Q: I RECENTLY heard from a friend who sued her employer for unpaid wages. However, the court threw out her case and she had to go to “arbitration.” She said she lost because the arbitrator was biased and she could not appeal. My company is now asking me to sign an “arbitration agreement.” What should I know about arbitration?
A: Arbitration is a procedure to resolve disputes without filing a complaint in court. The disputing parties refer the case to a third party (the arbitrator) who reviews it and makes a decision that is legally binding on both sides. By signing an employment arbitration agreement, the employee is agreeing to settle any claim against the employer before an arbitrator and not before a judge or a jury. This means the employee cannot file a lawsuit in court to resolve the claim.
Court proceedings are public, with the case being heard either by an impartial judge or an independent jury. An arbitration proceeding is a private process in which an arbitrator is hired by the parties to make a decision regarding the dispute. The process and its results are generally confidential and not disclosed to the public. The parties are bound by the arbitrator’s decision and the losing party cannot appeal.
Arbitration is most commonly used in commercial disputes, where the disputing parties are all business entities and have equal bargaining powers. The use of arbitration in employment disputes, may be problematic. Arbitration in an employment situation is not usually the product of negotiation but is practically imposed on the employee. The employee needs the job. The company may not give the job unless the employee agrees not to sue the company in court when disputes arise. Employees often automatically sign these types of agreements, without understanding the consequences.
The New York Times reported the impact of arbitration on regular employees. Below are some of the horror stories:
Deborah L. Pierce, an emergency room doctor, brought a sex discrimination claim against the employer that had fired her. She had evidence that the employer had a pattern of denying women partnerships. However, she was blocked from court and forced into private arbitration. The arbitrator was not a judge but a corporate lawyer. When Dr. Pierce showed up one day for a hearing, she noticed the arbitrator having a friendly coffee with the head of the company she was suing. During the proceedings, the employer withheld crucial evidence, including audiotapes it destroyed. When her lawyers asked the arbitrator to impose sanctions on the defense for destroying evidence, the arbitrator simply fined the defense $1,000 after investigating the matter.
The arbitrator ultimately ruled against Dr. Pierce. After the ruling, Dr. Pierce’s lawyers wrote to the arbitration firm questioning the arbitrator’s qualifications. The firm, American Health Lawyers Association, responded that it was not its responsibility to verify the “abilities or competence” of its arbitrators. If the case had been heard in civil court, said the report, Dr. Pierce would have been able to appeal, raising questions about testimony, destruction of evidence and potential conflicts of interest.
Another employee, Leonard Acevedo of Pomona, Calif., brought an employment case against his employer, a short-term lender company. His case was sent to arbitration due to an arbitration agreement he signed with the company. The employer’s preferred arbitration company assigned an arbitrator who was also simultaneously handling 28 other cases involving the employer. Acevedo lost his case in October 2014. His lawyer said, “It clearly appears that the arbitrator was working for the company . . . [and] he disregarded evidence to hand a good result to his client.”
A cruise ship employee who said she was drugged, raped and left unconscious in her cabin by two crew members could not take her employer to civil court over negligence and an unsafe workplace. She had signed an arbitration agreement.
A housekeeper, who signed an arbitration agreement with her employer, regretted it later when he sexually harassed her and she had no legal recourse in court.
Employees who are bound by arbitration agreements are deprived of their rights to have their day in court. Litigation in court gives employees an opportunity to have their claims decided by a jury of their peers, not by arbitrators, whose decisions may be affected by business considerations.
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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com.
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C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully obtained significant recoveries for thousands of employees and consumers. He is named Top Labor & Employment Attorney in California by the Daily Journal, consistently selected as Super Lawyer by the Los Angeles Magazine, and is a member of the Million Dollar-Advocates Forum.
