private. There are no outsiders involved, and no records of the proceedings are available to individuals, other employers, or the press later.
• Efficiency: Arbitration is not subject to backlogged court schedules, and the process is quicker than formal court proceedings. Issues can be resolved in several weeks instead of stretching into a year or more. The faster process also saves on the cost of attorney’s fees and preparing and filing documents.
• Informal and Flexible: Arbitration is less formal than court proceedings. The arbitrator and parties to the dispute can design the arbitration process to accommodate their respective needs. Issues like the nature and scope of discovery, the conduct of the hearing, and the length of time for the entire process are up for discussion.
• Effectiveness: Arbitration can lead to just decisions, and often does. Arbitrators are often chosen for their expertise in the relevant field, ensuring that someone with a deep understanding of the subject matter hears the case.

The downside of arbitration includes

• Limited Appeals. An arbitration decision is usually binding. The ability to appeal arbitration decisions is more limited than pursuing appeals of court decisions.
• Lack of Precedent: Courts rely on “case law,” the results of previous decisions in similar cases. This gives you an idea of how a judge will rule. Arbitrators are not bound by previous decisions. Similar cases may be decided differently in different arbitration proceedings.
• Lack of Formal Discovery: Discovery is a process in which each side in a court case obtains evidence from the other side through depositions and document requests. Discovery in arbitration is limited, which could adversely affect your ability to make your case. The employer will typically have better access to documents and other evidence pertaining to the dispute than the employee.

If you are already in a dispute with your employer that is headed to arbitration, the employment law attorneys at Cruz Law can help you prepare your case and ensure your rights are upheld during these proceedings.

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