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How Employers Force Workers Into Arbitration

Your Job or Your Rights: How Employers Force Workers Into Arbitration

Seven of Jamie Leigh Jones’s male co-workers welcomed her to her new job in Iraq by drugging and gang-raping her, according to the federal Equal Employment Opportunity Commission. She says that the rapists were so violent that afterwards she had to undergo reconstructive surgery on her breasts.

Ms. Jones sought her day in court, but her employer, Halliburton, tried to bar the courthouse doors. When she took the job Halliburton made her sign an arbitration agreement which forces employees to give up their rights to take employment-related disputes to a jury. Instead, they pledge to resolve disputes through secret, binding arbitration.

Supreme CourtOn Wednesday the Supreme Court issued an opinion in another forced arbitration case, AT&T vs. Concepcion, which involved cell phone users whose service contract required them to take disputes to arbitration and not to court. It also prohibited them from bringing a class action in arbitration, leaving them no way to bring a class action at all. The Supreme Court announced that that is just fine. It is legal for a company to unilaterally ban customers from court and eliminate the possibility of a class action.

Many employers force similar arbitration provisions on their employees. In fact, there is a decent chance that you gave away your right to a jury without realizing it when you accepted your current job. Like mobile phone and credit card companies, employers hide this tidbit in jargon and small print. If you want the job, you trade your right to a jury, and in its place you get private, paid arbitrators whose decisions are essentially unappealable and who don’t have to follow the law. They don’t even have to explain the reasoning behind their decisions.

Not every employer pulls this trick, but many of the big ones do, including Anheuser-Busch, Cisco Systems, Dillard’s Department Stores, Halliburton, Hooter’s, and most major employers in the financial services industry. Approximately 48 million American workers may be bound by arbitration agreements, according to the National Employment Lawyers Association.

Employers favor arbitration because it can be faster and cheaper than court. But time-consuming judicial procedures are meant to make the process fair to both parties. Their absence from arbitration weights the balance in favor of employers: for instance, in court, employers have to turn over damaging documents and produce supervisors and co-workers for depositions; in arbitration, employers can usually keep all that information to themselves. Employers also like that arbitrators have a financial incentive to favor them: employers hire the same private arbitration companies over and over, whereas each employee tends to be a one-time player.

In Ms. Jones’s rape case, federal courts ruled that several of her claims were not covered by the forced arbitration clause in her employment agreement because they were not related to her employment. Those claims included: vicarious liabilitylaw books and gavel for assault and battery, intentional infliction of emotional distress, in addition to negligent hiring, retention, and supervision of the employees involved in the assault and false imprisonment. The last claim arose from Halliburton’s allegedly locking Ms. Jones in a container after the alleged gang-rape and refusing her to make even a phone call.

Therefore those claims could be heard in court rather than arbitration but only after the arbitration of her other claims ended. This ruling validates the statements of many federal courts, below the Supreme Court, that forced arbitration is unfair and that it is particularly unfair in the context of employment discrimination claims. 

Halliburton fought hard to convince the courts that all of Ms. Jones’ claims based on her alleged assault should be heard in private arbitration and not in open court because it knew it would be better off if it could keep Ms. Jones’s brutal allegations muffled in an inherently biased arbitration instead of public in an open, unbiased court. Despite its efforts, this June Ms. Jones’s remaining claims will go to trial.

The Supreme Court has signaled that it will not stop companies from forcing arbitration on individuals, and in the AT&T case it ruled that states may not do so either. Yet 59% of Americans oppose forced arbitration according to a study by Lake Research Partners. If employees (or consumers) are going to be protected from take-it-or-leave-it forced arbitration agreements, it will have to be by an act of Congress.

About Piper Hoffman

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